After Bitcoin, Ethereum is the second best-known blockchain project in existence. But knowing of its existence isn’t the same as knowing what it actually is. That’s why this article will examine Ethereum as well as its main rival EOS. What are both projects, and how do they differ from each other? Which project is best for gaming? And which one is likely to come out on top? Find out here.
What is Ethereum?
Although Ethereum is often associated with Bitcoin, the two are very different projects. Whereas Bitcoin is mainly a cryptocurrency (BTC), Ethereum is a platform on which developers can build decentralized applications (DApps).
Ethereum does have its own cryptocurrency (ETH), but it’s used to pay for transaction fees and computational services on the Ethereum blockchain, not as a digital currency to exchange for goods and services outside of Ethereum.
Compared to other blockchain projects, Ethereum has been around for a while. It was launched in August 2014 by the Ethereum Foundation, a Swiss not-for-profit led by Russian-Canadian whizz-kid Vitalik Buterin. The Foundation currently still monitors the development of Ethereum in ways similar to how ICANN monitors the Internet.
The Ethereum blockchain was the first project that allowed developers to create smart contracts: applications that can exchange value between two parties without the need of a third party. Ethereum’s smart contracts are coded in Solidity, its own programming language.
Ethereum was also the first project to allow other projects to launch their own token on the Ethereum network. These Initial Coin Offerings (ICOs) have become incredibly popular. 2017 saw 456 ICOs for a total of over $6 billion invested in blockchain startups.
The vast majority of these ICOs were held on the Ethereum blockchain and have spun off many great projects, from gaming DApps to decentralized exchanges. Popular Ethereum-based projects are OmiseGO (OMG), Golem (GNT), Augur (REP), and WAX (WAX).
In fact, Ethereum’s rival EOS started out on the Ethereum blockchain too.
What is EOS?
Just like Ethereum, EOS is a blockchain platform that developers can build DApps on. Just like Ethereum, it consists of two key elements: the platform EOS.IO and its cryptocurrency EOS. The project is still very new. Its white paper was published in 2017 and the EOS.IO open-source platform was launched only on June 1 of 2018, a few months from the time of writing.
EOS.IO is developed and updated by Block.One, which consists of Brendan Blumer as CEO and Dan Larimer as CTO. Blumer has been a tech enterpreneur since 2001, when he built okay.com, now Hong Kong’s largest digital property agency. Larimer is the founder of BitShares as well as Steemit, the first blockchain social media platform.
The team behind EOS is ambitious. That ambition was reflected in their year-long ICO, which concluded in June this year. They raised a total of $4 billion. It was the largest ICO by far, more than twice the size of Telegram’s (also respectable) $1.7 billion.
So this team has expertise and certainly money as well. But how does it differ from Ethereum, and why do its supporters call EOS the Ethereum killer?
Advantages of EOS over Ethereum
EOS focuses on the critical pain points that come with building on the blockchain: speed and scalability. The speed of a blockchain project can largely be measured by Transactions Per Second (TPS). The higher the TPS of a blockchain project, the faster it can verify and add transactions to its blockchain. This means users won’t experience delays when they’re doing their transactions.
Blockchain projects like Bitcoin and Ethereum are slow, processing 7 and 15-20 TPS respectively. This is partially by design, because an entirely decentralized network requires 51% to verify a given block of transactions.
Getting to 51% takes time, particularly if an increasing number of transactions are crammed into a single block. It’s what makes Bitcoin and Ethereum difficult to scale, and also what made Ethereum crash in December last year, because of the popularity of CryptoKitties, a game built on Ethereum.
But EOS has a TPS all-time high of almost 4,000. Significantly faster than Ethereum. They have a much higher TPS because EOS runs on a Delegated Proof of Stake (DPoS) consensus mechanism, where only 21 nodes have to verify transactions blocks, while Ethereum runs on Proof of Work (PoW), which requires 51% of its entire network to agree on transactions.
The second big advantage of EOS over Ethereum is how its cryptocurrency is used. While on Ethereum, developers have to spend “Ether” to do any kind of transaction on the Ethereum blockchain, EOS developers only have to hold EOS tokens. Transaction fees are eliminated with EOS, and developers can use EOS resources in proportion to the stake they’re holding.
This is a much improved experience for the developer as well as for the user. Anyone who’s ever tried to play a game based on Ethereum knows they have to pay fees to the Ethereum network for anything they do. For example, playing chess on an Ethereum-based chess game could mean you’ll have to pay some Ether to move your pawn two places forward.
For a large part, these fees go to Ethereum miners, who give their computational power to process transactions in exchange. It’s how the network stays alive, but it’s not a great user experience regardless.
Transaction fees are gone with EOS. Individual developers can determine themselves how (and if) users will pay transaction fees. It’s much more user-friendly and makes it easier to scale a DApp and tap into a bigger audience.
Advantages of Ethereum over EOS
The Ethereum Foundation knows that TPS are a significant hurdle for Ethereum. As such, they’ve been working on two new pieces of technology (Sharding and Plasma) that would allow Ethereum to scale up to 1 million TPS.
Additionally, Ethereum has the advantage of having been around longer and as a result having a much bigger community, many more developers, many more ICOs, and many more DApps built on it. This is momentum that’s likely to continue for some time in the future.
Ethereum also beats EOS hands down when it comes to security. EOS has a shaky security history, with multiple breaches of its MainNet right after its launch in June, frozen user accounts, and hacked DApps built on EOS.
Ethereum is also a much more decentralized blockchain. EOS, with it requiring only 21 nodes to verify transactions, is much more centralized. Then again, this centralization does offer the benefits of a higher TPS and a more scalable blockchain, so there’s no right or wrong here.
And finally, there’s no real reason to spend the EOS cryptocurrency. You only hold it, and you never actually spend it. While that’s a good thing, because it helps eliminate transaction fees and you get to keep your investment, you can’t really do anything with the coin apart from holding it to transact.
Gaming DApps Compared
If the idea of both blockchain projects is to become the platform for DApps, it only makes sense to review some of the stats of each blockchain. Below findings come from our free DGaming October industry report, which goes in much more detail on the specific DApps of both Ethereum and EOS.
What’s apparent from above screenshots is that gambling has by far the biggest volumes on both the Ethereum and particularly the EOS blockchain. EOS dwarfs Ethereum in terms of total volume, but this should be taken with a serious pinch of salt. There have been many reports of EOS bots (1) (2) (3) manipulating the data, something that’s easier to do because there are no transaction fees.
Who Will Win?
First of all, a disclaimer: it’s unlikely that there will be a single blockchain platform for DApps in the future. Everything we’ve built up as a species offers some kind of choice. Full monopolies are far and few between, and it’s unlikely there will be one here.
But a dominant blockchain platform is likely to emerge. Facebook has become the dominant social media platform, whereas other social media platforms have their particular niche: Twitter for news and journalism, Snapchat for youngsters, etc...
As it stands, EOS can pretty much do everything Ethereum can do, just without fees. That sounds pretty good, but whether it will succeed in taking over will depend on the amount of developers on the platform, how good their EOS DApps are, security developments and how fast Ethereum catches up with EOS’s feature set.
This being said, it’s possible neither EOS or Ethereum becomes the dominant platform. Other platforms like TRON and NEO (both Chinese projects) also allow for developers to build DApps on them.
The market could also move towards a model without a dominant leader, but with several DApp platforms that each serve a niche. For example: EOS for games, Ethereum for business DApps, and TRON or NEO for DApps in the East.
Or a yet to be developed platform currently lurking in the mind of a developer could take it all. In the blockchain industry, things move so fast there’s a big chance everything will look very differently in even only a few months.