EOS is an interesting crypto asset. It’s a relatively new (~1-year-old) competitor to Ethereum (~4-years-old) in the decentralized application/smart contract use case.
Like Ethereum, it hopes to offer a platform and infrastructure for applications to use blockchain technology referred to as dApps (decentralized applications).
The initial version of the EOS blockchain is planned to be released on June 1, 2018.
To raise money for development of the platform, block.one, the Cayman Islands-based company behind EOS, has held a year long Initial Coin Offering (ICO) using Ethereum ERC-20 tokens, the very platform it hopes to compete against.
Those ICO tokens can be transferred to native EOS tokens on the launch, June 1, 2018 and is on track to raise over $4B USD (subscription required) for block.one.
For comparison, the Ethereum presale in 2015 raised over $18 million.
EOS has raised over 200 times that amount!
How much of that vast sum of money raised by EOS is due to the ICO frenzy of the past year and a half, compared to how much the market values the EOS product?
Well, the price of Ethereum shortly after launch was around $0.06 and is now hovering around $550, so the price has appreciated about 8,500 times since launch.
A comparison of the EOS token and ETH shows that the EOS price has significantly outperformed Ethereum year to date and the trading volume has been impresive in recent months leading up to the end of the ICO, Ethereum is still much further ahead in terms of overall market cap.
Ethereum’s value has clearly been proven out over time as its platform has developed from concept to actual working product.
EOS and Ethereum Price Performance (USD) May 30, 2018 YTD
EOS and Ethereum Trading Volume (USD) May 30, 2018 YTD
EOS and Ethereum Market Cap (USD) May 30, 2018 YTD
EOS’ Path to a Becoming a Better dApp Platform
Block.one still must demonstrate that it can put this vast sum of money it has raised to effective use to mature its product into a functional platform and to market it effectively.
EOS has already made mistakes in marketing strategy that have clearly hurt its brand.
Now, many will say that although Ethereum ‘works’, it only works at limited scale.
This is where EOS is hoping to come in and demonstrate that it’s more centralized (validation of transactions in EOS is concentrated among semi-trusted authorities) platform and technology will be able to scale.
EOS’ main differentiators to Ethereum are centred around trying to find the balance between a decentralized, censorship-resistant blockchain platform and one that can support the scale of transactions that a dApp platform will need for ‘Web 3.0’ type applications.
EOS’ 5 Main Differentiators
Scalability – EOS’ targeted throughput on launch is 2 orders of magnitude better than Ethereum (1000-6000 transactions per second compared to 15 tps in current Ethereum implementation).
Zero transaction fees – EOS users need to own or rent some of the coin to use the network but there are no fees per transaction.
Inflation capped at 5% per year – EOS’ delegated proof of stake model generates coins to fund the validators of the blocks (people/organizations making sure each transaction is legitimate).
Human-readable usernames/accounts – EOS usernames would be akin to current user expectations, whereas Ethereum accounts are a string of numbers/letters.
Governance based on the amount of coins held – Holders of the EOS coin can vote on changes to the protocol with their vote counting proportionally to the amount of coin held. Governance in Ethereum is a hotly debated topic and there’s still some uncertainty as to what if anything will change.
EOS vs Ethereum: Who Will Win?
Do these differentiators put EOS ahead of Ethereum in the race to become the application platform of the future?
At Grizzle, we believe that although they provide an advantage over the current Ethereum implementation, it’s important to note that Ethereum is also in the process of developing/debating changes to address scalability, transaction fees and governance.
Will it be easier for EOS to mature its own solutions to scalability challenges by taking the lessons learned from Ethereum and building the platform from the ground up or will Ethereum be able to swap out major pieces of its working platform to implement its own less centralized solutions to the scalability issues?
Time will tell which development team is able to win the technological arms race and which philosophy wins out in the long run.
Some dApps will need the scale and speed that EOS can provide, whereas others will need the censorship resistance and privacy that the more decentralized Ethereum can offer.
End users of the dApps won’t care necessarily which platform is used and developers will choose the one that suits their use case.
It’s not just EOS with the potential to disrupt Ethereum and application platforms as a whole who are raising a war chest of money to market and develop their platforms.
Other Players to Watch Out for
Telegram is another big player who have raised $1.7B for a blockchain platform that will offer dApps and smart contracts but public knowledge of its planned platform is a hot mess of vague solutions to all of blockchain’s ills, no matter how much money they have to develop it.
Ethereum may have the first mover advantage, but the number of competitors entering the market to chase them down shows that dApps and smart contracts are going to be an area where blockchain technology can challenge the status quo.
In the volatile and not yet truly liquid world of crypto asset pricing, watching the prices of tokens like EOS, Ethereum and other competitors such as NEM, Stellar and Ethereum Classic isn’t the true indicator of how the market share of dApp and smart contract platforms will shake out.
However, keeping track of which of these platforms is attracting ICOs of applications that could become the next ‘killer dApp’ will be the trend to watch as the market matures.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.