Why I Join the EOS Community Part 6?

The Cryptoeconomics of EOS vs Ethereum with interesting readings from Ian Macalinao:


1. No Transaction fees – In Ethereum specifically, each transaction has a certain amount of “gas” associated with it and a gas limit per block. Thus in order to raise your chance of your transaction getting accepted, you increase the gas price of your transaction.

2. Proof-of-stake bandwidth allocation – EOS allocates blockchain bandwidth based on the amount of EOS tokens one holds. That is, if you hold 1% of all tokens, you are entitled to 1% of all bandwidth of the network. Any EOS token holder can perform operations on the blockchain since they have reserved bandwidth. Unlike Ethereum, tokens are not spent in order to perform actions on the network. Due to this, EOS users will not be discouraged from using the network to perform various tasks, such as sending out a tweet or posting a classified. Ethereum users on the other hand must spend tokens for actions, causing users to be more reluctant to use dApps for non-financial tasks.

3. Miners – EOS block producer will process transactions without transaction fees. In Ethereum and Bitcoin, miners are incentivized to create blocks for two reasons: block reward and transaction fees. The block reward is a guaranteed amount of tokens given to the miner of the block. This reward is specified in the rules of the blockchain. For example, in Bitcoin, a block grants the miner 12.5 bitcoins. Ethereum is a bit more complex than this but follows a similar structure. EOS has 21 block producers which process transactions into blocks on the EOS blockchain. These block producers are voted on by token holders, of which token holder voting power is based on the amount of tokens they hold. Token holders are incentivized to pick the best performing block producers for the task in order to increase the value of their tokens. Block producers are paid very well for their performance (EOS has an initial 5% annual inflation), and if voted off, they lose access to all block rewards. Thus they are highly incentivized to not underperform.

4. “Everything they don’t want you to know about EOS.” by Thijs Maas:


The unique selling points of EOS are that the platform will eventually allow for industrial-scale applications, through elimination of transaction fees and an ability to support millions of transactions per second. EOS developers expect that the platform will at least handle 1000 transactions per second upon launch. In contrast, Ethereum can currently handle around 15 transactions per second.

The decentralized operating system will, much like Ethereum, allow developers to build decentralized applications through smart contracts with in scalability. The idea behind EOS is that the processes of storing the blockchain, the ‘block propagation’ and the execution of smart contract code should be handled by only 21 parties, called Block Propagators (BPs). These BPs use optimized hardware and only have to sync with each other, instead of a large network. This allows EOS to have a transaction output like no other crypto before it. Aside from this insane transaction throughput, EOS also promises that transactions on the network will be completely free!

So, Is 21 BP’s enough to be decentralized? In essence, anyone who has any EOS can stake their tokens to vote for candidates that wish to become a BP. The 21 that are voted into office are allowed to create blocks, and, as such, they also receive block rewards. Once elected, all BPs will want to remain in power. Therefore, there is an incentive to maintain the established order, which means elected block producers will form alliances to vote for each other.

The coalitions can even start extorting businesses building on EOS in various ways. We can imagine a scenario where a business’ transactions are censored by the cartels unless it behaves in a certain way or pays money to BPs.

Now you might say that such censorship would hurt the BPs. It would lead to public backlash and subsequently, a decrease in the price of EOS. As the BPs are likely to hold EOS themselves, this would hurt them. The BP cartels could for example make it more difficult for a specific business to function, through small changes in how the network works. After all, decisions on what is allowed or not on the network are in the hands of the ‘democratically elected’ cartels.

By censoring in an indirect, hidden fashion, any possible public backlash is minimized. After all, the only thing that the BPs will have to do is provide an explanation of why they made the protocol changes.

5. Conclusion

Compared to traditional token models, EOS encourages:

Hodling — EOS users want to hold tokens to rent out or gain access to more bandwidth.

Usage of dApps — EOS users will use the platform more because there are no transaction fees.

EOS has written a ‘constitution’ – a binding set of rules for everyone who uses the network. A combination of a set of clear rules on and strong legal remedies against colluding BP’s would be a detrimental mechanism to reducing BP’s incentives to collude.

Its economic model is better poised to encourage activity on the platform and thus make it the dominant platform in the mainstream.

The birth of EOS Nation has taken place with the dream of a strong governance and arbitration resolution. Aren’t you glad that you have joined the EOS Community! 

Part 7: Am I an Investor or Trader or Believer of the new Crypto Space to Succeed?

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