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EOS: Not Buying Into The Rebrand

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Thesis Summary

With the biggest and most hyped Initial Coin Offering (“ICO”) in the history of crypto, EOS (EOS-USD) raised over $4 billion in its 2018 ICO. EOSIO (the platform) was built as a decentralized operating system to provide developers with the tools needed to build and scale decentralized applications. The EOS blockchain, powered by EOSIO, was hyped to be the fastest blockchain network at its release. The EOS blockchain supports smart contracts and industrial-scale decentralized applications (dApps).

EOS has received some attention as it aims to “rebrand” itself with a forecast. Still, I don’t see this as a worthy coin to own.

Hyped Start, Bumpy Ride

Riding on the back of its ICO hype, EOS quickly climbed the ranks of cryptocurrencies on Coinmarketcap, becoming a part of the top five cryptocurrencies at the time of its release. The initial EOS hype was driven by grandiose promises of scalability and flexibility made by the developers of EOS, Block.one. It was advertised that the EOS blockchain will have the ability to run millions of transactions per second, all without transaction fees.

EOS uses Delegated Proof of Stake (dPoS). In dPoS, network users are the ones who cast a vote to elect delegates that validate the next block. This helps the blockchain produce blocks faster. However, there is a downside to this method of block creation and validation. To take control of the EOS network, a malicious actor needs to control at least fifty-one per cent of the validators, which in this case is just eleven nodes out of the twenty-one validator nodes. In other consensus mechanisms, like proof-of-work, to take control of fifty-one per cent of the network, millions of dollars of investment in energy and mining hardware is required – no easy feat and practically impossible to achieve. In 2019 a hacker successfully moved 2.09 million EOS tokens, worth about $7.7 million, owing to a failed blacklist update by an EOS block producer. The decentralized notion of EOS has largely been questioned.

Though not a dead or rug-pull project, activities on the EOS blockchain have been in decline. EOS has failed to deliver most of the initial promises in its whitepaper. EOS was initially seen to be the Ethereum (ETH-USD) killer, but four years on and EOS has yet to “kill.”

The Future of EOS

With many failed promises, no one outside the development team would be able to predict accurately what the future holds for EOS, but we could deduce from the information at our disposal what the future will likely be for EOS.

Block.one, the ICO backers and initial creators of EOS, have been blamed for most of the issues plaguing the EOS blockchain. The EOS Network Foundation (ENF) was formed to remove the project from Block.one. ENF aims to attract new talents to and create ground-breaking projects for the EOS ecosystem. ENF was formed by the community and is community-owned. The ENF and EOS community have taken certain actions to revive EOS.

ENF started the Blue Paper Community Feedback Initiative to collect feedback from the community and plan how to bring improvements to EOSIO. In a bid to distance itself from the previous developer, Block.one, there has been some news of an imminent EOS rebranding. There is also a planned hard fork to upgrade the EOS network to a new code base. This upgrade will seek to improve efficiency and earn EOS a place in the DeFi space. This includes the “Yield+” initiative, which incentivizes liquidity providers in EOS. However, there is nothing in this upgrade that would make EOS stand out against competitors like Cardano (ADA-USD) or Solana (SOL-USD)

Tokenomics

There are currently 995,528,087 EOS tokens in circulation. Block.one was initially awarded 100 million EOS tokens which were locked in a 10-year vesting schedule; however, as a result of the conflicts between Block.one and the EOS community, the network reached a consensus to stop vesting the awarded tokens. There are 68 million unvested EOS tokens locked out of circulation; this has, in a way, helped reduce supply. EOS token is actively traded on top exchanges, including Binance and Huobi.

Risks

Although ardent EOS supporters and maximalists believe “EOS will be great again,” this does not rule out the evident competition that EOS now faces from better blockchains built over the past few years. Other blockchains have overtaken EOS’ initial vision of a highly scalable and free blockchain. Kava, a layer-1 blockchain that combines the Ethereum and Cosmos (ATOM-USD) ecosystems into a single, scalable network, is an example of how far things have gone in blockchain scalability. Even some older blockchains that were initially slow are now implementing layer-2 solutions to help them scale easily; some are upgrading their consensus mechanism. Ethereum has been in the news lately for its planned migration from proof-of-work to proof-of-stake consensus mechanism; the migration has been called The Merge. EOS now has lots of forces to reckon with.

There might be some new hype around the EOS project as a result of the announced upcoming rebranding and hard fork. Still, for EOS to maintain a sustainable, long-term value, the new developers at the helm need to right all the wrongs of the former developers, build quality products that will give the ecosystem a competitive edge and attract dApp developers.

Conclusion

The crypto space is fast-paced and highly competitive; being almost stagnant for about 4 years is a lot of wasted time in crypto. It will take some serious work for the EOS token to hit its all-time high once again, as it has never reached its all-time high price since 2018. Now that Block.one is getting out of the picture, there is some hope that this will end the bottleneck in the project.

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