EOS smart contract network

ResearchMay 18, 2022
EOS Smart Contract Network

The EOS blockchain platform focuses on highly performant Dapps powered by smart contracts. By design, this Web3 project prioritizes speed and eliminates transaction fees. Positioned as a decentralized operating system, it even borrows some computing features. Learn about its components — the EOSIO platform and the EOS blockchain — in our guide.

What makes EOS special?

This smart contract environment is supported by EOSIO, open-source software emulating an operating system. It regulates the entire network while the EOS tokens give it fuel. However, developers do not pay to use it — they merely hold the native tokens to access the necessary resources.

On the EOSIO platform, cloud storage, server hosting, and user authentication work out of the box. This agile ecosystem streamlines the process of smart contract building and makes it more convenient. EOS solves many of the problems plaguing its predecessors.

Features of EOSIO. Source: EOS.IO
Features of EOSIO. Source: EOS.IO

EOS vs. Ethereum

On Ethereum, running a smart contract requires a specific amount of gas — a fee paid to the EVM (Ethereum Virtual Machine). It determines how much computing power is accessible for execution. EOS eliminates this requirement — it only obliges developers to stake the native tokens. This model is based on ownership, as opposed to renting Ethereum's resources.

Although ETH is the second-biggest cryptocurrency, persistent blockchain issues hinder decentralized applications. Congestion due to inferior capacity results in delays and exorbitant gas fees. The current speed is a meager 15 TPS. EOSIO is head and shoulders above Ethereum, thanks to its high configurability. Here are some of its strengths:

  • Higher transaction speed. EOS boasts 4,000 TPS and sub-second block time latency (the speed at which new transactions appear on the blockchain).
  • Support of Dapps built using WebAssembly languages. Smart contract developers do not have to master project-specific programming languages like Solidity for the Ethereum blockchain. Instead, they can stick to popular options like C++, Java, or Python.
  • Superior scalability. EOSIO allows both vertical and horizontal scaling of Dapps — that is, adding more power and expanding the supporting infrastructure.
  • Flexible use. Developers can access network resources based on their EOS stake (more on this below).
  • Self-describing interfaces and database schemas. Humans can read the data going to the blockchain and realize how to use it.
  • Declarative permission scheme. Accounts have high-level control over who can do what and when.
Speed Is One of the Key Advantages of EOSIO. Source: EOS.IO
Speed Is One of the Key Advantages of EOSIO. Source: EOS.IO

Who created EOS system?

This smart contract platform was established in 2017. A private company named Block.one developed the EOS protocol. Its Chief Technology Officer, Dan Larimer, is credited with architecting pioneering projects:

  • BitShares (the first DEX)
  • Steemit (the first crypto social media network)
  • Delegated Proof-of-Stake (the consensus mechanism used by EOS)

Brenden Blumer is Block.one's CEO and the second co-founder of EOS. Previously, he focused on digital solutions for real estate in Asia.

In June 2017, Block.one and EOS launched a year-long initial coin offering, the largest crypto ICO so far. The crowd-sale of 1 billion EOS  generated over $4 billion in revenue. Unlike Telegram and Kik, the company managed to reach a favorable deal with the SEC to settle the U.S. regulatory charges.

How EOSIO smart contract platform works

This blockchain technology utilizes three types of resources borrowed from computing. All costs are transferred to developers — they must stake EOS to run Dapps. Meanwhile, users have their transactions executed for free.

  1. Bandwidth (Disk) relays data across the EOS network.
  2. Computation (CPU) provides the processing power for running Dapps.
  3. State Storage (RAM) stores data on the blockchain.

Smart contracts run on the EOSIO nodes, whose RAM stores persistent data and events of actions. As we have mentioned, this model is based on resource ownership. When EOS holders are not running Dapps, they can allocate or rent their bandwidth to peers. For the basics of self-executing contracts, check out our in-depth overview.

EOS security and governance

The consensus mechanism is dual. It involves the consensus layer 1, where block production and validation happen, and the DPoS layer 2, where producers are voted for. This model allows parallel execution, but only after the genesis block is created.

Consensus layer

Layer 1 rests on WebAssembly (WASM) smart contracts. It uses an algorithmic model with an ordered schedule of elected participants. Each of them authorizes a chain at a particular moment.

This system is more energy-efficient compared to Bitcoin's PoW, where validation requires computing efforts linked to a node. It is also more secure against 51% attacks and other types of interference.

Delegated Proof-of-Stake (DPoS)

Layer 2 secures the blockchain. Anyone who owns EOS can compete to generate the next block. The selection process involves a real-time voting and reputation system. The more EOS you lock (stake), the higher the chances of contributing to network operations. Each token represents one vote, with 21 delegates (block producers) in total.

DPoS in EOSIO. Source: Research.binance.com
DPoS in EOSIO. Source: Research.binance.com 

EOS constitution

Users and block producers can vote for amendments to the EOSIO software documents. Producers have an obligation to carry out the approved changes. However, the model gives them extensive powers, which has raised concerns. For instance, an account can be frozen if at least 15 block producers vote for it.

Critics warn that EOS could be susceptible to centralized abuse by design. For example, soon after its launch, on June 17, 2018, several accounts were frozen by 21 block producers on suspicion of theft. This led to backlash on Twitter.

Structure of EOSIO

Aside from the blockchain, the core of the ecosystem comprises four components. You can see that their names are formed by adding -eos (CLI + eos, key +eos, and node + eos). This flow chart describes their relationship.

Key Components of EOSIO. Source: Developers.eos.io
Key Components of EOSIO. Source: Developers.eos.io

Cleos (command line interface)

Using this CLI, developers access tools for interacting with the blockchain platform. They can read data from its history, send new transactions, test smart contracts, and deploy them.

Keosd (key manager)

Keosd stores keys for signing digital messages like transactions. Keys remain in an encrypted local wallet file that requires a secure password.

Nodeos (core daemon)

A daemon is a computer program that runs in the background without user participation. Nodeos, as the name suggests, is responsible for running nodes on the EOSIO network. They support its functioning in three ways:

  • processing smart contracts;
  • validating transactions ;
  • producing, recording, and confirming blocks on the blockchain.

EOS Virtual Machine (EOS VM)

This is the heart of this blockchain ecosystem. As a WebAssembly-based environment, it ensures optimal smart contract execution.

EOSIO Contract Development Toolkit (EOS.CDT)

This web toolkit is used for building, modifying, and utilizing smart contracts. It includes standard library implementations for the C and C++ languages.

EOSIO system smart contracts

This type of smart contracts forms an integral part of the protocol. They access the privileged functionality of the blockchain, so builders can modify its behavior without altering the core software.

Self-executing contracts accommodate a wide variety of use cases. They support the implementation of the core blockchain principles, including:

  • consensus
  • cryptoeconomics
  • block producer registration
  • fee schedules
  • account creation and modification
  • voting
  • multi-signature systems
  • resource allocation and accounting

Developing smart contracts on EOSIO

On Ethereum, developers must keep up with all updates to Solidity, the proprietary object-oriented language. On EOS, smart contracts are created using the WebAssembly (WASM) standard. It allows developers to write code in any programming language.

WASM code is compiled into a byte-code that can run on any supporting browser. This brings higher efficiency, speed, and user-friendliness. The Pretty Print feature simplifies debugging, testing, optimizing, and coding.

Smart contracts and Dapps

To build and launch applications, developers buy and stake EOS without spending it. This is a peculiar way to pay for smart contract computations. According to DappRadar, EOS is the second most popular platform, with 582 Dapps in total. As of May 18, 2022, its top 5 applications by the number of users are:

  1. Upland, a blockchain metaverse with a property trading game;
  2. PROSPECTORS, an MMO (massive multiplayer online) real-time economic strategy game;
  3. AtomicAssets, EOS' native NFT standard;
  4. Wombat Dungeon Master, an adventure game with multi-chain NFT staking;

AtomicMarket, a smart contract for building NFT marketplaces using the AtomicAssets standard.

Upland, the Most popular Dapp based on EOSIO. Source: DappRadar.com
Upland, the Most Popular Dapp based on EOSIO. Source: DappRadar.com

Interacting with other smart contracts

EOS smart contracts can execute actions through programmatic interactions with other contracts. They can handle notifications and call their actions if the eosio.code permission is included.

EOS token

As of May 12, 2022, EOS is worth $1.26. Its price has nearly halved over the past 12 months. With a market cap under $1.26 billion, it is now at the modest 51st position. The all-time high of $22.71 was achieved on April 29th, 2018. Unlike Bitcoin, EOS has no limit on total supply. A 1% inflation rate supports block production rewards.

EOS Price Chart. Source: Coingecko
EOS Price Chart. Source: Coingecko

Applications of EOS tokens

EOS powers Dapps and governance on EOSIO. Dapp creators must stake the tokens for three days to use a share of the blockchain capacity. For example, a holder of 0.5% of all tokens can access 0.5% of the CPU. Thereby, the system incentivizes smart contract developers to purchase and hold the native cryptocurrency.

Block producers get freshly minted EOS tokens for every new block. They can publish the desired figure, but the reward is calculated based on the median value. To prevent abuse, EOS caps the annual supply growth at 5%.

Looking ahead

In April 2022, three other blockchains (Telos, WAX, and UX Network) joined forces with EOS to propel the development of its core code. The tech stack will be improved and rebranded in areas of blockchain overlap. The coalition's annual budget of $8 million will be spent on new features and security enhancements. This event is an important milestone for all companies using the EOS protocol.

Tweet on the Coalition of EOS and Other Blockchains. Source: Twitter Account of EOS Network Foundation
Tweet on the Coalition of EOS and Other Blockchains. Source: Twitter Account of EOS Network Foundation

Conclusion

The EOS blockchain is a smart contract environment emulating an operating system. It is focused on quick and easy deployment and maintenance of Dapps. The EOSIO software facilitates interface development with self-describing database schemas and flexible tools. More sustainable than Bitcoin and more efficient than Ethereum, the protocol provides quick transactions without gas fees. These benefits, which outweigh any governance concerns, have made EOS the second most popular Dapp platform.

Disclaimer:

The information provided by CoinLoan (“we,” “us,” or “our”) in this text is for general informational purposes only. All investment and financial opinions expressed by CoinLoan in this text are from the personal research and open information sources and are intended as educational material. All outlined information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information in this text.

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