Will Eos Kill Ethereum? Part 1

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Includes: EOS-USD, ETH-USD, ICOS
by: Ryan Wilday
Summary

I contribute to this debate from the perspective of my two phase career: ex-product developer and now professional trader.

I discuss the differences between EOS and Ethereum as product experiences.

From a market share perspective EOS and Ethereum should coexist.

Will EOS Kill Ethereum?

Introduction

Has EOS brought the Grim Reaper’s sickle upon the neck of Ethereum? This is a question stirring in the minds of many cryptocurrency investors and developers alike. For investors holding the Ethereum bag, they are wondering if the time has come to let go. And, I’m sure developers have started to wonder if they are creating a product using old technology.

Before you read on, note I am writing this analysis for an audience with at least a basic knowledge of ‘blockchain vernacular’ and a rudimentary understanding of how blockchain and crypto use cases are evolving. If you are not familiar with the EOS vs. Ethereum debate, it might help to read up on the concept of smart contracts and to check out the phrase ‘platform coin.’

In basic language, a platform coin is a coin that serves as a home base for many other coins running on its blockchain. Ethereum was the first coin to be called this name, at least as far as I know. The creation of Ethereum opened up an easy method for other blockchain projects to be developed without the burden of having to create a new blockchain network from scratch, and allowed the coins produced in these projects to be easily exchanged for Ether in decentralized exchanges and initial coin offerings (ICOS).

However, Ethereum is struggling to scale further as the network has become clogged and slow, allowing EOS, a new blockchain and coin, one free of such issues, to seemingly race ahead.

On a second note, I have to reveal my background, which some might feel may taint my analysis to some extent. I am currently a professional trader and analyst. Previously, up to late last year, I was a practicing designer and product strategist, mostly in hardware. I have no experience as a developer past editing a few lines of code. Yet, it is precisely my experiences in my two phase career that I draw on in this analysis, and hopefully this allows me to offer an unheard voice.

I’m going to weigh in on this debate in two parts: one from a product development perspective, and second as a trader. Also, I’ll bring my perspective to conclusion with my price forecasts to bear in the second half. I hope you find this interesting and thoughtful.

I’m sure no one would deny that Dan Larimer and Vitalik Buterin, the chief architects of EOS and Ethereum, respectively, have done much to push blockchain tech forward. Dan’s projects, namely Bitshares, STEEM, and EOS, account for a large share of blockchain transactions each month. Bitshares, the first meaningful decentralized exchange, and STEEM, the token that powers a social media network that pays users for content, are visionary in themselves.

Vitalik, I believe, was an important architect in moving the smart contract concept forward and arguably helped set the modern blockchain economy in motion.

Vitalik and the Ethereum team’s work on smart contracts sparked the initial coin offering market, and prompted a relook at modern securities law. Ethereum also advanced the concept of smart contracts and Decentralized Applications (DAPPs). Today, millions of dollars in transactions occur through smart contracts and DAPPs on the Ethereum blockchain. This work has spawned ‘decentralized organizations’ working in ‘trustless’ communities, meaning they no longer need to rely on trusting each other as the blockchain effectively makes everyone an honest player.

This debate, I hope, honors both Dan’s and Vitalik’s immense contributions and leadership to the art of blockchain.

Speed and its Twin: Usability

Why is EOS such a threat to Ethereum? In essence, it is speed. Currently, Ethereum can handle up to 15 transactions per second (TPS). The latest figures I’ve been able to find clock EOS at over 1200 TPS. Certainly this difference in speed is huge, but why does this matter? Chiefly, in my point of view, the speed of transactions affects the usability and user experience.

There are also some instances where speed is mission critical. For example, in online gaming, which has recently started to emerge on the blockchain. We saw CryptoKitties, the most well-used DAPP and game on Ethereum, elevate transaction costs and cut speed on the Ethernet with disastrous effects, sometimes even making the network grind to a near halt. So far, we’ve just seen the beginning EOS game development, but early reviews suggest it holds great promise.

I have interacted with a number of decentralized exchanges (DEXs) based on both chains while trading. In general, I have found the interaction with DEXs on the Ethereum chain a bit frustrating and cumbersome, while interacting with DEXs on EOS is faster and easier. To me, it seemed that Ethereum simply takes too long to receive deposits into a DEX smart contract. Actually, I found the EOS exchanges, such as dexeos.io, much easier to interact with than centralized exchanges, like Binance and Bittrex, though I have no real complaints about the latter two.

Based on my experiences, and watching CryptoKitties bring the Ethereum network to its knees, it appears Ethereum is not up to the task in such use cases. But, is this level of speed-driven usability always necessary? My thesis is no. If you are releasing an ICO on the Ether that will later be turned into a mainnet launch, is speed critical? It doesn’t seem so if your product will have its own mainnet later. If you are running a decentralized organization on the blockchain, are consensus actions, such as voting on expenditures or projects, speed critical? I don’t think they are, but perhaps there may be some special cases where they are.

So when I ask the question, “Will EOS ‘kill’ Ethereum?” I am asking whether EOS will bring Ethereum to zero- that is to a zero monetary value, and zero activity. With respect to EOS’s speed advantage, I don’t think it will ‘kill’ Ether. However, I do believe, unless these speed concerns can be repaired in future forks, we’ll see Ether scale more slowly, see less projects commence on its chain, and see some projects simply leave Ether to port over to EOS.

Vitalik has stated that Ethereum will eventually achieve 1M TPS through a couple of technologies he is working on, but many in the development community seem skeptical about this. I will hold back judgment as I am not qualified to weigh in on this concern.

Coins as a Product

In drawing on my product development background, I know that simply saying that most teams will leave the Ethereum blockchain to go to EOS is not a fair assumption. Developing projects and products requires time and resources. How you expend those resources is, of course, a key aspect of project management as these usually tend to be limited.

Whether a team decides to move from Ethereum to EOS, particularly if their project is already developed, depends on how critical this speed issue is. My examples above may be simplistic, but not every project needs speed in the same way. Development teams must pick their battles and should only pursue necessary wins when resources are tight.

I understand from what I’ve read that EOS has a different programming language (C/C++), while Ethereum uses Python, or can be developed in Python. So, any movement of a project would need recoding, so that could be a big consideration. Note, however, I may be incorrect in this understanding.

So finally, from a product strategy, I find the assumption that one coin will rule them all as unlikely. Just as for every Apple phone, there is a Samsung phone, and a Xiaomi phone, and for every Ford F-150 there is a Chevy Silverado and Toyota Tundra, every market is full of 1st tier, 2nd tier, and tertiary players. Why can this not be true with platform coins too?

In further building on my product strategy background, I can see that Ethereum has ‘first mover advantage.’ However, eventually being the first out diminishes in return. We have seen many market leaders eventually succumb to upstart competition. Yet this doesn’t mean they simply go away. Usually unseated leaders simply take less share.

This evolution of innovation is best for consumers and users at the end of the day. But it’s also true that first movers are typically hard to unseat. Currently, the projects on the Ethereum chain are more established. I looked for data on how large the ‘GDP’ of Ethereum and EOS are. By that, I mean how much economic value changes hands on each chain, not just in the coin itself but in terms of its smart contracts. While I could not find the data, I assume Ethereum currently has a higher GDP, but that may change in the future.

It’s notable that Block.one, the company that developed the EOS blockchain with Larimer, announced it is running a $1B venture fund to foster the development of projects. Certainly, this will chip away at Ethereum’s market share.

Conclusion

In the next article, to be released next week, I’m going to leave the product development and product strategy side of my brain behind and talk from a trader’s perspective. Just as the arguments are not cut and dry on the product development side, they are not on the trader side either. I hope you’ll find it interesting. Stay tuned until next week.

Disclosure: I am/we are long EOS-USD, ETH-USD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.