What is EOS? (Beginner’s Guide) Part 1

Social Media and forums have been buzzing with information about EOS, and for great reasons. Their yearlong ICO smashed all of the documents by set a staggering $4 billion. Plus, all of the drama surrounding their mainnet launch has definitely set them under the spotlight. EOSIO Dawn 4.0 brought along a great deal of intriguing creations and speaking points. Inside this guide, we’re planning to do a deep dive of all of these intriguing capabilities.

What is EOS? (Beginner's Guide) Part 1

So what is EOS?

EOS are planning to become a decentralized working system that may encourage industrial-scale principal software.

That seems pretty amazing but what’s actually captured the public’s imagination is the following two claims:

  • They are claiming to have the ability to conduct millions of transactions per second.
  • They are planning to completely remove transaction fees.

So, how are they planning to bring along all these innovations? You can check out our in-depth guide to get all the details, however, we will glance over them briefly here.

The Team Behind EOS

What is EOS? (Beginner's Guide) Part 1

What is EOS? (Beginner's Guide) Part 1

Image Credit: Medium

The center team supporting EOS is”Block.one”, which will be located in the Cayman Islands. Brendon Blumer, the CEO, was engaged in blockchain because 2014. He has been involved in businesses which dealt with money trades in MMORPGs and at the actual estate.

Dan Larimer, is that the CTO. He’s the founder of assigned proof-of-stake and decentralized autonomous associations aka DAOs. He’s the also the guy behind BitShares and Steem.

Now we know more about the staff behind the job, let us consider how it intends to reach both largest asserts.

Millions of Transactions per Second

EOS accomplishes its scalability through using this assigned proof-of-stake (DPOS) consensus mechanism, and this can be a version of the conventional proof-of-stake.

This is how conventional proof-of-stake (POS) functions:

  • The validators participate by locking up some of their coins as stake.
  • After that, they will start validating the blocks. Meaning, when they discover a block which they think can be added to the chain, they will validate it by placing a bet on it.
  • If the block gets appended, then the validators will get a reward proportionate to their bets.

So, how is DPOS different from traditional POS?

Firstly, anyone that retains tokens onto a blockchain incorporated into the EOS program can pick the block manufacturers through a constant approval voting strategy. Everyone can take part in the block manufacturer election and they’ll be provided an chance to create cubes proportional to the total votes that they receive relative to other manufacturers.

How does it work?

  • Blocks are produced in the rounds of 21.
  • t the beginning of each round 21 block manufacturers are selected. Top 20 are automatically chosen while the 21st one is selected proportional to the amount of the votes relative to the other manufacturers.
  • The manufacturers are then shuffled around using a pseudorandom number derived from the cube period. This is done in order to make certain a balance connectivity to other manufacturers is preserved.
  • To make sure that routine block manufacturing is preserved and that obstruct period is retained to 3 minutes, manufacturers are penalized for not engaging by being eliminated from consideration. A manufacturer must make a minumum of one block each 24 hours to take into account.

The DPOS system does not encounter a fork because rather than competing to come across cubes, the manufacturers might need to co-operate instead. In case of a fork, then the consensus switches automatically to the maximum string.

Removing Transaction Fees

EOS functions on a possession model whereby users possess and are eligible to utilize resources proportional to their own bet, instead of having to cover each and every trade. Therefore, in essence, should you maintain N tokens of EOS then you’re eligible for N*cash trades. This, basically, eliminates trade fees.

The expenses of hosting and running programs on Ethereum may be high for a programmer who would like to check their program on the blockchain. The gasoline cost involved with the first phases of development could be sufficient to turn off new programmers.

The basic difference between the manner Ethereum and EOS function is that while Ethereum rents their computational capability to the programmers, EOS provides ownership of the tools. Therefore, in essence, if you have 1/1000th of this bet in EOS then you’ll have possession of 1/1000th of the overall computational power and assets in EOS.

Just as ico-reviews states in this article:

“EOS’s possession model offers DAPP programmers with predictable hosting expenses, requiring them to keep a particular percentage or degree of bet , making it feasible to make freemium applications. Additional because EOS token holders will have the ability to rent / assign their share of funds into other programmers, the possession model ties the worth of EOS tokens to the supply and demand of storage and bandwidth

So, both of these would be the biggest USP of EOS. Now that we’ve gained a little understanding of everything EOS plans to perform, let us take a look at a few of the qualities that Dawn 4.0 intends to bring together.

EOS Dawn 4.0

EOS Dawn 4.0 is the most recent testnet version that premiered by Block. 1 before the launching of the mainnet. There are a whole lot of fascinating talking points which have come to light due to its launching. Among the largest changes that Dawn 4.0 is bringing together is altering the present period from”period of mind block” into”period of block”. With this shift, all time-related problems are rectified simultaneously.

Along with that, some of those other fascinating features that EOSIO is bringing together improving are:

  • Last Irreversible Block Algorithm

As you can imagine, there’s a great deal of content to pay and that is the reason why we believed it was wise to divide this manual into two components. This way, we could present your appropriate value without compromising due to content span. So, with no additional ado, let us start!

#1 The RAM Marketplace

Like we’ve mentioned previously when you bet your EOS tokens, you’re eligible to own resources such as RAM, Network Bandwidth, and CPU Bandwidth in return. Therefore, in essence, not only are you able to utilize EOS tokens as a very simple payment token, you may use it like a toll both that entitles you to specific resources. Having said this, these tools are extremely rare and that’s the reason why you can just continue to the EOS tokens, without using them, for a period of 3 decades. Holders using their tokens will obtain their account .

Now, in regards to resources such as CPU and Network Bandwidth, the interchange is really simple. If your plan is to market them and return your staked tokens, you’ll receive precisely the exact same number of tokens back.

But when it comes to RAM, it isn’t so easy.

You see, though these tools are infrequent, RAM appears to be much more scarce and valuable. Here is the kicker, although RAM is rare, there’s always likely to be a high need for RAM.

High performance and scalability are two of the most popular topics from the blockchain area. As a result of this, RAM is a very strong and crucial resource for blockchains. Before we proceed any farther, let us familiarize ourselves with a few of the simplest concepts in microeconomics, supply, and need.

Fundamentally, more the requirement and decrease the supply, more is going to be the cost of the goods. The supply-demand chart looks sorta like that:

What is EOS? (Beginner's Guide) Part 1

What is EOS? (Beginner's Guide) Part 1

The sweet spot where both the curves intersect is the equilibrium.

Thus, let us consider what we have here, a rare asset which will remain full of demand. That’s certainly going to influence the cost, to be exact, it will surely boost the purchase price of the advantage, i.e. RAM.

Nonetheless, in EOS, in the event that you staked a particular amount of and got a proportionate quantity of funds, then you may sell them back and find the precise amount of back. That is where we hit our first street bump. This mechanism will not work efficiently for RAM.

Consider it, ancient EOS adopters will clearly receive the RAM for fairly cheap, however since the system grows and an increasing number of programmers enter the blockchain to construct their own Dapps in addition to it, the requirement for RAM will take through the roof. Now, remember two things:

  • RAM is already a scarce resource, so the supply will be low.
  • With the increased demand, the price of RAM will go up.

Within an ecosystem in which the cryptoeconomics demands are perfectly coordinated, early movers ought to have the ability to market their RAM to get an elevated cost, but EOS until recently, treated RAM as another source.

But if you recall, EOS holders can not only hold on their tokens and do nothing for over 3 decades, so at one stage, these individuals would need to market their tokens and tools without needing any financial incentive of doing this.

In addition to this, another barrier was realized by Block.One. Different tests concluded that how the EOSIO System Contract was allocating RAM to stakeholders could necessarily result in shortages in the future.

A solution was required.

Enter, the RAM Marketplace.

By using this Bancor algorithm, EOSIO is having a market-based strategy for RAM allocation. This is how It’s going to operate:

Suppose somebody wants to purchase or sell RAM, a 0.5% commission will be billed on both the purchaser and vendor’s side. By introducing this charge, it provides a proper financial incentive to RAM sellers. Additionally, EOS also aims on controlling speculative inflation and marketing because the fees which are accumulated burnt.

Dan Larimer revealed how the calculation will probably operate on his moderate article:

“Our mathematics suggests that when 1TB of RAM was allocated to a pro-rata foundation to token holders afterward the cost-per-byte will be 0.018 (supposing $20/token). The truth is that the majority of token-holders do not really possess a busy need to utilize the RAM they may be eligible for; hence, we’re first pricing RAM at $0.000018 each byte (presuming $20/token). New accounts need about 4KB of RAM so they’ll cost approximately $0.10. Since RAM is booked the cost will automatically grow so the cost approaches infinity until the machine runs out of RAM.”

Note: He was working with a 1% fee on both seller and buyer side in his calculations and not 0.5%.

Also remember the other difficulty that Block.One desired to resolve was that the accessibility issue. A market will go a long way in ensuring that there’s a steady access to RAM. The cost of RAM will also be determined by the currently available source and it’ll be set by the computer system.

The market also introduces a different way to suppress speculation. Any cube manufacturer can only add more RAM into the market and increase the distribution. With the greater supply the worth of RAM will return.

Future Expansion

In order to understand how an asset will behave in the long run, one must know about the Moore’s law. According to Investopedia:

Moore’s law identifies an observation made by Intel co-founder Gordon Moore in 1965. He discovered that the amount of transistors per square inch on integrated circuits had doubled every year since their creation. Moore’s law predicts that this trend will continue into the near future. Even though the rate has slowed, the amount of transistors per square inch has since doubled roughly every 18 months. This can be used because the current definition of Moore’s law”

What is EOS? (Beginner's Guide) Part 1

What is EOS? (Beginner's Guide) Part 1

In accordance with Larimer, according to Moore’s law, EOS block manufacturers ought to have the ability to update to 4TB as well as 16TB of RAM. This increase in supply may reduce the Purchase Price of RAM from the Market

#2 Future Parallelism

Among the more intriguing features that EOSIO Dawn 4.0 expects to bring together is parallelism. Scalability is the title of the game these days, and everyone who’s anybody from the crypto-community is knee deep in study.

EOSIO understood that because of their Dapps to climb correctly, they have to make the most of their RAM usage. An intriguing way they are approaching that is by employing side chains with separate memory areas.


Sidechain as a theory was at the crypto circles for quite a while now. The notion is quite simple; you get a parallel series which runs together with the principal string. The side chain will be attached to the main chain with a two-way peg

The EOS programmers are planning to utilize side-chains to kill two birds with one stone:

  • To create a sense of competition between the side chains.

So, how is this going work?

The EOS block manufacturers work on the side-chain of the choice and apply the token to purchase RAM in the side-chain. The side-chains will occur after the government protocols which were laid down from the primary EOS blockchain. Every one of those sidechains can possibly have # 1 TB of the own RAM.

NOTE:  Dan Larimer said the following his Medium Post:

“Some community members voiced concern that a number of folks will derive unjustified gains by purchasing cheap RAM before anybody else could get on the series. To mitigate this, we urge that individuals who launch a series begin with an extremely limited source of RAM then slowly increase the RAM within the first two or three months. If the RAM distribution starts out in 32GB then develops to 1TB over a span of weeks afterward the purchase price of RAM may quickly drop more than 3 percent of its original pricing. Only people who actually need RAM or that variable in future RAM provide when bidding will purchase the first RAM. In any event, nobody will receive”cheap” RAM or even”free gains”

All these sidechains will acquire interoperability by being able to”speak” to each other through Inter-Blockchain Communication (IBC). Utilizing IBC, Daps is going to be able to purchase unused RAM in another sidechains, which will lead to the climbing of RAM usage.

Now remember how we said EOS is also likely to incorporate a feeling of rivalry between these sidechains? Wish to understand how it accomplishes this?

The cost of RAM isn’t fixed across all of the side chains. Therefore, a Dapp programmer can decide to run on a sidechain in which they’re receiving the cheapest RAM. This can help incentivize the sidechains to supply the very best value proposal.

Inter Blockchain Communication (IBC)

Block.One firmly believes that updating from a single-threaded implementation to some multi-threaded one is your route to scalability. So as to accomplish this, a new series with multi-threaded support implemented by precisely the exact same block manufacturers has to be launched. By doing this, ay quantity of evaluations and updates can be performed into the new chain with no dangers to the live principal chain.

That is the reason IBC is indeed crucial. It will permit these chains to communicate with one another and put down the bases for exponential scalability. It enables EOS to scale the usage of its available resources.

To be able to comprehend how it functions, you ought to be clear about Merkle Roofs.

What is a Merkle Tree?

Image Courtesy: Wikipedia

The above diagram shows what a Merkle tree looks like. In a Merkle tree, each non-leaf node is the hash of the values of their child nodes.

Leaf Node: The leaf nodes are the nodes in the lowest tier of the tree. So wrt the diagram above, the leaf nodes will be L1, L2, L3, and L4.

What is EOS? (Beginner's Guide) Part 1

What is EOS? (Beginner's Guide) Part 1

Child Nodes: For a node, the nodes below its tier which are feeding into it are its child nodes. Wrt the diagram, the nodes labeled “Hash 0-0” and “Hash 0-1” are the child nodes of the node labeled “Hash 0”.

Root Node: The single node on the highest tier labeled “Top Hash” is the root node.

What is EOS? (Beginner's Guide) Part 1

What is EOS? (Beginner's Guide) Part 1

So what does a Merkle Tree have to do with blockchains?

Each block includes thousands and tens of thousands of trades. It’ll be very time wasteful to keep all the information inside each block for a collection. Doing this will make locating any specific transaction exceptionally cumbersome and time consuming. Should you take advantage of a Merkle tree, nevertheless, you may greatly decrease the time necessary to learn whether a specific trade belongs in that obstruct or not.

Let us see this in a good example. Think about the next Merkle tree:

Image courtesy: Coursera

Now suppose I want to find out whether this particular data belongs in the block or not:

What is EOS? (Beginner's Guide) Part 1

What is EOS? (Beginner's Guide) Part 1Instead of going through the cumbersome process of looking at each individual hash and seeing whether it belongs to the data or not, you can simply track it down by following the trail of hashes leading up to the data:What is EOS? (Beginner's Guide) Part 1What is EOS? (Beginner's Guide) Part 1

Doing this significantly reduces the time taken.

Back to IBC

So, as we’ve observed, Merkle Trees are a really helpful index of displaying evidence of consumer activities to lightweight customers (through Merkle Roots). In IBC, 1 blockchain functions as a lightweight client to another. Imagine there are two chains B and A. Should Chain A accepts and logs at a trade, then using IBC, Chain B may affirm the occurrence of the function. It does so by getting messages from Chain A and after its block headers and processing all of the Merkle proofs. The signs have specific sequence numbers that Chain B may use to ensure there haven’t been any gaps in processing.

IBC involves validation of Merkle proofs from the two chains, which can be 1KB+ in dimension and demand plenty of cryptographic hash works or 15 signature verifications. Therefore, the price of validation for just one IBC 15X and at times much 30X greater than that or regular transactions.

Now you’re most likely wondering, the entire purpose of doing so is to scale upward, but this does not really look fairly scalable today, does it? Luckily, it turns out these signs are fairly straightforward to parallelize because they’re independent of blockchain state.

Rather than the condition, EOS creates Merkle tree within sequenced activity, in other words, rather than going through every individual activities, a mild client can merely check to determine the completion and confirmation of every evidence.

Consider it in this way. Suppose you get a massive account balance sheet facing you. Rather than going through the specifics of each transaction all you’re assessing is if the trade went through or not.

As this usually means that IBC’s are only successful when you will assure the completeness and arrangement of these trades, the EOS protocol has made a TCP like communication channel between the chains. Using this very simple invention an individual can quickly detect missing and from sequence proofs. To prove completeness into the specific current moment, an individual has to bring in a trade and get a proof to prove that the trade was verified with the appropriate sequence number.

Regarding parallelization, Dan Larimer said,

“Beneath EOSIO Dawn 3.0 we left a great deal of design choices around the capacity for prospective multi-threaded WASM implementation. Regrettably, until you truly implement a whole multi-threaded execution it’s not possible to know whether we’ve got all of the corner cases insured. This usually means that EOSIO Dawn 3.0 had a great deal of architecture sophistication that wasn’t providing any immediate advantage.”

Basically, a lot of things are needed to be ironed out for this to be fully effective.

#3 Header Only Validation

The final feature that we will be covering this section will be”Header Only Validation.” Before it had been not possible to confirm one block-header without utilizing the entire block. As you can imagine, this consumed a great deal of unnecessary time and funds.

To hasten this procedure and make it even more effective, EOS Dawn 4.0 will support header-only validation. This feature is Very Important since:

  • Allows block propagation across the network without waiting for full verification through each node.
  • Allows simple IBC execution
  • Prevents a lot of attack vectors

We will continue with the rest of the updates in part 2!


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