When Satoshi Nakamoto launched Bitcoin in 2009, he made two paradigm shifting breakthroughs:
- He created the first currency which has neither intrinsic value nor a central issuer.
- He introduced Blockchain technology to the world, providing a way for a decentralized network to reach consensus and record a true history of transactions.
These breakthroughs mark the beginning of the modern era of cryptocurrency, which experienced another significant gear change in 2015; when Ethereum mined its first block. Ethereum represented the first meaningful step towards a cryptocurrency which could be utilized beyond the strict confines of digital cash.
Instead, Ethereum introduced a raft of features and – for the first time – made the blockchain “smart”. More specifically, Vitalik Buterin and his team implemented smart contracts onto the Ethereum Blockchain, a feature that allows for transactions to be tied to computations. The power of this innovation might not even have been clear to the people who participated in Ethereum’s ICO, but the effects are still resonating everywhere.
Nothing is perfect however and pertinent criticisms of cryptocurrency’s new poster-boy soon emerged. We’ll go into those in more detail later, but for now it suffices to say that a myriad of blockchain-powered projects popped up, claiming to be the true heir to Bitcoin’s throne.
So far, the strongest claim comes from EOS – the brainchild of one of the industries most important people: Dan Larimer. Larimer has established himself among Blockchain’s brightest minds by first launching Bitshares and then founding the popular publishing platform Steemit.
In 2017, Larimer and his team at Block.one introduced EOS to the world. With such pedigree behind it, EOS quickly garnered attention. The hype reached fever pitch when extravagant claims in the Whitepaper became more widely known, causing investors to flock to the project – ultimately culminating in a staggering $4 billion USD ICO.
But what exactly is EOS and how does it differ from Ethereum? Let’s find out.
EOS (EOS) vs Ethereum (ETH)
|Creation date (first block)||January 31st, 2018||July 30th, 2015|
|Blocksize limit||1 Megabyte||No Limit|
|Transaction limit per day||~345,600,000||~1,123,200|
|Transaction confirmation time||0.25 seconds||15 seconds|
|Transaction avg per hour||~3,000||~24,755|
|Avg transaction fee||No transaction fee||$0.105 USD|
|Average transaction value (last 24 hours)||N/A||5.61 ETH|
|Block confirmation time||~1 second||~14.6 minutes|
|Consensus Algorithm||Delegated Proof of Stake||Proof of Work|
|Developer team||Block.one||Ethereum Foundation|
|Original Author||Daniel Larimer||Vitalik Buterin|
Looking at the comparison chart above, the first striking difference between EOS and Ethereum is the transaction limit per day. EOS can process nearly 4,000 transactions per second, which would theoretically mean a capacity of 345 million transactions per day.EOS vs Ethereum: Scalability
Ethereum, on the other hand, can only process 13 transactions per second, resulting in roughly ~1,123,200 transactions per day. This comparison highlights what we discussed earlier: Ethereum does not solve Bitcoin’s biggest problem – scalability.
EOS boasts an impressive capacity for transactions even in comparison to current mainstream solutions. Visa for example, processes around 150 million transactions per day (although its capacity is much larger), while PayPal handles around 30 million transaction every day. This means that EOS is one of the few platforms for decentralized applications that could feasibly support a large user base.
This is vital, not only for EOS but also for the plethora of entrepreneurs building applications on top of it. For businesses, it is crucial to have a robust and scalable blockchain that has the capacity to serve a growing community. As a result, teams like Effect AI are leaving less powerful blockchains behind and migrating to EOS.
Dan Larimer and his team at Block.one achieve this level of scalability by introducing several important innovations. Perhaps the most significant is Delegated Proof of Stake, a high-performant consensus algorithm that can confirm transactions in 0.25 seconds. Add to this, EOS’s ability to run multiple transactions in parallel, and you start to see how it could theoretically reach hundreds of millions of transactions per day.
Interestingly, EOS’s white paper does not provide a detailed technical explanation however and instead describes these concepts in general terms. As a result, we need to trust Larimer and his team that they will figure out how to execute on their ambitious plans.
Regarding scalability, Ethereum lags far behind, clocking in at a 15 seconds per transaction. Naturally, Ethereum’s development team is well aware of the problem and is working tirelessly to provide a solution. The first step will be to switch from the problematic Proof of Work consensus model to the Proof of Stake based Casper protocol. Launching Casper is a huge undertaking however and Plasma has since been proposed as a faster way of reaching significant scalability.
EOS vs Ethereum: Consensus algorithm
Besides scalability, the consensus algorithm has significant implications for the network has a whole. Proof of Work, for example, is optimized for decentralization. Anyone can run a node or mine blocks. In this sense, Ethereum is a democracy.
In the spirit of the metaphor, EOS is more like a small republic. Of course, anyone can perform an EOS transaction, but transactions are confirmed on the blockchain by 21 elected block producers (BP). These are voted for by EOS token holders who can grant or rescind their vote of approval at any time.
Theoretically, this should ensure good behavior on the part of the block producers, as negative behavior would result in diminishing approval and the subsequent disqualification as a block producer.
Interestingly, EOS does not use transaction fees to incentivize network members but instead introduces an inflation rate of 5% per year. 1% of these newly generated tokens are used to pay block explorers for securing the network.
As of February 2019, this works out at roughly 318 EOS distributed to the 21 active block explorers every day. Should the price of EOS fall to such an extent that confirming transactions is no longer attractive, the network members can vote to change the yearly inflation rate and thus ensure profitability. Therefore, EOS block producers have a substantial financial incentive to act in accordance with the community or else risk losing out on their EOS payments.
Returning to the topic of decentralization, we can see how EOS falls short of the levels reached by Ethereum – at least on the surface. If we dig deeper, we can see that network members congregate in mining pools, which essentially act like block producers.
Looking at the data from Etherchain, we can see that three such mining pools control over 50% of the networks hashing power.
This means that neither Ethereum or EOS successfully achieve meaningful decentralization, a fact that Dan Larimer is quick to acknowledge:
“Decentralization isn’t what we’re after. What we’re after is anti-censorship and robustness against being shut down.”
EOS vs Ethereum: Governance
Centralization creates the opportunity for more powerful network members to bend the blockchain to their will and act against the best interests of the community. This has been the case for both Ethereum and EOS. In Ethereum’s case, the most pertinent example comes in the form of the Constantinople update.
Constantinople was designed to improve the speed, efficiency, and cost of transacting on the Ethereum network, but was also supposed to reduce block rewards for miners. This was intended to prepare miners for the switch from POW to POS, and naturally has been met with a lot of hostility. The result so far, is that mining pools like Ethermine have the power to fight this change and act in their own best interest rather than that of the network. Perhaps unsurprisingly, the Constantinople upgrade has suffered numerous delays.
As discussed previously, EOS’s dPOS consensus model gives block producers a significant amount of power. On June 17th 2018, the platform for decentralized applications garnered ridicule in the cryptocurrency community as a few top block producers intervened to manually stop a number of transactions.
This marked a messy period in EOS’s history as both block producers and The EOSIO Core Arbitration Forum came under increasing scrutiny, leading EOS New York to label it: “a rampant misunderstanding about what arbitration is.”
In EOS a few complete strangers can freeze what users thought was their money. Under the EOS protocol you must trust a "constitutional" organization comprised of people you will likely never get to know. The EOS "constitution" is socially unscalable and a security hole. https://t.co/WusEqBMGBp
— Nick Szabo ? (@NickSzabo4) June 19, 2018
These examples show that neither EOS or Ethereum have mastered the governance of their blockchain. Nevertheless, it is fair to say that Ethereum has a done a significantly better job of decentralizing power. EOS on the other hand relies on a relatively small group of people to uphold the integrity of the entire ecosystem.
EOS vs Ethereum: Adoption
All innovation in the blockchain space is ultimately designed to facilitate adoption. Building a protocol that can process millions of transactions per second is pointless if nobody uses it. Adoption, refers to people’s willingness to use either Ethereum or EOS.
Both are platforms for decentralized applications and we can look at a number of metrics regarding dAPP usage to gauge adoption thus far. Of course, this is somewhat unfair because:
- Ethereum is much older than EOS
- Some dAPPS (like games) might be used a lot without providing much value to the network
- Some dAPPS might provide value that is not captured in our metrics
Nevertheless, I think a comparison can be instructive with this context in mind. As is to be expected, many more dAPPS have been built on Ethereum rather than EOS. The picture changes somewhat when we compare the top 10 most used dAPPS on both platforms.
According to dapprader, Ethereum’s most popular dAPP received 1,600 users over the last 24 hours (24th of February 2019). Compare this to the 6,800 users EOS Knights received in the same time-frame and it becomes clear that EOS is putting up a good fight. In fact, it seems as if 14 dAPPS serviced more than 1,600 users on the EOS blockchain implying that overall dAPP usage is much higher than on Ethereum.
Despite the larger number of users, Ethereum dAPPS seem to generate much more transaction volume than their EOS counterparts. As we can see, three of the top eight dAPPS on EOS saw no measurable transaction volume. Ethereum, on the other hand, saw considerable volume over the same time-frame.
This data shows us, that the battle of the dAPPS is much closer than we may have supposed. Ethereum is much older and is considered the definitive smart contract platform, so it would have been reasonable to assume a strong lead over the EOS upstart.
EOS (EOS) vs Ethereum (ETH) – Conclusion
In the wake of EOS’s $4bn ICO, it is clear that the momentum lies with the underdog. EOS has incredibly ambitious plans and – in Dan Larimer – perhaps the only person in the world with the genius to pull it off.
Nevertheless, Ethereum has a much stronger track record and has established itself as the default ICO platform. Vitalik Buterin actually addresses EOS in this video and explains why centralizing power in the hands of the Block producers is too high a price to pay for scalability.
As mentioned previously, mining pools enjoy almost as much power as EOS’s block producers, meaning Buterin’s point falls a little flat. It’s easy to see why Ethereum might be fighting to diminish the credibility of EOS, as 2019 may well be the year Bitcoin finds a new heir to its throne.