What Is EOS Blockchain?

By Mohammad Musharraf

The three fundamental properties of a blockchain are scalability, security, and decentralization. But blockchains can maximize only two properties at a time, leading to a problem called blockchain trilemma.

For example, blockchains like Bitcoin prioritize security and decentralization over scalability. But it means these chains are not yet ready for high usage volumes, hindering mass adoption.

The EOS ecosystem aims to solve this blockchain trilemma and help developers create scalable decentralized applications (dApps). 

But what is EOS and how does it work? Let’s explore the EOS ecosystem, including its potential benefits and risks, and how you can use it safely.

What Is EOS Blockchain?

EOSIO is an open-source blockchain software platform for developing scalable blockchain apps and networks. To clarify, EOSIO is like an operating system which allows programmers to use WebAssembly languages like C++, Java, and Python to build blockchain apps.

The first blockchain network in the ecosystem is named EOS blockchain, and it uses EOS as its utility and governance token. 

In 2017, the private company, Block.one published the EOS white paper. The company’s former CTO Dan Larimer, of BitShares and Steemit fame, and CEO Brendan Blumer headed the initial development of the EOS infrastructure.

Then, Block.one conducted the biggest ICO in crypto history, raising $4.1 billion over a 12-month period. Finally, the company launched the EOS blockchain in 2018.

The EOS Ecosystem: Explained

So now you know how the EOS Blockchain came to be, but what about its key ecosystem features? Put simply, it has two elements: EOSIO software and EOS tokens.

What Is EOSIO?

EOSIO is an open-source software that provides the system architecture for building and deploying scalable dApps. The software resembles a computer and thus uses some similar concepts such as bandwidth, state storage and computation. To explain, bandwidth is needed to relay information across the chain, state storage is necessary for storing information on-chain, and then computation is necessary for running blockchain apps and dApps.

These three features are all available to use for network participants as long as they stake EOS coins. 

What Is EOS Coin?

Well, first of all, EOS is a utility token. To explain, EOS token is the in-platform currency of the EOS network, and, as mentioned, it’s necessary for using bandwidth, state storage and computation. But what else is it used for?

Well, being a decentralized blockchain, the EOS network also uses EOS coin for governance.  To explain, token holders can vote and participate in the protocol’s decision-making process to decide the network’s future trajectory.  

Possibly most importantly, EOS coin is used for crypto staking. Like with most proof-of-work networks, EOS requires participants to stake coins to secure the network. This stake works as collateral, ensuring validators act ethically. EOS Stakers can then earn passive rewards with an annual yield of up to 33%.

So What About Its Tokenomics?

Like you might expect, each time block producers generate a new block, they get EOS tokens as rewards. However,  there’s no cap on the maximum supply of EOS coin like there is with many popular cryptocurrencies. Instead, a mechanism ensures the total token supply doesn’t surpass 5% in a year. As a result, there’s a current circulating supply of over 1 billion tokens.

How Does EOS Blockchain Work?

The EOS Blockchain employs several key pieces of technology in order to work smoothly. So what exactly are they and how do they work?

EVM Compatibility

Firstly, the EOS blockchain uses an Ethereum Virtual Machine (EVM). In short, EVM enables Ethereum developers using Solidity programming language to build dApps within the EOS ecosystem. EVM compatibility means EOS benefits from all of the interoperability possible with EVM chains, plus, it has the power to execute complex code through smart contracts.

Then, in May 2023, the EOS Network Foundation (ENF) made the EOS EVM an open-source code. This helps developers to run their own RPC nodes instead of relying only on ENF nodes, thereby increasing the decentralization the EOS network. The EOS EVM enables any Antelope chain to launch its own EVM. Plus apparently, the EOS EVM is one of the fastest in existence, with double the swap throughput of Solana.

DPoS Consensus Mechanism

When it comes to network security, EOS uses a Delegated Proof-of-stake consensus mechanism. To explain, Proof-of-Stake (PoS) is a consensus mechanism where network validators stake (lock) their crypto tokens to validate transactions and produce blocks. Then, Delegated Proof-of-Stake (DPoS) is a variation of this mechanism which offers increased democracy. 

On the EOS blockchain, EOS coin holders vote to choose block producers. Then each round of voting determines 21 validators who produce 21 blocks on the chain. From there, DPoS relies on a real-time reputation system to select block producers, which allows EOS holders to vote out malicious validators. Finally, each block producer gets EOS tokens as a reward for successfully creating new blocks.

While many blockchains require every node’s participation to achieve consensus,  EOS blockchain’s DPoS mechanism relies on the democratically selected pool of 21 block producers. This makes EOS transactions much faster than its competitors, plus, more scalable and energy-efficient.

Benefits of EOS Network

Every blockchain has its advantages and disadvantages. So, what are the best features of the EOS blockchain?

Designed With Blockchain Apps in Mind

EOS aims to increase transaction speed and enhance dApp performance by leveraging parallel execution and asynchronous communication technologies. Asynchronous networks facilitate independent data transmission where all network nodes need not be online or relaying information for transaction validation.

Plus, its EOSIO-native dApps are flexible enough to add new features, change app logic, and deploy code fixes. Plus, its EVM compatibility and EOS developer toolkit mean that it’s easy for people to create apps.

No Transaction Fees

EOS blockchain does not charge users transaction fees. This makes the chain extremely accessible. However, although users don’t pay per transaction, they must stake a certain amount of EOS coins to be able to execute a transaction. This means interacting with the network will cost you something, but it’s not directly related to your activity.

Anti-Hacking Mechanism

The EOS community also has a formal hacking incident response portal called Recover+ with an asset recovery framework. On November 5, 2022, a hacker attacked the Pando Rings lending platform and exploited $70 million with $2 million in EOS tokens. Recover+ intervened immediately and froze the stolen funds to protect EOS users.

Human Readable Addresses

EOS also stands out from other blockchains as it uses human-readable names composed of ‘a-z’, ‘1-5’, and dots(.). This makes identification and usage simpler as compared to accounts of other networks. For example, EOS account addresses can have names like ‘Bob122’ instead of a random hexadecimal string.

Risks of EOS Network

Of course, it’s not all easy when it comes to designing a blockchain. Thus, there are some downsides to the EOS network too. Let’s explore some of the risks you may encounter when interacting with EOS.

Centralization

Although the DPoS consensus mechanism makes the EOS blockchain highly scalable, it’s also more vulnerable to attack. To explain, the EOS ecosystem has 21 block producers. Thus, it requires just 11 nodes (50% of validators) to take control of its consensus mechanism. This puts the security of the network at risk.

Moreover, a 2019 CoinDesk report suggested that EOS is “excessively centralized” with the majority of block producers situated in China. Such clusters led to correlations between voting patterns and regional distribution.

A Binance Research report also highlighted the EOS network may have several problems like “low voter turnouts, little resistance to Sybil attacks, and coherently little transparency.”

Bot Activity

Since transactions on the network are free, and the network can handle complex blockchain apps and smart contracts, this leaves the door open for bots. Allegedly, up to 75% of EOS dApp transactions could be initiated by bots rather than people. 

How to Use EOS Securely

So now you know about EOS, from its coin to its consensus mechanism to its benefits and risks. But what about how to use the network? If you want to start interacting with EOS, it’s important to know how to do so securely.

Firstly, if you’re going to buy any cryptocurrency, it’s imperative to protect it—just like you would with your euros, dollars, or any other fiat currency.  To protect your crypto effectively, it’s always recommended to use a non-custodial wallet—one that allows you control over your own assets. Then, for maximum security, you need to store your private keys somewhere no one can get access to them. With many non-custodial wallets, these keys are stored on the host device, like your smartphone or laptop. The best option for your crypto is using a hardware wallet like the devices Ledger offers. 

So, once you have your hardware wallet, how do you manage your EOS coins?

Well, for the full guide, visit our support article on how to set up a Ledger EOS account and buy EOS. But here’s a quick step-by-step guide to get started:

1. Update the firmware of your Ledger device.

2. Set up the Ledger Live App.

3. Open ‘My Ledger’ and install EOS from the app catalog.

4. Your EOS wallet is ready to use. 

5. Purchase EOS on crypto exchanges using a credit/debit card or bank transfer.

6. Transfer EOS tokens from the exchange to your hardware wallet.

You can also stake EOS coin within Ledger’s ecosystem, meaning you can generate rewards while benefiting from Ledger’s security model.

Get Involved in the EOS Ecosystem

To start using EOS blockchain apps, you may need to connect your Ledger to a third-party wallet like Scatter or Fairy Wallet. For the full instructions, make sure you check out the support article on create a Ledger EOS account with third-party apps. However, don’t let that extra step faze you. Once you connect, you can interact with all sorts of dApps while benefiting from the security of your Ledger.

Here’s what you need to:

1. Download Scatter EOS on your computer

2. Open the Scatter dashboard and import your keys from your Ledger wallet

3. Open eosx.io and create a new account

4. Install and setup the Anchor Wallet app, and select the EOS blockchain

5. Click on ‘Import an existing Account’ from Ledger and select the accounts you wish to load on your Ledger device.

The Future of EOS Blockchain

From conducting the largest ICO, to implementing a “constitution” for a blockchain, EOS has been responsible for many firsts in the crypto ecosystem.  Believe it or not, the network was even featured on an episode of John Oliver’s popular HBO news show “Last Week Tonight”. However, this high-profile exposure also made it a target for regulators, resulting in it disabling its coin sale in the US and China. 

Despite its reactivity in dealing with local laws, the EOS chain has seen a decrease in active participants. Plus, unfortunately, there’s still no formal roadmap for updates or innovations in the future. That said, various EOS developers are keeping the chain going, offering unofficial roadmaps and community updates. So, only time will tell whether the community will build the chain out, or it will fade into obscurity.