EOS is a next-generation smart contract platform, utilizing a Delegated Proof of Stake (DPoS) consensus mechanism that emphasizes high transaction throughput and scalability. EOS positions itself as a competitor to Ethereum as a platform for decentralized applications (dApps), offering increased scalability features as a tradeoff to a comparatively centralized node distribution.
The primary feature distinguishing EOS from other smart contract platforms, such as Ethereum, is its use of a Delegated Proof of Stake (DPoS) consensus architecture. In Proof of Stake, token holders produce blocks themselves in proportion to their holdings. In DPoS, token holders elect third party block producers, who produce blocks and validate transactions. Dishonest block producers are removed from the consensus process by token holders, whose vote is proportional to the percentage of total tokens held. Block producers are not required to have a significant token stake themselves, and tokens used to vote for block producers can be used and transferred; the tokens are not locked directly, as in traditional Proof of Stake systems. Effectively, the slashing condition for invalid transaction processing by block producers is token holders realizing this and removing them from their block producer role (thus losing the token rewards through inflation), not block producers losing staked tokens (as in PoS). Token holders are not directly compensated for voting, but are incentivized to elect quality block producers who will maintain the integrity of the network and the value of the EOS token: users with more tokens will be more interested in electing quality block producers that maintain the value of their own tokens.
While EOS as a smart contract platform will compete with the Ethereum network, the role of the EOS token is considerably different than that of ETH. Per the upcoming Smith + Crown Token Rights framework, the EOS token provides access to premium features on the platform. Token holders have a claim to the network’s computational and storage capacity in proportion to their holdings. There is no fee paid to execute a smart contract. Instead, token holders must hold tokens commensurate with the amount of processing and storage capacity required to execute the smart contract on the EOS network. Token holders can purchase RAM processing power, CPU space (including storage), or participate in the governance process. In order to efficiently allocate processing power, the current implementation will include an internal market for buying and selling RAM. Tokens used for CPU space and block producer voting are locked in a smart contract. This is in comparison to the role of ETH, which functions as a payment mechanism for smart contract execution on the Ethereum Virtual Machine.
A total of 900 million EOS was offered in the token sale, with a further 100 million EOS allocated to Block.one over a ten-year vesting schedule. The total supply is inflationary at an initial annual rate of 5%. An initial pool of 200 million EOS was sold during the first five days, and 700 million was split evenly in 23 hour sale periods for the remainder. The tokens are distributed pro rata to contributors in each period; a record of contributions is found at EOSScan.io. The EOS ERC20 token offered in the year-long sale is only a placeholder for funding purposes. After conditions are met for mainnet launch in June 2018, the EOS ERC20 tokens will be exchanged on a 1-1 basis with actual tokens on the EOS blockchain. Users must register their Ethereum address in advance of the launch in order to exchange tokens. As defined in the initial software, holders of at least 15% of the total supply of the EOS ERC20 token must register and vote for block producer candidates on one chain in order for the network to launch. Some exchanges, such as Binance, Bitfinex, and Kraken, will support this crossover on platform.