Is EOS Overtaking Ethereum? A Deep Dive into Network Activities

Deep Pockets, Dapps for Days, and Digital Democracy

EOS builds on lessons learned from Ethereum

In just one year since its launch on June 1, 2018, EOS has become the most dominant blockchain platform in the world by most measures, which means that EOS is now extremely undervalued in cryptocurrency markets, especially relative to Ethereum. This article aims to support that thesis objectively with supporting data from EOS network activity and token economics.

I will also explain why EOS is the one platform that stands the best chance of returning critical rights to individuals around the world, including United States citizens, by providing an uncorrupted high-throughput infrastructure to support reliable access to truthful and accurate news and information about our friends, family, news, politics, science, and technology, etc., on a global scale. Democracy is built into the EOS infrastructure through its Delegated Proof of Stake (DPOS) governance system.

As an investment opportunity, EOS currently represents a convenient combination of ultra-high potential ROI and ethical urgency, with a splash of righteous indignation.

This article also addresses the two primary sources of market FUD (fear, uncertainty, and doubt) — rumors swirling around the crypto news sphere targeting EOS, including (1) widespread confusion about bot activity on the EOS network, and (2) the belief that the largest EOS investors (aka “whales”) have a disproportionate (and therefore undemocratic) influence over the EOS network updates, and explains why the market has embraced these rumors, which are understandable though misleading in that they do not threaten the medium-long term viability of the EOS network as claimed.

EOS.io, “Simplified”

I find it helpful to think about EOS at its most basic level as a decentralized Amazon Web Services (AWS). AWS is controlled by Amazon, which runs most of our Internet websites and mobile apps in big warehouses of servers that Amazon owns and controls. While AWS is centralized, EOS is comprised of more than 300 entities — nerds running “nodes” in buildings around the world — that make up its decentralized data storage and processing infrastructure.

People who hold EOS coins have the option of voting for their favorite group of nerds (who run nodes, in buildings around the world…) to be among the 21 EOS Block Producers, or “BPs”, who collectively manage the more critical EOS infrastructure and publicly vote on big decisions related to EOS network operations and governance. In addition to decentralized apps (dapps) being built by many of the 100 nodes, there is block.one — the private company that conducted the EOS initial coin offering (ICO) and has been distributing the ICO funds in strategic support of the larger EOS ecosystem, including its network operators and dapp companies that run on the EOS main net.

Like the World Bank, the EOS Mission is to “end world poverty”, but EOS is by no means a charity, or a bank. The EOS central thesis is that people thrive when they collaborate and support one another — that life can be value-creative, as opposed to zero-sum — which is exactly what you want in a digitally managed network of stakeholders — aligned incentives — through its Delegated Proof of Stake (DPOS) governance structure, which is designed to give all network stakeholders a voice — with proportionate influence, rewards — including powerful positive contribution-to-feedback mechanisms that are already- and will continue driving engagement and network adoption.

Valuing Crypto Assets

EOS is considered a utility coin in that its purpose is to provide infrastructure services — data storage and compute — to app companies, and in this way it is similar to Ethereum.

In his December 2017 paper, “An (Institutional) Investor’s Take on Cryptoassets”, John Pfeffer writes:

Not only must protocols compete against their own potential forks; competition amongst protocols is also fierce. Witness, for example, recent press reports that Kik is considering migrating its token network from the Ethereum backbone to another blockchain because the Ethereum network is becoming too expensive to use. — Pfeffer (Dec 2017)

Ethereum’s GAS-powered transactions process at a current rate of 15–20 transactions per second. The EOS model improves on these rates with free transactions at a current rate of around 3,500 transactions per second (source).

The EOS network presently includes more than 300 nodes competing for rewards given to the top 100 and top 21 block producers who earn the most votes from coin holders. A list of these nodes — each representing an individual business — can be viewed here. EOS pays its top 100 nodes and 21 block producers through a 1% inflation mechanism that generates new coins to compensate the network’s infrastructure providers.

EOS Origination

The EOS.io initial coin offering (ICO) was facilitated by block.one, spanned a full year from June 2017 to June 2018, and raised an estimated $4B USD, which is more than 12x the second largest ICO in blockchain history (Huobi raised $300M Jan 2018). The EOS ICO funds are being managed by block.one, which is funding its own dapp projects, and has already distributed more than $170M in capital to seven different venture capital firms around the world, through EOS VC, to fund further EOS ecosystem development.

How To Value EOS — Key Metrics

Total Dapps Launched/Active

At first glance, Ethereum may appear to be dominating the blockchain sphere. Ethereum launched in July 2013, and after six years there are 752 apps running on the Ethereum blockchain (Q1 2019 Dapp Market Report). As of April 2019, there were 326 dapps launched and active on the EOS blockchain, which launched only one year ago, in June 2018.

True Ecosystem Size & Growth Rate Driven By Total Engaged Users

An April 2019 post from Hacker Noon’s Dapp Market Report provides useful comparisons of a few popular blockchain platforms, including EOS and Ethereum (and others) — which I used to calculate the Total Engaged Usersmetric, found by calculating Total users x Percentage of Users Engaged).

Total Engaged Users EOS: 261k = (335K users) x (78% engagement)

Total Engaged Users ETH: 179k = (1.1M users) x (16% engagement)

Overall Network Activity

Blocktivity provides more helpful metrics in its ranking of few top blockchain projects, which update in realtime, here: https://blocktivity.info/

“Total Employees” or Developer Community

This is an important metric that institutions often use to measure the size of a corporation, in addition to metrics such as “revenue” and “profit” as part of a valuation exercise. For distributed systems such as EOS, Ethereum, and Bitcoin, this is often difficult.

The size of the total development community is arguably the most accurate (certainly still rough) sizing metric for blockchain projects, or total individuals working on those platforms, on average.

Reddit is among the most popular chat forum for the more product-focused members of the tech community. I took the following screenshots of activity on a recent Monday morning (June 27 2019), which shows the size of developer communities (“members” or “builders”) and how many of them are active (“online” or “building”). Understandably, the Ethereum Red community has built up to 441k Reddit members in its six years of existence, which is nearly six times EOS total Reddit members (67k).

However, it is the total “active” community members that give us a sense of the overall magnitude of development activity happening on EOS. Again we find that EOS is rapidly approaching Ethereum, having nearly equalled Ethereum in numbers of active community members, after only one year.

One year after launch, the EOS development community rivals Ethereum in Reddit activity.

And like most people, developers work more if you pay them, which leads us to the next relevant valuation metric — cash.

Cash (War Chest)

In February of this year (2019), block.one had at its disposal approximately $3B in funds, including 140 thousand BTC (which has more than doubled in price since that time). Most of the company’s holdings, ~$2.2B, are in “liquid fiat assets”, with the majority invested in U.S. government bonds (Bloomberg).

Because of the volatility of cryptocurrency markets, treasury management is existentially important for blockchain projects, with many projects shutting down during bear markets. Block.one’s CEO — Brendan Blumer — brings a private equity background to the B1 leadership team, which has ensured a consistent firehose of funding for EOS dapp startups.

The idea is for most of block.one’s capital to end up paying developers as they build out the EOS ecosystem. As of May 2019 $172M had been distributed to seven capital firms, according to Bloomberg. The dapps launched by block.one and its global affiliate venture firms (see EOS VC) are joined by a consistent stream of dapps put out by hundreds of EOS network operators(“nodes” including the top 21 BPs).

I am not aware of any such funding mechanism for Ethereum-based applications, which leaves these companies to seek funding alone and unsupported.

Blockchain 3.0: EOS Builds On Lessons Learned From Predecessor, Ethereum

I place great value on the fact that EOS Creator (white paper author) and block.one CTO Dan Larimer designed EOS to build on his previous (successful) blockchain projects, Bitshares and Steemit, and applied lessons learned from observing other projects in the space, including Ethereum. Larimer noticed Ethereum-based projects experiencing problems related to transaction cost, transaction speed, and the fact that it was impossible for Ethereum’s development community to significantly update the Ethereum protocol’s source code without the risk of dividing the Ethereum development community into two separately running projects (see Ethereum Classic). It’s no wonder Dapp companies began moving their programs over to EOS as early as September of 2018, as reported by LiquidEOS (an EOS BP).

Positive Feedback Loops

The success of any blockchain ecosystem relies on the alignment of stakeholder interests. This is one of the greatest opportunities for companies to unlock new value for users, building processes to facilitate the exchange of information and value between ecosystem stakeholders in a way that is additive, and creates network-swelling positive feedback loops each time content is generated and delivered, with every transaction logged. Each new market of digital goods — coins (see Newdex cryptocurrency exchange), blog posts (see WordProof time-stamping/sourcing blog posts for WordPress), digital art elements (see PixEOS art gamification), digital lumber yards (see Prospectors Gold game), or a loan for compute power and data storage space on the EOS network (see REX resource exchange), EOS already supports the exchange of numerous categories of digital assets. Many of the coins on the EOS network issue dividends (see TokenYield dividend tracker).

King of the Positive Feedback Loops: Airdrops

This usually blows people’s minds when it sets in.

Imagine if owning shares in Amazon entitled each shareholder to a dividend from every startup that launched on AWS servers. That’s essentially what’s happening with EOS Airdrops. The coins are sent to holders’ EOS address, whether or not they have an app to view them. It’s an incredible positive feedback loop where new companies get to advertise their existence to all stakeholders in the EOS ecosystem — investors, traders, developers, and many other folks from the EOS community who may find those companies interesting — each of whom enjoy even greater margins from their EOS investments, collectively comprising the EOS ecosystem. While the fervor over airdrops has waned over the course of the recent crypto bear market, this mechanism remains perhaps the most powerful double-punch fundraising-and-launch-marketing tool the technology world has ever seen.

Facebook’s Libra isn’t democratic, and doesn’t do airdrops, or change in price. It’s not comparable to EOS.

The EOS Governance System Is Digital Democracy

Dan Larimer designed EOS to be a completely self-governing ecosystem similar to a Democratic Republic, and to align incentives, which involves group decision-making mechanisms to effectively capture and implement the will of its stakeholders — the EOS community — through voting mechanisms that mimick the way in which the United States was designed to work. The EOS nodes are like uncorrupted and well-compensated U.S. Senators, who would probably not take so many bribes from corporations if every decision they made was reviewed and discussed and voted on. The EOS nodes are paid, and they make more money if they earn more EOS coin-holder votes. Larimer happens to be from Virginia, and understands the United States Constitution. He writes about his philosophies related to governance structures on his Medium page.

Then They Fight You

EOS is can no longer be ignored. In the mainstream, the idea of a truly democratically operated and ethically run business has become laughable in this dark time of rampant greed and corruption, but that’s why it’s also necessary for us to seek it out. A concept like EOS is now in the “laugh at you” phase of mainstream acceptance, but that is about to change. Ethereum advocates — folks who made lots of money betting on ETH, affirming their opinions about what’s acceptable in the world of blockchain — comprise the majority of existing blockchain and cryptocurrency influencers, and most of them are now fighting EOS. It need not be this way.

Understanding (And Dismissing) The Widespread EOS FUD

The “bot” issue is misleading, because bots are often fundamental elements of web apps.

Some bots are good, and some bots are bad, and the EOS bots have not been proven to be bad. Additionally, the source of the EOS bot rumors — the agency responsible for providing the inconclusive data that was republished by countless crypto news outlets — AnChain AI — has not yet conducted an equivalent analysis of the Ethereum network. I made a semi-aggressive comment on their original medium post that started these unfounded rumors, which you can see here, to which AnChain replied, directly stating:

By no means do we intend for this article to be an indictment of EOS as a platform. In fact, we are currently performing similar analytics on the other leading platforms in the space. We make no comparisons between EOS and other platforms, and any derivative conclusions made by outside sources are purely their own. - AnChain (July 2019)

Learn more about bots by reading AnChain AI’s 2019 Bad Bots Report.

The “whale” issue is mitigated by a second layer of voting.

Any blockchain project that raises a lot of money will create wallets with large sums of coins in them, the holders of which are known as “whales”. Indeed, whales on the EOS network do have a disproportionate influence on which Block Producer they personally favor, because their tokens give them more votes. I believe that the influence of whales in electing one or two Block Producers is an appropriate reward for their investment in EOS, which is significant and helpful to the network. Those few Block Producers vote among 21 total BPs, which is where democracy lives. No individual or entity in this dynamic has any interest in seeing the value of their EOS coins decrease over any period of time. Incentives are aligned, and the network remains uncorrupted and democratic.

Why All The Hate? EOS Sits in Limbo Between Two Old Guards

EOS faces a unique public sentiment problem in the two markets it seeks to disrupt: (a) Mainstream tech and (2) blockchain tech. FUD from mainstream is nothing new. As for the existing blockchain community, most of them have experienced a lot of success (both financial and professional) by advocating for Ethereum, and it’s understandable for people to stick with what’s worked for them. The most intellectually honest and self-aware Ethereum supporters who have taken the time to understand EOS complex governance structure generally acknowledge EOS strengths over Ethereum. Unfortunately, these open-minded folks are in the minority.

Valuation: More Than Ethereum, Soon If Not Already

Ethereum is an extremely useful network. Its creator, Vitalik Butarin, is a genius. Nobody wants Ethereum to fall in price, including me. I’m simply arguing that the EOS market capitalization should be higher than Ethereum’s. EOS is already the dominant blockchain globally, by nearly all measures other than market cap. The EOS network is also growing at multiple times the rate as Ethereum network and is all but guaranteed to surpass Ethereum’s market cap sometime over the course of the next bull run, if not the next few months. We’ll see.

The Enemy Is At the Gates (No Time For Bullshit)

If ‘realness” were a valuation metric, facebook would be worth much less.

Nobody knows how many of Facebook’s 2.3 billion “users” are fake accounts, including Facebook itself. The population of the United States — 330 million — represents only 15% of FB’s claimed total user base. Could more than half of facebook’s users be fake accounts? Absolutely. As I write this I can assure the reader that I have had two different facebook accounts for more than five years — originally intended to separate professional and personal networks — and facebook never seemed to have a problem with me doing so. Creating an additional FB account required nothing more than two separate email addresses. I have no reason to believe that an unlimited number of accounts could easily be created and maintained by a motivated actor on a much larger scale, especially if the effort was well funded. We know this is already happening.

EOS Is The Digital Revolution

Isn’t it funny how, in a world with so many anti-democratic happenings, something immutably democratic is considered revolutionary?

The bias of Google’s search algorithms push mainstream media-generated social and cultural narratives, which often suppress independent journalism, truth-telling international reporting about human rights violations, as discussed in a recent Joe Rogan episode featuring Abby Martin of Empire Files TV. (Martin’s Medium account)

The most notable difference difference between Facebook’s Libra network and EOS is voting. EOS coin-holders can vote for the organizations that run the EOS network. More than 100 different organizations around the world compete to earn the votes of the EOS stakeholder community. There’s no voting mechanism with Libra, which is run by old-guard tech and financial powerhouses — the exact same organizations that have unapologetically betrayed the public’s trust to criminal degrees for far too long.

Everyone Deserves a Voice

It is no secret that we’re living in a world in which information is manipulated by those who control its distribution, with bias toward topics and viewpoints that suit the personal agendas of whomever happens to sit on each company’s board of directors — wealthy individuals. The dismantling of Net Neutrality has enabled the entrenchment of behemoths with their outdated digital infrastructure at continuously increasing prices for service. Similarly, State actors are now fully engaged in social media and news media in an effort to further their own national agendas in ways that are both functional and extremely dysfunctional, and now because of the Patriot Act, often in ways that violate its citizens’ constitutional rights to privacy. This applies to most governments globally, most of whom attempt (and do) surveil private citizens both home and abroad. It’s reasonable for a government to protect its citizens through reasonable means, but government overreach due to war-time exuberance has left the Internet in need of repair.

The Importance of Competition in Democratic Systems

In a September 2017 publication from Harvard Business School titled, Why Competition In The Politics Industry Is Failing America, Katherine Gehl and Michael Porter write:

Citizens should expect four outcomes from a healthy political system — which currently delivers none of them:

1. Practical and effective solutions to solve our nation’s important problems and expand citizen opportunity.

2. Action (legislation)

3. Reasonably Broad-based buy-in by the citizenry

4. Respect the Constitution and the rights of all citizens

How EOS Delivers a Healthy Democratic System (per Gehl, Porter)

1. Solutions: First layer of voting by EOS coin-holders is earned by participating nodes, which are already earning votes predominantly by building software tools considered most-helpful to the community, such as EOS Authority’s dual-purpose web wallet/network explorer dashboard.

2. Action: Second layer of voting among the top elected 21 nodes, or Block Producers, produces open-source version updates and important network decisions through majority consensus of EOS BPs.

3. Reasonable Buy-In by Citizenry: All EOS coin-holders have the right to vote, or can choose to proxy their votes to entities who they trust to reflect their voting values, enabling an ultra-convenient mechanism collective action, creating even more competition for whales.

4. Here is the EOS Constitution, for all to see, to be followed vigilantly.

Community Vigilance is Hard To Quantify

It’s been one year.

Maintaining a truly democratic system requires vigilance of its stakeholders (“The People”) to remain informed and act on that information. EOS’s continuous election for Block Producers enables a quickly-responding and connected network to vote out infected entities shortly after any single BP becomes a known bottleneck for network consensus, certainly fast enough to influence voters prior to a catastrophic action being both voted-on and acted-upon by all 21 BPs. Which of the top 100 nodes are included in the top 21 varies daily. If censorship became an issue globally, votes will shift to nodes in countries that respect freedom of speech and net neutrality. It’s difficult to argue that a hack is even mechanically possible, let alone a hack that could cause irreparable damage to the network. EOS meets all criteria of a decentralized and “antifragile” entity.

EOS is an incredible system with the immense potential to support the world’s future Internet, and in no small way represents a revolution in individual empowerment with the potential to uplift countless populations around the world. Patriotic American citizens should be all over this, given the country's founding principles.

And If You Still Don’t Believe Me, See For Yourself

This is how to have an EOS epiphany (once one has purchased a few EOS from Coinbase or some other exchange) in a few hours:

1. Create an EOS account for yourself, here: https://eosauthority.com/wallet/create-account (STORE YOUR PRIVATE KEY)

2. Send like 20 or so EOS to that account from your exchange

3. Get Scatter for desktop here: https://get-scatter.com/download

or from Github (same diff): https://github.com/GetScatter/ScatterDesktop

4. Buy two or three funny EOS sub-account names here (using Scatter to log in and pay): https://www.eosnameservice.io/en

5. Send most of your coins to your customized sub account through Scatter (which you’ll find intuitive — “wallets”, “send”, etc.)

6. Store 10 EOS on the EOS resource exchange by purchase REX tokens here (log in w/ Scatter): https://eosauthority.com/rex?account=eostimespace

7. Vote for block producers or choose a proxy voting representative here: https://eosauthority.com/vote/producers

and then,

8. Lynx mobile wallet for iPhone: https://apps.apple.com/us/app/eos-lynx/id1401398759

9. EOS Knights game for iPhone: https://eosknights.io/

10. Prospectors Gold for desktop (log in w/ Scatter): https://prospectors.io/

11. EOS Exchange NEWDEX (log in w/ Scatter): https://newdex.io/

12. Request an invitation to Voice at https://voice.com/

These represent only a handful of the 350+ dapps already launched on the EOS network.

Important note: YT video how-tos are great if you get stuck. See the list of great EOS-focused YouTube channels below.

Twelve steps to wake up and start backing EOS.

God speed,

Rich

P.S. EOS is already the #1 cryptocurrency in China.

P.P.S Other YouTube channels w/ helpful grassroots EOS How-To videos:

Everything EOS (especially for devs)

Colin Talks Crypto

Crypto Tim

The Awakenment

EOS San Diego

Investing With a Difference

About Me (Bio):

I approach the subject as a retail/tech entrepreneur with a consulting background. I’ve started two mobile app companies in mobile payment and enterprise management, and one brick/mortar retail company that grew to five locations. Early in my career I worked for a consulting group that performed due diligence services for the largest companies in the aerospace/defense sector. I’ve also worked as an independent contract consultant for a top-3 telecom company conducting a global market entry strategy for the cloud infrastructure (IaaS), platform (PaaS), and software (SaaS) sectors. I recently spent six weeks as a Project Director at a Blockchain startup incubator in Koh Phangan, Thailand, called Master Ventures. I have an MBA (2010) from a school that I’m proud to say ranks #1 the world in business ethics (for reasons). I’ve advised startups in Harvard’s Innovation Lab. Presently I’m in Boston thinking about how to best get the message out about EOS and participate in what I believe represents a promising sort of digital cultural (and peaceful) revolution.

EOS Wallet Address (every EOS counts): RichJDowning