Ethereum vs EOS: The Enterprise Operating System Vs ETH?

When EOS announced its initial coin offering (ICO) using the Ethereum network, it led to an unprecedented amount of intrigue (and conflict) in the world of cryptocurrencies. The decision for EOS to use Ethereum as its network was highly controversial; EOS was intended to be an improvement of Ethereum. The developers of EOS wanted their ICO to be impartial and fair to all parties, which is why they went with Ether for its smart contract blockchain.

Quick Summary: What is EOS?

EOS describes itself as a consensus blockchain operating system that intends to improve the utility of smart business development. EOS is one of the newest additions to the market, as it started its operations in June 2017. The platform provides core features to developers that includes authentication, account permissions, and databases,  people to focus on creating applications that benefit their end users.

Critical Features of EOS

1. No Transaction Fees

The most prominent feature of EOS is the absence of transaction fees of the network. Instead of charging for each transaction, users make use of the resources they have paid for in advance. For example, if you own 10% of the EOS network, then you are entitled to 10% of bandwidth and storage capacity. Extra room on on the network can even be leased to other users.

2. More flexibility

EOS was designed to fill the holes in the market created by its competitor Ethereum. One common complaint of either is that if one application stopped working on the network, it could affect the performance of others.

With EOS, if an app fails, it is suspended until the problem is fixed by a team of “block producers” who will then update the code. Parts of applications can be enabled and disabled at the same time. For example, if an application offers shopping and social media modules, you can specify that only one part of the app will send and receive data, thus improving redundancy.

3. Improved Scalability

EOS is able to process millions of transactions every second, making it a huge improvement over its competitor, Ethereum. Despite the fact that the platforms share similarities, EOS is able to offer people what ethereum can’t: speed.

EOS achieves faster speeds through both asynchronous communication and parallel processing. This means that when a block is added to its blockchain, it will not need to be verified again as the source code is coded into the platform itself.

History of EOS

Just after the release of Bitcoin, some people realized that the blockchain behind the currency had greater potential than being used as a form of payment. It was this this revelation that led to the countless number of altcoins and decentralized applications to be released using the same technology. A few examples of these decentralized applications include Bitmessage, which is an encrypted messaging system, trustless gambling (Peerplays), and cloud computing (Golem).

One of the frustrations for app developers incorporating the blockchain is building the network from scratch. Additionally, with the proof-of-work (POW) and proof of stake protocols, the security of the network can be called into question. These protocols depend on a large amount of computing power or an enormous distribution of network tokens. These barriers to entry means that small businesses cannot possibly build these apps without a powerful computer network.

In order to address this weakness, smart contracts were developed and implemented into the most recent applications on the Ethereum network. This led to the release of decentralized applications (Dapps), that can be executed without relying on a third party. At the moment, the Ethereum blockchain has a market capitalization of $30bn.

Dan Larimer, who is the founder of Bitshares, Steemit, and Graphene, announced the release of EOS. This release was for the benefit of application developers so that they are able to focus on creating profitable ventures, all without having to worry about implementations or communication with the blockchain.

EOS, The Blockchain And Smart Contracts

For those who are unfamiliar with the concept of cryptocurrencies and the blockchain, the first step is to understand what a blockchain is and what it does. A blockchain is comparable to a public ledger.

A ledger in this sense is a way for everyone to see the balances held in each cryptocurrency account. The blockchain also supports a decentralized mechanism that updates the state of the ledger automatically. For example, when money is sent to and from an address on the blockchain, the amount, date, and destination are all updated and without the need for an intermediary.

Smart contracts are used to facilitate the transfer of money or property on the public blockchain. These contracts also stipulate the responsibilities of each party, and any consequent penalties from breaking the contract.

In short, smart contracts work the same as the legal contracts we use in the physical world. The only difference is that smart contracts are designed to work with decentralized applications and on the Ethereum network. Although practical and useful, EOS intends to resolve the most common problems of smart contracts faced by developers using the Ethereum network.

Differences Of Intention Between EOS And Ethereum

One significant difference between Ethereum and EOS is the design philosophy of the networks. With Ethereum, all potential applications are supported on its network. In the Ethereum Design Rationale document, the network claims to have “no features” and that intrinsic parts of its design reduces bloat and excessive resource consumption for its applications. However, one downside to this rationale is that many different applications end up reusing the same codebase, which leads to losses in network efficiency.

In contrast, EOS acknowledges that various kinds of applications necessitates the same type of functions and seeks to provide them. Some tools available to developers are cryptography, blockchain communication tools, and webhooks that are used to power online platforms. EOS also allows access to its self-describing interface, database schemes, and a declarative permission scheme.

When all of these features come together, we could see a powerfully simplified user account management platform, as well as enhanced security via the use of declarative permissions.

Governance And Consensus

EOS and Ethereum also differ in their approach to consensus and network governance. Ethereum leverages a proof-of-work algorithm, whilst EOS will be using a delegated, proof-of-stake mechanism.

The reason for the change in governance is that the present proof-of-work algorithm that Ethereum uses makes it difficult to fix applications that have stopped working. A notable example of this mechanism not working out is the failure of the decentralized autonomous organizations (DAOs) on Ethereum, which suffered a fatal failure.

This weakness in the Ethereum network resulted in a risk for investors to lose their investments, or could necessitate a hard fork in the network. In the past, hard forks have shown to be detrimental, and can encourage the creation of competing blockchains (Ethereum classic was split as a result of a DAO failure).

On the other hand, EOS allows developers to freeze and rectify a broken application. If decentralized applications were used on EOS, they could have been fixed then updated without causing interference to other applications on the network. Additionally, the DPOS consensus that will be used will eliminate the option of competing chains during a hard fork.

Finally, EOS features a legally binding constitution that will outline “common law” for its network. These rules will include a disputes resolution process and community applications that will be chosen through a stake-weighted voting process.

Scalability of EOS

For a network platform to have a strong business case, the ability for a network to scale with its application and demands is of utmost importance. Scalability is one area where EOS and Ethereum will differ from each each other.

At present, Ethereum is restricted to the single-threaded cycles of a CPU. In the past, the network has been overwhelmed by transactions to the point that it slowed down to a halt, allowing only the largest transactions to be sent through. One example of this network congestion is during the Status initial coin offering. The network was overwhelmed, and led to a painful crash of Ether’s value.

It is claimed that EOS will have two key advantages over Ethereum when it is finally implemented. First of all, EOS will be the only platform that will be able to handle enterprise-scale decentralized applications. This will be made possible through its use of Graphene technology, which can handle between 10,000 to 100,000 transactions each second.

EOS will also make use of asynchronous communications that will isolate authentication and execution requests, which will also make the network significantly faster.

Network Redundancy

Also related to the commerciability of the network, it is critical to outline the potential methods of attack to the network. Denial of service attacks are among the most common vectors that an attacker will attempt when attempting to disrupt a network. This type of attack involves sending large amounts of “junk traffic” to a network to prevent real traffic from being received.

With Ethereum, it is understood that miners will prefer high-free transactions to add to the blockchain. This preferential mining can lead to problems for the network, as it has only limited resources and bandwidth. For this reason, it’s not hard to imagine that the blockchain could be overloaded with too many high-value transactions that would prevent small trades from being accepted.

There are financial motivations for people to carry out this type of attack, such as the case of securing ICO tokens at discount prices. This misuse outlines a weakness of Ethereum when it comes to network security, as a single actor or application could freeze the entire network.

EOS should not have this problem of potential DDoS attacks. The model of the network means that each person a proportional stake in terms of bandwidth and computing power. For this reason, an attacker would only be able to consume as much bandwidth as their tokens let them. This method also provides a disincentive for spammers to attack the EOS network in the first place.

Economics Of EOS

Last of all, there are some economic differences between EOS and Ethereum. A simple way of describing them is that one makes use of an ownership model, and another a rental model. When you use Ethereum, you pay for gas fees in exchange for every bit of bandwidth and storage you consume.

These fees can spike as miners select transactions that carry the most reward. This model also requires both developers and startup businesses to consume gas fees fees throughout the alpha and beta stages of their development cycles. The addition of these costs could be enough for some entrepreneurs to reconsider using the Ethereum network altogether, opting for an alternative such as EOS.

One day soon, EOS could be seen as a main competitor to Ethereum. This is due to the fact that EOS will employ an ownership model for each user on its network. As stated previously, tokens will be issued to users, which will give them a proportionate stake in network resources.

With this model, startup companies can purchase only as much of the network as they think they will need, which also helps the company scale with its number of users and bandwidth demands. Startups can simply purchase more tokens if they want to scale their applications.

Lastly, there are no transaction fees for EOS, nor are there network development costs apart from the purchase of EOS tokens.

Ethereum vs EOS Summary

Although EOS has made a contentious introduction to the world of the blockchain and cryptocurrencies, the network looks promising. The zero-fee model of monetization means it could sway developers from Ethereum over to EOS. Additionally, the DDoS protections and other security features could improve the investors perception of its commercial viability.

In short, EOS represents a significant step forward in the development of the blockchain, regardless if is able to successfully compete with Ethereum and other major networks, or not. More details about EOS can be read in its white paper, which includes the credentials for its management and development team.

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