Obviously, you’ve heard of the two most popular smart contract blockchains, but which is better, EOS or Ethereum? Perhaps you would like to compare the two technologies? Well, you’ve come to the right place, because I’m gonna tell you everything you need to know!
In this EOS vs Ethereum guide, I will first explain the basics of each project and then outline the execution of each blockchain. This will include things like transaction times, transaction fees and scalability.
After that, I’ll briefly describe how to verify transactions without a third party. This will include a comparison of Proof of Work used by Ethereum to the Delegated Proof of Stake used by EOS.
Finally, I’ll give my own thoughts on where I think each blockchain is headed in the future. So by the end of reading my Ethereum and EOS guide, you will be able to determine what the best option is!
What are you waiting for? Let’s first find out the basics of each blockchain!
basis
What is Ethereum?
Ethereum was launched in 2015 by a young Canadian-Russian programmer, Vitalik Buterin. It is a blockchain platform that allows people to send and receive funds without the need for a third party, such as a bank.
The Ethereum project became the first to install a blockchain protocol called smart contract technology, allowing strangers to sign agreements in a trustless environment. The technology is based on pre-defined conditions that, once met, allow smart contracts to automatically release funds without the help of a middleman.
To give you an idea of how much potential it has, check out the following example:
- James owns a farm. If it doesn’t rain for more than seven days, he decides to take out insurance.
- Instead of using a third-party insurer, James decided to join a smart contract.
- To activate the smart contract, James deposited the premium.
- Smart contracts can analyze thousands of web pages to check weather history.
- If it doesn’t rain for more than seven days, the smart contract will automatically pay James. If it rains, James will lose his insurance premiums.
- All of this is possible without a third party insurance company!
The examples above can be used in many industries, including banking, energy, lotteries and even political elections!
Ethereum also has its own cryptocurrency, called Ether (ETH), which is traded on most cryptocurrency exchanges. In all, more than 100 million tokens are in circulation. While there is no limit to the number of tokens that can be issued, Vitalik Buterin suggests there might be a limit to more tokens being created.
Just like Bitcoin, the Ethereum blockchain is decentralized, meaning no one controls it. This prevents any single person or institution from changing or modifying the data published to the blockchain.
Instead, transactions are confirmed by the Ethereum community, which rewards them in return for providing additional computing power. I’ll discuss this in more detail later.
So, now that you know some of the basics of Ethereum, the next part of my Ethereum and EOS guide will discuss the basics of EOS!
What is EOS?
EOS is one of many alternatives to Ethereum. This is a brand new blockchain project that is also capable of handling smart contracts. Block.One, a cayman Island-based company, first launched the project in 2017.
The development was led by Daniel Larimer, who also created the highly successful projects BitShares and Steem. Larimer’s other projects have been so successful they are now worth billions of dollars!
EOS recently made history when its year-long initial coin offering (ICO) raised more than $2.5 billion. That makes it one of the biggest ICOs ever! Just like Ethereum, EOS has its own cryptocurrency that can be used to send and receive funds, wallet to wallet.
The ultimate goal of EOS is to become the fastest, cheapest, and most scalable smart contract blockchain in the world. As a result, it hopes to win a large share of ethereum’s market.
The EOS blockchain is also decentralized, meaning it is not controlled by any single person or entity. Like Ethereum, transactions are verified by the community.
Interestingly, EOS tokens were originally built on top of the Ethereum blockchain, which means they are ERC-20 tokens. However, after the mainnet was released in June 2018, the team began exchanging these tokens for official EOS tokens that are now supported by the EOS blockchain.
According to the developer, it is hoped that the total SUPPLY of EOS tokens will initially be capped at 1 billion tokens with an annual inflation rate of 5%. I’ll explain that in a later post!
Although EOS and Ethereum sound very similar, there are actually some significant differences that make them very different. So the next part of my Ethereum and EOS guide will look at the performance of both blockchains!
performance
The etheric fang
As the first and original smart contract blockchain, it is important to understand how it handles transactions. First, it takes an average of 16 seconds to verify a transaction on a public blockchain.
This includes financial flows and the recognition of smart contracts. In practice, there is no difference between the sender’s position and the receiver’s, and the transaction time is always the same. That’s really impressive, since it can take up to three days for banks to process international payments.
What about transaction fees? When Ethereum was first launched in 2015, it was possible for networks to verify transactions for less than a penny. As time goes by, more and more people start to use it, which has slowly increased.
The most expensive period was as early as December 2017, when the average cost of sending a transaction was $4. This makes Ethereum unsuitable for transferring small amounts of money. Fortunately, this has been reduced to less than $1, but prices can easily revert to high transaction costs if the network gets very busy again.
The most worrying aspect of the Ethereum blockchain is the scalability of transactions. Scalability refers to the extent to which a network can handle a large number of transactions at once. For example, Visa can process up to 50,000 transactions per second, and the systems used by the banking industry can do much more!
However, in ethereum’s case, the blockchain can only handle a maximum of 15 per second. This is a major issue that will not achieve global adoption if it is not addressed. Fortunately for ETH investors, the Ethereum team is working on some different solutions to this problem, which I’ll discuss below.
Anyway, now that you know how Ethereum performs, the next part of my EOS vs. Ethereum guide will look at how EOS compares!
EOS
Before I go on, it’s important to understand this key difference in the EOS versus Ethereum discussion. While Ethereum is a highly mature blockchain project with a fully functional platform, EOS is still in its early days. Of course, the team has some ambitions.
There is no way to guarantee that they will achieve all their goals until they have a finished product. However, let’s look at what the EOS team hopes to achieve.
The primary target market for the EOS platform is decentralized applications (dApps). In essence, Dapps are like the Internet or mobile apps like YouTube, Facebook and Gmail, but they don’t have a centralized point of control, they are decentralized!
For more information about dApps, click here to read this!
Ethereum is currently stuck at 15 transactions per second, while EOS plans to raise the bar and scale up to millions of EOS transactions per second. This makes it not only the most scalable blockchain in the industry, but also capable of handling any real-world application.
For example, did you know that more than 52,000 Facebooklikes occur every second of every day? Each Like is actually a single data transaction that the system must process. If these scalability goals can be achieved, applications like Facebook will be a good fit for EOS.
As of this writing in July 2018, EOS has successfully managed 1,000 EOS transactions per second. The team succeeded in the testing phase three months ago. This is clearly better than Ethereum, but it is far from the ultimate goal.
Well, what about the charges? According to the EOS White paper, there are no transaction fees to pay when sending and receiving funds! The reason the network can do this is because when people help validate transactions, they are rewarded with newly created EOS tokens (which I’ll discuss in the next section).
The EOS white paper also states that the blockchain takes only 0.25 seconds to confirm a transaction with an efficiency of 99.9%, and after 1 second it is 100% efficient!
In short, if EOS can achieve its goal of near-instant and free exchange, and scale to millions, there will be no other competing blockchain in the industry.
Here’s a comparison chart to review some of the things said so far!
| Blockchain platform | Consensus mechanism | Transactions per second | The market value | Loop supply | The release date | team | Transaction costs |
|---|---|---|---|---|---|---|---|
| EOS | DPoS | 1,000+ | 6.9 Bil | 896 Mil | In June 2017 | Block.One | Free |
| ETH | PoW | 15 | 44 Bil | 100 Mil | In July 2015 | Ethereum Foundation | < 1 $ |
So, now that you know what Ethereum can do and what EOS plans to do, the next part of my EOS and Ethereum guide will look at how two blockchains confirm transactions.
Reach a consensus
The etheric fang
Before I continue, I just want to make sure you understand what consensus mechanisms mean. Because blockchain is decentralized, transactions can be verified without the use of intermediaries.
Different blockchains reach consensus in different ways. So they both confirm that the transaction is valid, but in different ways.
Ethereum uses a consensus mechanism called proof of work, the same as other popular blockchains like Bitcoin, Bitcoin Cash and Litecoin. Here’s how it works:
The blockchain creates a random puzzle that must be solved before a transaction can be confirmed. However, the puzzle is so difficult that no one can solve it. Instead, it requires a computer (or node node) to solve it.
Anyone who decides to contribute to the Ethereum network can do so by connecting a GPU device to the network. These people are called miners, and there are thousands of them competing to be the first to solve the problem. Whichever device solves the puzzle first gets an Aether bonus!
While this is a good system for keeping the network decentralized, there are some major problems. First, because the problem is difficult, the computing power required is very high. That means it consumes a lot of electricity, which is expensive and bad for the environment.
In addition, the scalability issue of 15 transactions per second mentioned in this EOS and Ethereum guide is due to proof-of-work limitations.
That’s why the Ethereum team plans to change their consensus mechanism to something called Proof of Stake. Proof of Stake is not only more context-friendly, it also allows the network to process more transactions.
Ethereum also hopes to install two new protocols, called Sharding and Plasma, which will increase the number of transactions the network can handle. Eventually, hopefully, these solutions will allow Ethereum to process thousands of transactions per second.
So, now that you know how ethereum transactions are handled, the next part of my EOS and Ethereum guide will discuss how EOS does it!
EOS
Unlike Ethereum and its proof-of-work model, EOS does things differently. The consensus mechanism used to support the network is called certificate of Share Authorization (or DPoS). Interestingly, DPoS was invented by EOS founder Dan Larimer!
To clarify, the certification system allows anyone with a certain number of tokens to help verify transactions over the network. Winning this verification opportunity depends on the number of tokens you hold.
For example, if you hold 5% of the total supply, you basically have a 5% chance of winning a mine every time you create a new block.
In DPoS, on the other hand, you don’t have to hold a token to verify a transaction. However, it allows you to vote on who should validate the transaction. In a way, it’s like a democracy.
The people you can vote for are called Block Producers, and these are the people who validate the deal and get a reward. EOS has a total of 21 block producers responsible for keeping the network secure.
If block producers do not do their job properly, they will be replaced by another block producer. It’s like voting in an American election. Should we keep Donald Trump, or replace him?
Next, you may remember that IN the previous Ethereum and EOS guide I said that EOS transactions are free. But if that’s the case, how do community producers get rewarded for their time? Well, this is where things get interesting!
In fact, with this EOS solution, the total supply of EOS tokens will increase by 5% per year. This is similar to real world inflation, where the central bank prints more money. Of this 5%, 1% is given to the block producer as a reward for verifying the transaction, meaning that the user does not pay any transaction fees when sending funds.
In any case, while the EOS blockchain and its DPoS consensus are still being built, it’s important to remember that BitShares (also founded by Dan Larimer) also use DPoS. The Bitshares network can scale to 100,000 transactions per second, so that’s a good sign!
So, now that you know how each blockchain confirms transactions, in the last part of my EOS and Ethereum guide, I’ll let you know what I think about the future!
How does EOS compare to Ethereum in the future?
I just want to make it clear that any predictions I make are my own. The most important thing is that you do your own independent research.
First, no matter which side of the EOS versus Ethereum argument you are on, both projects are doing very well in the cryptocurrency market.
Ethereum is the second most popular cryptocurrency in the world, behind Bitcoin. In 2017, its value increased by more than 10,000 percent to an all-time high of $130 billion. Not only that, there are hundreds of cryptocurrency tokens built on top of the Ethereum blockchain, but it also has over a thousand DApps.
Speaking of EOS, although it is still in its early days, it is doing very well. As I mentioned earlier in the EOS and Ethereum guide, the project raised over $2.5 billion during the year-long ICO.
During icOs, investors bought, sold and traded EOS tokens, driving EOS to a market value of more than $17 billion. This is very impressive for a project that has yet to release its final product.
However, EOS has yet to achieve what Ethereum has achieved. Still, if EOS can achieve their goals, it will be a better blockchain than Ethereum.
If EOS can achieve real-time, free and millions of EOS transactions per second, ethereum will struggle to match this level of performance. However, if Ethereum can successfully implement Proof of Stake, Sharding, and Plasma, I think it will be tough for ethereum alternatives to surpass Ethereum.
But as we are seeing with EOS, there is no guarantee that they will deliver. Let’s be reminded that the cryptocurrency market is an unpredictable business and one of the fastest changing industries in the world!
Therefore, all you can do is check the development progress of both blockchains for regular updates!
Conclusion of ethereum and EOS comparison
My EOS and Ethereum guide is coming to an end. As usual, I hope you find this interesting, but most of all – very informative!
If you’ve read this guide from start to finish, you should now know what EOS and ethereum blockchains are technically doing, and what they plan to do in the future.
Not only that, you should also understand the difference between proof of work and proof of share authorization, and the differences between the two consensus algorithms.
As I mentioned earlier, the EOS versus ETH debate is divisive. I understand both sides of the argument because while EOS has the potential to be the best performing blockchain in the world, Ethereum is already the second most popular cryptocurrency in the industry. So, it’s a difficult question to judge.
Ultimately, I think it’s a war of technology. Well, let’s see how each blockchain performs in a year’s time, then maybe we’ll be able to make a decision.
Anyway, I hope my tour has helped you find some unanswered questions. Now, with your newfound knowledge, which blockchain do you prefer, and why? Or do you think there is a better alternative to Ethereum than EOS? Please tell us!
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