OLD AND BUSTED: Betamax vs VHS.
NEW HOTNESS: EOS vs. Ethereum
Forty years ago, it was Beta vs. VHS fighting it out for dominance in the videocassette world.
Ten years ago, it was Blu-Ray vs. HD DVD.
Today it’s EOS vs. Ethereum, engaged in a knock-down, drag-out fight for predominance in the world of smart contracts.
And just as there was in the previous fights over how to format media content, there’s a lot on the line.
Both Ethereum and the newer EOS evolved as a continuation of the blockchain concept, picking up where straight-ahead currencies like bitcoin left off. While bitcoin works as currency – a store of value that is easily transferred electronically while bypassing the banking system – both Ethereum and EOS are designed to support self-executing “smart contracts” in a decentralized environment.
These are contracts that can be designed to automatically self-execute if the system sees that certain conditions exist – and the potential applications are yuuuuuuuuuge.
While Ethereum certainly has first-mover advantage and a solid advantage in branding and awareness, it has a perception problem: Actual users are treating Ethereum as a currency, and not as a smart-contract execution platform. Only about 10 percent of Ethereum transactions thus far actually involve the smart contract applications for which it was designed (the rest of the traffic is in the form of ICO and direct payments – indicating that users are primarily using Ethereum as a substitute currency).
EOS is positioned to compete directly with Ethereum – and may be successful in exploiting the branding challenges that Ethereum is struggling with.
EOS is being billed by its developers as an operating system for decentralized transactions and smart contracts. And while Ethereum can certainly be used that way, and was designed to be used that way, it hasn’t quite caught on yet.
The Crypto Trilemma
Architecturally, the difference between the Ethereum and EOS can best be explained using what computer scientists called the trilemma:
Security, scalability or decentralization: Pick any two.
Ethereum chose to maximize decentralization above all other considerations, thus far; EOS chose scalability. Ethereum Ethereum’s current Proof-of-Work (PoW) consensus algorithm (eventually to switch to Proof-of-Stake (PoS)), which allows anyone with a sufficiently powerful computer to mine new blocks – allowing for potentially millions of nodes and a massively decentralized system. There is no limit to the number of block producers.
EOS, on the other hand, chose a Delegated Proof-of-Stake (DPOS) mechanism that allows for just 21 nodes to produce new blocks on the blockchain. It’s a much more centralized system – but one that supports vastly more transactions per second. That’s going to be important if and when smart contracts become as routine as a credit card transaction and computers need to handle thousands of transactions per second.
EOS already demonstrated a greater capacity for traffic than Ethereum could ever handle – up to 1000 transactions per second as of July 2018, compared to Ethereum’s 15. However, Ethereum is moving to address this by introducing a hard fork called Casper.
Better user experience. Ethereum’s clunky interface seems a lot more optimized for machines than for people. EOS, on the other hand, has adopted a number of UX factors that actual people now take for granted, like actual readable usernames. People would much rather send money to “@usernamedoubledouble” than to “0ch48hsge1e4c68ilm77dz50hoeb6n3d477svuf2r4vxe87” as they have to do using Ethereum. Especially when missing a single digit means that money is irrevocably lost.
It’s fine for machines, but people are different. The EOS evolution is as significant as the evolution of the Mac operating system over DOS. But it’s not an insurmountable advantage – Microsoft quickly achieved parity with Apple when it created Windows. But Apple never went away.
EOS also built in a mechanism for recovering lost passwords – another advantage over the basic Ethereum platform. Computers have no trouble remembering passwords. Actual humans… not so much.
All that said, while the cryptosphere has been buzzing about EOS since early 2017, we didn’t see the first actual smart contract app launch using EOS until this last September, with MyWish – a platform that has created a variety of self-executing contracts for specific purposes like crowdsales, wedding contracts, self-executing wills that transfer assets at death automatically, automatic deferred payments, investment pooling and more.
No fees. EOS has figured out a way to make it happen without a transaction fee to the user. Yes, the network that supports EOS has to be paid for somehow. Instead of encumbering users with a transaction fee, EOS diverts a fraction of future EOS growth (1 percent of inflation per year) back into the network.
Less risk. With older platforms, losing a password is catastrophic. But EOS developed a recovery partner backup: If you lose your password, you and your trusted recovery partner can use your keys to get you access to your money again. You can even get a hacked account back.
Who’s going to wind up on top? It’s far too early to tell. Ethereum has a powerful advantage in that many app developers have already invested time and money in learning how to use it. They won’t be inclined to move to EOS without good cause.
EOS brings some powerful advantages, but the race is not always to the swift: VHS won over Betamax videocassette formats even though Betamax had important advantages.