What is EOS?

EOS is the name of a cryptocurrency that runs on the EOS.IO blockchain protocol. EOS.IO’s creators, Block.one, concluded a $4.1 billion raise for the protocol in a token sale back in July 2017—before they had even finished building the technology.

The huge raise, the largest of its kind, was part and parcel of the heyday of the Initial Coin Offering boom of 2017 and 2018, where it seemed that almost anything with “blockchain” in the title could raise millions in an instant.

The coin was at its most successful shortly after launch. While most blockchains set new all-time highs for their native cryptocurrencies in 2021, EOS only rose to $14.37 on May 11, far less than its all-time high of $22.89 set on April 29, 2018.

As of September 2021, EOS is the 40th largest cryptocurrency with a market cap of $3.7 billion—its fully diluted market capitalization, the result of the calculation of all the tokens that could ever be minted—is around the value of its landmark ICO.

But what is EOS, what’s its story, and how can you buy it?

How EOS works

EOS.IO is a blockchain, just like the Bitcoin or Ethereum blockchains. Blockchain are huge virtual payment networks that record transactions on a decentralized ledger. Instead of large banks or governments validating transactions, other computers on the network check that everything is kosher, and earn cryptocurrencies—the digital money that runs on these blockchains—as a reward.

But EOS.IO is very different from Bitcoin or Ethereum. The Bitcoin blockchain, created in 2008 as the original blockchain network, let anyone validate transactions, and rewarded people who used the most computational power. The beefier your computer, the more Bitcoin you’d earn as a reward.

EOS.IO, on the other hand, uses a consensus mechanism called delegated proof-of-stake. This lets EOS token holders vote for a small number of people who can confirm transactions, which are batched together as “blocks.” It’s a little like voting for a new prime minister in a democracy: Everyone chooses to delegate the decision-making power to one statesperson. Delegating power to a small number of people speeds up the blockchain and lowers transaction costs.

However, while most democracies function on a “one-person, one-vote” principle, each EOS can be used to vote on 30 prospective block producers simultaneously. Plus, anyone who timed the market right and bought EOS when it was very cheap got access to that vote for less than anyone else. So, large bagholders can choose who to keep in power.

EOS is one of several projects that run on the EOS.IO architecture. Others include WAX, Telos, and Upland. Each project selects different parameters around voting and delegation. On the EOS project, there are 21 block producers, and they can change at any time.

In addition, votes “decay” over time. Those who resubmit their votes weekly continue to have high vote strength. Top crypto companies, including Binance, Bitfinex, and Huobi are among the 21 block producers on EOS.

Some people think that the low number of block producers and low voter turnout and that several voting pools are managed by large cryptocurrency companies, means that EOS is more centralized than other networks like Bitcoin.

A research paper by Binance found that the network structure “may lead to an aristocracy, as rich individuals are in a ‘virtuous circle’ where they can amass an increasing amount of votes, as they earn income from using them.”

These block producers can vote for themselves through proxies, or register themselves as block producers under different names. On the other hand, block producers and voters change frequently and must, to an extent, submit to the demands of the people that voted them in.

Aside from questions of decentralization, EOS supports a wide variety of dApps, or decentralized applications. However, EOS is far less popular than other smart contract networks like Ethereum, Solana, or Binance Smart Chain.

As of this writing, on a dismal day in September 2021, only about 50,000 people had used EOS dApps in the past 24 hours. By contrast, 321,000 people had used PancakeSwap, a decentralized exchange on Binance Smart Chain. Development activities on EOS close to flatlined in the summer of 2021.

But EOS dApps exist nonetheless and some have found moderate success. One of the most popular apps is Upland, a property trading game that lets you trade virtual renditions of real-world addresses. Another is Everipedia, a decentralized version of Wikipedia that is hosted on IPFS, a decentralized web hosting service that’s difficult to shut down.

Who created EOS?

EOS.IO, the broader framework for EOS, was created by Brendan Blumer, Dan Larimer and Brock Pierce of American software company Block.one. Larimer, who served as the Chief Technical Officer of the company but left Block.one in January 2021, also worked on social network blockchain Steemit. Pierce, a former child star who appeared in the early 90s sports flick The Mighty Ducks, left the company in March 2018.

Block.one also created Voice, a decentralized social network that wants to rival Facebook. However, Block.one detached itself from Voice shortly before its launch and the company now runs independently.

An EOS overview

As of late September 2021, there are 959 million EOS tokens in circulation, each worth $3.85. About $1 billion in EOS tokens trade hands each day, and most of the trading takes place on centralized cryptocurrency exchanges.

The total supply of EOS isn’t capped. It increases at an annual rate of 1%, and the extra tokens are paid out to block producers as their reward. The inflation rate of 1% is a decrease from a previous rate of 5%. A report commissioned by Block.one has subsequently recommended that the rate of inflation increase to between 1.3% and 3.8% to increase the incentive of producing blocks.

The value of EOS can change dramatically. Crypto trading takes place 24/7 and is entirely dependent on market forces. In October 23, EOS hit its all-time low of $0.48. But by the following April, EOS had increased to $22.89, a rise of 4,668% in around six months.

And in the months following that rise, EOS crashed again, falling to as low as $1.74 by July 2018. The price of EOS didn’t budge by much until May 2021, when it rose to highs of $14.37 during the bull run of that year. As of this writing, about six months later, EOS has fallen to $3.87. All this is to say that, historically, EOS has provided investors with a very bumpy ride.

The most popular trading venue for EOS is Binance, where the EOS/USDT pairing (USDT is a stablecoin called Tether) accounts for 5.53% of all trading volume. Binance pairings account for four of the top ten most popular markets for EOS.

After the EOS/USDT pairing, the next most popular pairings for EOS are on Huobi Global, Bithumb and Gate.io, mostly for stablecoins pegged to the US dollar or fiat currencies themselves. As of this writing, Wealthsimple doesn’t offer EOS.

How to buy EOS?

The way to buy EOS on centralized exchanges is simple: create an account and fund it with tokens or fiat currencies (fiat currencies are regular money, like the US or Canadian dollar, or the South Korean won). Then, buy EOS tokens with your funds on the exchange.

It’s usually cheaper to use the more advanced, graph-heavy trading view rather than interacting with any brokerage services the exchange might offer. Note that regulation around cryptocurrency exchanges is sparse, depends on location, and is still being built up; some exchanges are uninsured and others have turned out to be scams.

If you like (and if the exchange permits), you can then withdraw your EOS tokens to your own non-custodial wallet. The crypto community’s adage, “not your keys; not your coins,” underscores the importance of non-custodial wallets—only the person with the private key to that wallet can access the coins within.

Creating an account on cryptocurrency exchanges usually requires the submission of a piece of identification, such as a driver’s license or passport.

Some exchanges, such as Binance, aren’t available in Ontario.

EOS isn’t the only coin on the EOS project. Within EOS, there are three different resources: RAM, network bandwidth (also known as NET) and CPU bandwidth, usually shorted to CPU. CPU is required to execute transactions, NET is the amount of capacity left on the EOS blockchain and the supply of RAM increases each day.

You can trade CPU and NET on EOS REX, the EOS Resource exchange. You can lend to REX, and earn CPU and NET by staking (locking up) EOS. REX offers interest rates of under 1% APY, and usually 0.5% APY. All these returns are paid out in EOS-related currencies, meaning that the total return in dollar value depends on the EOS market, which can be highly volatile.