It’s no secret blockchain is a land of extraordinary claims.
Complicating matters, though, is even the most ridiculous have shown a propensity to work. If two years ago, you were told a blockchain would exist that would be so powerful as to enable startups to forego VC investing, you might have laughed. Today, the creators and developers of ethereum would be the ones laughing.
Amid this larger context, last month's Consensus conference was abuzz with energy surrounding EOS – a new smart contract platform for building decentralized applications which purports to solve some of blockchain technology's thorniest problems.
Block.one, the developer of EOS, made a public relations splash, hosting numerous informational sessions, sponsoring post-conference receptions, giving out free t-shirts and even advertising on a Times Square jumbotron.
The selling point? Block.one claimed its platform has eliminated transaction fees and has the ability to process millions of transactions per second.
Yet today, the platform is still just a concept, just a white paper, and there’s no code to examine as of yet.
So, what should investors make of this mysterious project? And what should they think when, as part of an effort to build the platform, they hear the company is raising funds through a four-stage offering of 1 billion EOS tokens, scheduled to commence next week?
Depending on who you ask, you may get one of many answers.
Perhaps the most notable aspect of EOS is who’s involved. For example, there’s the familiar face the company pulled to be its CTO: Dan Larimer.
A controversial figure in the blockchain community, Larimer has won praise for his intrepid and heterodox approach to developing new projects, but also scorn for the way in which he's handled and exited those same endeavors.
Larimer, who’s credited with inventing delegated proof-of-stake and the concept of decentralized autonomous organizations (later adopted and modified by ethereum), is a cryptocurrency veteran who made a splash in 2014 with the launch of BitShares, a decentralized exchange.
While many saw BitShares’ introduction of market-pegged assets as a much-needed hedge against cryptocurrency volatility, others saw the project as overly convoluted and deceptive. And, many were flustered by Larimer’s abrupt exit from BitShares, which left the entity with no clear path forward.
Larimer’s departure from BitShares came with the launch of another project, Steem, in 2016. The Reddit-style social media platform allows users to generate income based on the popularity of their posts. It has received both kudos from blockchain pundits making thousands of dollars off short, biographical entries and criticism from many who argue the platform is unsustainable, based on a contrived notion of scarcity.
But Larimer and his colleague, block.one CEO Brendan Blumer, argue that while these projects have had their hiccups, they served as the foundational building blocks of this capstone project: EOS.
Each project, Larimer claims, solved a core problem inhibiting the widespread use of blockchain applications on a commercial scale. BitShares introduced the concept of horizontal scalability, which allowed for transaction processing speeds as high as 100,000 per second. Steem sought to tackle the issue of transaction costs by providing a means by which users could interact with the application without incurring fees.
According to Blumer, who has a background in video game currencies and real estate, horizontal scalability – which allows for the parallel execution of smart contracts and the simultaneous processing of transactions – is the "game changer" EOS hinges on.
This is different than other blockchains in which essentially every application is running on the same network, "getting into single file line and then processing one at a time", Blumer said.
“The existing platforms don’t scale and they won’t scale without a complete rebuild.”
Like what EOS did, building an asynchronous proof-of-stake blockchain platform from the ground up.
"Those two showed me how to make blockchains that are indistinguishable from centralized alternatives as far as user experience goes," Larimer said.
Can it work?
This new project of Larimer’s, much like his past ones, has been met with pushback from some in the community. Some are taking an ‘I'll believe it when I see it’ approach, while others are accusing him of selling snake oil outright.
The primary ground for objection is that important technical questions remain unanswered. EOS’s goal is to essentially create the equivalent of an early 1990s web server, albeit one which uses some of the cryptographic principles found in bitcoin and ethereum.
EOS will incorporate Larimer’s delegated proof-of-stake (DPoS) consensus protocol – which can be compared to a republic whereby members of the community delegate the responsibility of verifying transactions to elected ‘witnesses."
Proponents claim that DPoS has the potential to reduce transaction processing time because fewer nodes are involved in the verification process. This, in turn, provides a workaround to some of the traditional scaling issues found in proof-based protocols.
But many are cautious about the opportunities for double-dealing.
According to Tone Vays, a blockchain consultant, in both Larimer’s former projects, the cryptocurrencies at work were controlled predominantly by a small inner circle looking to hype the platform.
“Dan Larimer has started several proof-of-stake based projects and they have all been shady in nature,” Vays said. “Both Bitshares and Steemit allowed insiders to create lots of tokens for themselves, and after that, the proof-of-stake nature of the project allowed those insiders to print tokens of value for themselves in perpetuity.”
The white paper also explains latency problems will be mitigated by breaking each block into “cycles” divided into different threads, and subsequently into different transactions that contain messages to be delivered.
“This structure can be visualized as a tree where alternating layers are processed sequentially and in parallel,” the white paper states.
While it’s certainly possible the claims to infinite scalability and free transactions could come to pass, objectively evaluating them is impossible with the information currently available.
“The white paper does not go over any specifics and there is no code yet. So nobody can answer any specific technical questions,” said Wayne Vaughan, founder and CEO of Tierion.
Despite the lack of specificity, the project has been lauded as the "next ethereum", and as a blanket solution to scalability problems, but Vaughan noted there’s an element of hysteria and irrationality driving the surge in interest.
“The people who are excited about it, I don’t think they understand what they’re excited about because there’s no mention of end user applications yet and there are no technical specifics.”
And Larimer doesn’t know what those applications are either because there’s no working software, according to Vaughan.
While Vaughan seems to give Larimer some benefit of a doubt, others won’t.
Chris DeRose, an industry pundit and software developer, argues Larimer’s past claims and value propositions have been “completely divorced from reality” and his current project should not be taken seriously, either.
“He’s very audacious. He offers this as an act of generosity, but in reality it’s just a Ponzi scheme,” DeRose said.
On Reddit, a user named Geraldo went so far as to call the project a “centralized clusterfuck" and contended Larimer's projects will "always be top-down controlled disasters."
Leaving the past
Larimer insists concerns over his past are overblown.
For one, he alleges his intention with BitShares and Steem was all-along to build the platforms up to the point where they could be self-sustaining and handed off.
“I started [Steem] with the intention of leaving it to build a smart contract platform. I was just the person who conceived the idea and set the thing in motion,” he explained. “Steem is being produced by Steemit, Inc.”
And, as it relates to BitShares, “I made sure it was self-funding and self-sustaining. I built the project up and gave them the tools they needed,” he said.
Larimer pushed back against accusations that he let his previous projects die on a vine by highlighting that both Steem and Bitshares are continuing to generate strong interest. Both have received substantial upticks in interest and traffic in recent months, though some of that, he conceded, is attributable to the EOS marketing campaign.
Plus, according to Larimer, block.one brings a more robust level of professionalism and accountability than his other ventures, most notably because of the presence of industry veterans like Brock Pierce and Ian Grigg.
“I’m working with an extremely professional team that is managing EOS at a higher level than the previous projects.”
Larimer noted that several of his colleagues from the BitShares and Steem projects have followed him to EOS, and are currently helping to write and audit the project’s code – a fact that might not assuage the concerns of naysayers.
But Tierion's Vaughan makes a case for allowing entrepreneurs to innovate without all the gloom and doom.
“At the end of the day, this is a team of people who have come forward, and they’re trying to build something that they think is innovative and that they want people to build new applications on top of,” Vaughan said, adding:
“I think everybody should support people who are doing innovative things. That’s what we need in the world.”