Bitcoin demonstrated that it was possible to operate a decentralized network and have value flowing between its users through a subtle balance of economic incentives among its participants. EOS goes much further by enabling decentralized applications to be deployed on its network. However, there are significant differences between the two protocols :
- The miners, on Bitcoin, are paid with expenses. On EOS, there are no fees. Minters are paid by inflation ;
- Governance on Bitcoin involves 100% of the network nodes – if they want to participate – while only the 21 delegates have the right to produce blocks on EOS.
In this article, we will explore in more detail the mechanisms for funding and governing the EOS blockchain.
Blockchain funding and reward:
Like most open blockchains, block producers and validators are rewarded through inflation. On EOS :
- The monetary issue rate is capped at 5% per year. It can be modified (downwards only), as is the case on Steemit.
- Of this 5%, one fifth is allocated to block producers.
- Of this fifth, one quarter goes to the 21 delegates, and the remaining three quarters go to the remaining delegates who are not in the top 21.
- Block producers are rewarded in proportion to their involved funds.
- The remaining 5% inflation will be allocated to future EOS developments, which will be approved by the delegates’ vote, in the same way as Dash’s governance.
The idea is to finance both the 21 producers of active blocks, but also those on the waiting list, so as to be able to cover the maintenance costs of an infrastructure permanently connected to the network.
Governance and updating of the EOS protocol
The governance of EOS is based on the delegates elected by the token holders. The protocol shall be updated as follows:
- A change is proposed by a block producer. It must receive the approval of 17 delegates out of 21.
- Approval of 17 out of 21 delegates must be maintained for 30 days.
- Block producers must then adopt the source code changes and submit it on the blockchain.
- The change must still be approved by at least 17 out of 21 delegates for an additional 30 consecutive days.
- All full nodes then have one week to adopt the changes.
- At the end of this period, nodes that do not follow the new protocol are automatically excluded.
The idea of EOS and its DPoS is therefore to minimize the number of block producers, in order to ensure a very rapid spread of information. With only 21 delegates, the performances advanced by the Block.one team are extremely impressive:
- No transaction fees ;
- 3 second inter-block delay ;
- Throughput of up to several hundred thousand transactions per second ;
- Possibility to update decentralized applications deployed on EOS very easily ;
- Ability to fix bugs or recover lost access to an account ;
- Parallelization of tasks ;
- Flexible, transparent and democratic governance.