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Tuesday, December 7, 2021

EOS Explained – How Does The EOS Blockchain Work?


Hey, everybody and welcome to another episode of BLOCKCHAIN CENTRAL! In this video, we’ll take a closer look at EOS. EOS is a fundamentally new cryptocurrency. It is designed to support various industrial-scale decentralized programs and applications. But how does EOS differ from other cryptocurrencies like Bitcoin and Ethereum? The three main differences EOS lists on its homepage are scalability, flexibility, and usability.

But what does that actually mean? Scalability is probably the biggest challenge blockchain-based applications are facing at the moment. PayPal for example manages about 190 transactions per second. Visa manages around 1,660 transactions per second. And Facebook even processes over 52,000 likes per second, not to mention uploads, posts and other actions.

All these transactions need to be processed and that’s where the limitations of blockchain-based applications kick in. Bitcoin, for example, currently manages around 3-4 transactions per second. Ethereum fairs are slightly better at around 20 transactions per second. As you can tell right away, both will need to scale up their transaction volumes to handle the transactions of a company like PayPal, Visa, or Facebook.

The reason why most blockchain-based applications can’t compute such a volume of transactions per second is the proof of work protocol. The protocol states that each node in the network must reach a consensus for anything to be added to the blockchain. We explained this in detail earlier in our ABC of Mining – Proof-Of-Work video EOS on the other hand is using a so-called delegated proof-of-stake or DPOS algorithm.

This algorithm only requires 21 witnesses instead of the full network to produce blocks. This allows EOS to compute millions of transactions per second. Those witnesses are elected by the shareholders of EOS coins at a rate of one vote per coin. Thus, the shareholders with most coins, get more votes. A witness, however, must get the highest number of votes from various shareholders. Also, witnesses get rewarded with coins for their work.

This creates efficiency, by exerting pressure on the witnesses to perform well, as they can be replaced if they misbehave or act fraudulently. Secondly, flexibility. The Ethereum community experienced a split because of a DAO attack in 2016, which led to a hard fork. Hard forks refer to a software upgrade that isn’t compatible with older versions.

All participants must upgrade to the new software to continue participating and validating new transactions. Those who don’t upgrade, are separated from the network and can’t validate new transactions anymore. In EOS, if an application is faulty, the block producers can freeze it until the issue is resolved. This is possible because, in the DPOS system, not every node has to take care of chain maintenance. Finally, usability.

EOS allows smart contracts to be built on top of it. This, in turn, allows developers to build decentralized apps on EOS. EOS also wants to build a platform that functions as an operating system, making it much easier to use EOS and incentivize developers to create applications on the blockchain.

Unlike Bitcoin or Ethereum, in which users interact with one another using long strings of random letters and numbers, EOS will allow users to establish human-readable, persistent cross-application identities.

This is what an ETH address looks like: Whereas this is what an EOS address can look like: @BlockchainCentral. Protocol-layer account recovery is also a perk of EOS. Many consumers are hesitant to purchase and hold large amounts of crypto assets because they’re afraid to lose their private key.

Although it is possible to create backup-systems in Bitcoin and Ethereum, it is a very clunky, unclear, and complex process. EOS on the other hand will ensure that consumers can recover their funds even if they lose their private key.

But the most important feature is that EOS transactions will be free for users. This is a massive breakthrough, enabling consumers to interact with the EOS blockchains dozens of times per day without worrying about paying fees.

Consider a social media application in which you had to pay a fee for every picture, like, and comment. Or a game where you pay a fee for every move you make. Consumers would never adopt such a system. All those features are great and useful, yet they do not come for free.

Decentralization maximalists believe that EOS is too centralized due to the cap of only 21 simultaneous block producers compared to Ethereums over 10,000 validators. Ok, so what have we learned in this video? EOS is a promising new blockchain that will make it possible to run applications that require hundreds of thousands of transactions per second, like social networks or other large-scale industry applications.

These transactions will be free, further increasing the scope of possible application. But this advancement in transactions comes at a price, with EOS being more centralized than other cryptocurrencies and only requiring 21 randomly selected witnesses to verify new blocks.

We will have to wait and see what happens, but now you know the advantages and disadvantages of EOS and can closely track its development! That’s it for this episode of Blockchain Central.

Before you go, please note that this video does neither represent financial, legal, or tax advice, nor is it supposed to be understood or interpreted as a solicitation to buy or sell any securities, coins or tokens. Happy investing!

Read More: XRP: What Is Next For XRP? (HUGE NEWS)

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