EOS vs Ethereum - The tale of 2 Cryptocurrencies - Part II

Definitely, check out Part I before reading this post.

The Performance-Decentralization spectrum

We've been discussing Ethereum and EOS, their very different design principles and their suitability for different types of applications.

I tend to think of performance vs decentralization as a spectrum, where you can choose to have more of one at the cost of having less of the other. Going beyond just blockchain platforms, on one side of the spectrum: AWS and Digital Ocean, that are completely centralized, but can host application that require really high transaction throughput. Censorship-resistance? Forget about it. This is not as bad as it sounds and probably covers 90% of the World's app requirements.

On the other side of the Spectrum: Bitcoin. Decentralized, Censorship resistant, but lower performance in terms of transaction throughput.

Ethereum falls close to Bitcoin on the spectrum, being decentralized and mostly censorship-resistant with the notable exception of the DAO hack. Again, lower performance owing to its decentralized nature.

EOS falls between AWS And Ethereum on this spectrum. More decentralized than AWS, and Higher performance than Ethereum. Censorship resistant? Not so much as proven by the ability of Block producers to apply Blacklists and rollback transactions quite easily.

The founders of EOS probably wanted to hit some sort of goldilocks zone that gave them just enough decentralization and just enough performance. The Jury is still out on that one.

What's the verdict, already!

So who wins? Sorry to disappoint those that like clear-cut black and white answers, but the answer really is, it depends. It depends on your use case as a developer or user, what characteristics you value in a platform and what you hope to achieve with it. It also depends on whether the 2 blockchains will make the necessary progress to fulfill their respective destinies. I'll explain what I mean by that below.

Ethereum: The path forward

What does Ethereum need to do to secure its place in the distributed computing platform / blockchain app space?

Ethereum needs to make progress on 3 fronts: Become truly decentralized, fully embrace censorship resistance and scale off-chain.

Becoming truly decentralized means that Vitalik (and Consensys to some extent) need to do what they can to distribute the Stewardship of the protocol. They can no longer be seen as the power brokers that have enough clout in the system to engineer things like the DAO hack hardfork. This is going to be extremely hard to do, which is why the fact that Satoshi Nakamoto disappeared after creating Bitcoin is yet another notch on the first blockchain's belt.

On fully embracing censorship resistance: What was Ethereum's first killer app? It was the ICO or decentralized crowdfunding. To me, this is it. We do not need to go searching for the real killer app on Ethereum. Just like Currency / Money will probably be Blockchain's greatest killer app, no matter how far and wide we search for others, this is it for Ethereum.

And it is huge! The wild west of the ICO craze coupled with Ethereum development and leadership being somewhat centralized to North America, led to more of an effort on the part of the community to focus on Compliance and Reg(ulation) tech.

This is quite unfortunate. What the community needs to do is double down on the ICO. Truly permissionless borderless censorship resistant commerce and investment. De-Fi (Decentralized finance) to the max! If I want to buy shares in a Colombian Coffee farm sitting in Chennai, India well that's between me and the coffee farmer.

Tokenize everything! Let people around the world trade with each other on the basis of voluntary cooperation and consent. This is what the well-meaning proponents of compliance with SEC regulations are missing. There is a whole world out there for the taking. Let's take it! Ethereum is the platform that can do it.

If Ethereum can truly scale off-chain with technologies like Plasma, using an on-chain peg for trust and arbitration it will have taken another step forward in winning a large slice of the distributed computing pie. I do consider this secondary to the previous goal though. Controversial opinion: I think Ethereum would be perfectly fine without off-chain scaling if it embraces the first 2 goals laid out above. It is however a nice to have feature.

EOS: The path forward

EOS needs to make progress on a few fronts as well: Become more decentralized geographically, Deploy it's war chest towards app development and improve its constitution.

One of the main criticisms of EOS stems both from its design and how it has practically played out in the real world: Having 21 delegates voted in means less decentralization. This is by design and not much can or should be done about it, given the stated goals of the protocol. Having a majority of those candidates based in China and the rest of East Asia (Korea, Japan, Hong Kong) however, is how this has played out in the real world, and there is much that can and should be done about it.

While EOS will probably never be as decentralized as Ethereum, having the power of the network be geographically concentrated exacerbates the problem even further. It’s quite difficult for the network to adequately consider the requirements and interests of EOS token holders in other geographic regions of the world, if their electorate is in a small set of locations in East Asia.

If not in computer science terms, in practical terms, EOS can achieve a healthy level of decentralization and censorship-resistance by having the network's block producers be geographically distributed. Having the 21 EOS block producers based in all key jurisdictions of the world (East Asia, South Asia, The Middle East, Africa, Europe, Australia, North America, South America and throw in the Cayman islands and a couple of low regulation / low tax countries in the mix), will give the network a credible chance of being more resistant to censorship as there is a healthy tension between these constituents and the regulations / rules they have to comply with.

Another key asset that EOS possesses is Block.one, the organization that raised over 4 billion dollars in the EOS ICO, making it the largest to date. Block.one should deploy these funds post-haste (I'm sure this is probably well underway) to build the next generation of killer applications to disrupt Web 2.0. Given the current climate, especially in the United States with the social media and tech giants Facebook, Google, Youtube and others (talk about Centralized power!), the world is crying out for decentralized everything.

A Decentralized Facebook, Youtube, Amazon and Google. This class of apps will probably not come from Bitcoin or Ethereum, given their current state of development. This is a massive opportunity, where EOS can step in.

The constitution of EOS which is the document that all Block producers abide by, in theory, needs to be improved to deal better with Blacklists, Transaction rollbacks and becoming less centrally controlled. This is another area, where one is hopeful that things will be improved further.

Conclusion

It’s my firm conviction that good times are ahead as the sun sets on one monetary system and arises on another, Crypto-centric one. I, for one, would love to live in a world where my favorite Youtubers aren’t censored, free speech (even speech you don’t like) is fashionable again, my search results aren’t manipulated and of course I can buy a bit of an Iranian oil well, a smidgeon of Columbian coffee estate and a piece of a Himalayan tourist spot in a fully tokenized world.

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Gautam Sampathkumar

CEO / Founder, IndraCryptoCapital

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