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Ethereum vs EOS: A simple guide to the differences

Posted: 1 May 2018 5:20 pm
News

Ethereum and EOS are designed to do a similar thing in very different ways.

Ethereum and EOS are very similar in intended purpose, but very different in other ways. Both are primarily designed to operate smart contracts. These are automated contracts, which let blockchain technology cut the middleman out of a range of functions.

For example, many cryptocurrency exchanges use smart contracts to automatically process trades in large numbers instead of having a staff member manually check and process transactions.

Ethereum invented the smart contract system, but it was far from perfect. Since then, many other platforms, including EOS, have set out to become "Ethereum killers" by doing everything Ethereum can, but better.

Despite their similar functions, there are differences between Ethereum and EOS, specifically in how much progress each has made.

Progress

This might be the most important difference between EOS and Ethereum. By every measure, Ethereum has made much more progress. It started sooner, it is much more developed and is much larger than EOS in every way. In fact, EOS is still running on the Ethereum blockchain as an ERC20 (the Ethereum standard) token, rather than on its own system.

This might be EOS's main weakness so far, with some people arguing that all of its big promises are just talk until it launches its own "mainnet" EOS blockchain.

Ethereum also has a much larger ecosystem, with hundreds of other tokens (including EOS) living on its network and using its systems to create their own projects. Some developers have said they'll be launching on the EOS mainnet after it's up, but there are no guarantees until it actually happens.

The EOS mainnet is due to launch near the start of June 2018. After it does, it will be a lot easier to compare Ethereum and EOS fairly.

  • Conclusion: Ethereum has an enormous, advanced network. EOS hasn't even gone live on mainnet yet, which is usually a fairly basic early step, but it is scheduled to go live soon.

Features

EOS and Ethereum are both designed to let users create a versatile range of contracts, but they have different ways of doing it. Ethereum was the first, and it blazed its own trail by creating its own programming language, while EOS aims to make it easier for users to create their own contracts through the use of widely used existing programming languages.

There are also some ideological differences which manifest as differences in features.

Ethereum is largely focused on creating a permanent, decentralised and immutable global contract system, even at the cost of user experience. Essentially, once a contract is programmed and set to go live on Ethereum, it becomes completely permanent. Over the years, hundreds of millions of dollars' worth of Ethereum have been lost to programming errors, and once it's gone, there's no getting it back. By contrast, EOS has deliberately added a mechanism for undoing contracts and recovering funds in the event of human error.

EOS is aiming to create a smart contract platform that can be used as a real-world tool, while Ethereum wants to do the same but is primarily focused on being a kind of decentralised global source of truth.

For most business uses and other practical purposes, EOS might be a much more tempting offer which could see its ecosystem grow quickly in the future. At the same time, Ethereum's "fluffy" sounding stuff about being an immutable global source of truth is actually an important function in its own right, with its own practical business applications.

This ideological difference might be where EOS and Ethereum diverge the most.

  • Conclusion: The ideological differences might be a deal breaker for some people one way or another but also suggest that the world's big enough for both Ethereum and EOS. The ease of use that EOS aims to deliver through common programming languages could be significant, but it's not a hugely unique feature either and many other cryptocurrencies are doing the same.

Scaling

Scaling is a major problem for blockchain systems, including Ethereum. Scaling in cryptocurrency refers to a blockchain system's ability to handle more transactions, or process more smart contracts, more quickly.

So far Ethereum has been stuck at about 15 to 30 transactions per second, which simply isn't enough. It's safe to say that if Ethereum can't scale effectively and figure out how to process transactions more quickly, it's not very useful and will probably die in the future.

EOS promises to scale much more effectively than Ethereum, using what's called a "delegated proof of stake" (DPoS) algorithm, rather than Ethereum's current "proof of work" (PoW) algorithm.

If both projects go according to plan, then EOS will be scaling more effectively sooner than Ethereum, but both will reach their goals fairly soon.

However, while there's little doubt that Ethereum can achieve its goals, there are still minor concerns about whether EOS will be able to pull it off. It hasn't gone live on mainnet yet and DPoS is a fairly exotic solution, so there might be unforeseen problems with taking it live on such a large scale.

Ethereum's solution might be a little more reliable. It's gradually shifting from PoW to a "proof of stake" system, and is generally going slow and steady with a solid roadmap and solid track record. It's also making relatively swift progress on a solution called "sharding."

  • Conclusion: If everything goes as planned on both Ethereum and EOS, then EOS will be able to scale much better, much sooner. This could be a key advantage. However, the odds of something going wrong might be a bit higher with EOS than Ethereum.

Valuation and pricing

One of the main criticisms of EOS is that it's simply way overvalued for an unproven system that hasn't even launched on mainnet yet and has yet to show that it can deliver on its promises. Critics also point at the long time EOS spent in testnet and suggest that the additional complexities of launching on mainnet with an exotic new consensus mechanism leave a lot of room for things to go wrong.

Ethereum also has the distinct advantage of an exceptionally large ecosystem that now lives on the Ethereum blockchain. This is the kind of advantage that can only be built slowly over a long period of time. EOS has years of work ahead of it before it can say the same.

At the same time, Ethereum has plenty of lingering problems that need solving and EOS could be well-positioned to be that problem solver. If EOS can smoothly go live on schedule, and if everything works as it should, then it might become a serious Ethereum competitor in the long run.

However, from a price perspective, EOS might be a riskier proposition than Ethereum in the short term. EOS prices have increased steadily in recent weeks and might be extremely fragile until the mainnet launch. This can be seen in a report published today, where security researchers claim to have found a security vulnerability in EOS. It has been largely debunked as a problem with specific mis-coded contracts on EOS, rather than the EOS platform itself, but that didn't stop EOS prices from rapidly plunging about 20%.

Anticipation for the EOS mainnet launch is building, but EOS traders seem to be extremely cautious and ready to reflexively dump their tokens at the slightest sign of anything going wrong. And with so much room for things to go wrong, they probably should be. After so much price build up, and such exciting times ahead, traders should probably be handling EOS with extreme care. Ethereum prices are probably much more durable. Even if they slide, it might be a much slower and more leisurely downhill.

Overall, EOS is purely speculative right now. One reasonable near-term price prediction is growing prices as anticipation grows ahead of mainnet, followed by an immediate downturn about the time it goes live. This kind of pattern is fairly typical in cryptocurrency.

Until EOS mainnet goes live, buyers are getting nothing but marketing hype and run the risk of purchasing useless vapourware. Then again, this is exactly what people used to say about Ethereum.


Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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