How EOS Broke the Tradeoff between Performance and Decentralization

And How EOS Leapfrogged the Competition While Shifting Power to The Token Holders

One of the first things we all came across when learning about the EOS network is the sweet refrain found front and center on the Block.one website to ‘Decentralize Everything’. It’s a powerful idea of simple elegance that speaks to me.

Hundreds of people, many of them strangers to each other, connected around the world, working in multiple languages, in waves of activity following the sun, came together collectively, yet individually incentivized, to lift up into existence a global platform of free expression, already worth $Billions at birth, with no one single person in charge. A truly brilliant moment for mankind. Sincere gratitude to Daniel Larimer and Block.one and everyone that has contributed. Thank you for your courage to be bold, for working from your heart and doing good. Thank you!!!

EOS Performance Leapfrogged to the Top

Crypto Transaction Speeds — Check the article above for a Performance Review of EOS in addition to Bitcoin, Ripple, Bitcoin Cash, Litecoin, Ethereum, Nano, Augur, Dash, Tron, Cardano, Iota, Zcash, Monero, Stratis, Dogecoin, Vechain, Steem, Ardor, Nem, Stellar, Spectracoin, Neo, Golem, Bitshares, Electroneum.

EOS has already proven greater capacity than any other chain. The network is working; the protocol that is a blockchain has gone straight to the front of the line, straight to the top of the performance charts.

Question: How did EOS Achieve the Speed?

How is EOS able to produce more transactions per second than any other chain? What is EOS doing that is different from other chains and how does this relate to the hot question of decentralization?

To answer those questions we have to understand how most of the other chains perform the core operation that is central to all blockchains; consensus.

A Consensus model is the means by which blockchains decide which transactions are to be considered valid and in what order.

The Proof of Work(PoW) Puzzle

Consensus can be reached in more than one way. The most popular manner of consensus in use today, and the one that was used by Satoshi Nakamoto thru Bitcoin and also employed by Ethereum, is Proof of Work(PoW). PoW is an ingenious mix of technology and incentive economics. Under PoW, block miners, whose role is to validate transactions, are required to solve a cryptographic puzzle; essentially a math puzzle that is impossible to solve without access to hardware, software, technical talent and LOTS of electricity which all costs… LOTS of money. Today, it is estimated that the total electricity required to produce all cryptocurrencies is equivalent to the electrical consumption of the entire country of Iceland.

Yes, we’re talking about a math puzzle that is intentionally designed to burn valuable resources in an effort to drive the cost of cheating or gaming the system higher than the benefit of receiving the rewards for doing the job of validating transactions and generally not corrupting the data. If those are the token economics behind Proof of Work(PoW) block production, how did the EOS design-shift from PoW to Delegated Proof of Stake(DPoS) leap so far ahead on performance?

Delegated Proof of Stake (DPoS)

Answer: EOS cut the Puzzle

The Short Answer is they removed the cryptographic puzzle from the process. Yes, they removed the thing that by design was costing electrical bills the size of entire countries while making things work slower. Instead of requiring the PoW MINERS to solve a puzzle FOR EACH BLOCK to prove that they have done the work, spent the electricity for mining a valid block as is the case for Bitcoin and Ethereum, EOS BLOCK PRODUCERS are incentivized by the fact that they can be voted in or out of a lucrative income stream EVERY TWO MINUTES by you and me, the EOS token holders. Yes, that is Delegated Proof of Stake(DPoS).

In fact every two minutes, EOS BLOCK PRODUCERS can be;

voted in or out of the top 21 Elected Block Producer positions as determined by the number of votes by EOS Token Holders,

voted in or out of the Backup/Standby Producer position for having more or less than .05% of the total votes cast.

Explaining the Role of an EOS Block Producer

The money that block producers earn thru block rewards aligns their incentives with the interests of the EOS Token Holders who determine their fate thru votes EVERY TWO MINUTES. This alignment of economic incentives allows EOS to eliminate the need for the time and energy expensive cryptographic puzzle and gain record performance. That’s the key!

It’s All About What Drives Incentive Alignment

Remember, the cryptographic puzzle used in PoW makes it more expensive for block miners to cheat, thereby encouraging them to do their job and play the game honestly by confirming valid transactions. That’s how the PoW incentives are aligned to allow and promote economic value to flow. On the other hand, EOS shifts the economic incentive mechanism from cost the of the cryptographic puzzle to the benefit of economic gain. In the former, PoW block miners are spending computational energy(electricity) to prove the alignment of their incentives with token holders and in the later DPoS case, voter will as expressed by token holder voting, aligns the incentives of DPoS block producers with token holder interests.

It’s All About Mass Adoption

Ok so now we know that DPoS is more efficient in terms of performance as it completely skips the pointless puzzle work, that is clear. As of this writing, EOS has an all time high of 3996 transactions per second where Ethereum and Bitcoin are 17 and 3 respectively. Blocks that are produced by Ethereum can take a few minutes and blocks produced on Bitcoin are fixed at 10 minutes. Now imagine having a online chat with someone and having to wait minutes between responses. Or standing at the cash register at your local coffee shop waiting minutes for your payment to process. No one is going to tolerate that kind of lag time. You can imagine all the scenarios; you’re pumping gas, you’re shopping for groceries, you’re renting a car, etc. You can completely forget about playing any kind video game. You get the point. It’s just too o 0 o 0 0 oo o SsSsssl oooo www.

It’s All About Our Freedom to Associate, Express and Transact

Now imagine EOS transactions being produced every half second. Your chat happens just like it always has. Your coffee, gas and groceries are paid for and confirmed in the same moment. This is what mass adoption looks like. This is what we are all familiar with in today’s connected world. This is what EOS represents; the next step towards a decentralized system that can meet the demands of our everyday life, without making us wait, completely peer to peer, and out of the hands of any central authority as the mysterious founder of Bitcoin and arguably the entire cryptocurrency revolution Satoshi Nakamoto envisioned.

The DeCentralization Debate

Some people are calling EOS and it’s DPoS system of 21 block producers centralized. The internet is filled with these claims. The claim states that by having 21 elected block producers decide which transactions are valid and which ones are not, we are centralizing power to those 21 block producers. This couldn’t be farther from the truth.

Considering that most other blockchains have become dominated by a few mega miners that determine the fate of every transaction on their chains, 21 EOS block producers seems relatively democratic. And here is the real key difference that makes EOS more decentralized. The mega miners of the other blockchains can’t get voted out! On the EOS blockchain, block producers have a term limit of two minutes. In fact EOS is far more decentralized than any other chain because the power vested in the 21 block producers can be revoked by the vastly greater community of voting EOS token holders. In the EOS blockchain, the power to validate transactions, to determine the state of the chain itself, has been delegated to block producers but can be withdrawn by EOS token holders EVERY TWO MINUTES.

Conclusion

So in fact the real power lies not in the 21 block producers themselves but the many EOS token holders determining whether they have a job or not EVERY TWO MINUTES. As of this writing, the total number of EOS token holders is 305,931. If you compare that number to the handful of miners that control the other major chains, it’s not even close. That is precisely how EOS has leapfrogged all other blockchains in performance while INCREASING decentralization and setting the stage to either disrupt or host the largest players in all major sectors.

If you are wondering why people like Eric Schmidt, the executive chairman of Alphabet Inc(parent company of Google), who has access to arguably the best business intelligence in the entire history of commerce, has invested millions of dollars into EOS, well…now you know.

In my next article,

I will outline a radical proposal for the governance of the EOS ecosystem. I choose the word ‘radical’ very carefully as it is an interesting word with multiple and very different definitions. One definition describes ‘radical’ as ‘fundamental’ while another describes it as an ‘extreme’ and yet another as slang for ‘excellent’ and ‘cool’. I believe all are true and you will learn why.