EOS vs Ethereum: Comparison for Investors
In this article you will learn the similarities and differences for EOS vs Ethereum. You will also get a better idea of the potential of both cryptos.
Note this article has been thoroughly researched and meant for informational purposes only. This article is not in any way, shape or form financial advice.
EOS vs Ethereum: Similarities
EOS is one of the many cryptos that is in direct competition with Ethereum. For this reason EOS is one of the many projects that are so called ‘Ethereum killers’. This is because EOS is similar to Ethereum in that it is also a crypto commodity.
Crypto commodities fall under the umbrella of cryptocurrencies. Crypto commodities are a specific class of crypto assets because they do not just offer their own cryptocurrency. They also offer up their platforms for other projects to be built upon them.
These projects are called Dapp. Dapps is short for decentralised applications. They can be either other cryptocurrencies, products or services. Developers building Dapps create them using smart contracts.
Ethereum is the first crypto commodity that appeared in the crypto space. It was the only crypto commodity for some time. However as in any industry, competition comes along after some time to challenge a players market share. When competitors arrive, they aim to improve on the failings of the first players in the space. EOS is one of those projects. Others include Cosmos, Polkadot, and Waves. You can buy Waves or read more about the project in our Bitcoin vs Waves article.
EOS vs Ethereum: Differences
Quick overview of the basic differences between Ethereum and EOS:
All there is to know about Ethereum
Here we will go through how Ethereum started, fund raising campaigns, DeFi investments and improvements.
The Start of Ethereum
Ethereum has the advantage of being the first crypto commodity in the crypto space. They have what is known as the first mover advantage. Although being the first mover does come with its drawbacks, Ethereum has done well.
Firstly this is because it has strong brand recognition. Additionally Ethereum was able to garner loyalty before other crypto commodities appeared on the market. It became recognised as the industry standard. As a result Ethereum attracted great talent to work in their team. It was also attractive to initial investors.
Ethereum Fund raising
Ethereum’s ICO launched in 2014 and in 12 hours it raised 3,700 Bitcoin. At that time 3,700 Bitcoins were worth around $2.3 million.
Ethereum was not the only one to raise funds through ICO’s. A lot of other crypto projects also got stuck into raising funds. Consequently there was an ICO craze in 2017 and 2018. However Ethereum’s projects or Dapps took the cake for the most amount of funding.
Sourced from Investerest by Vontobel
Ethereum DeFi Investment
Part of Ethereum’s platform is dedicated to DeFi or decentralised finance. The teams working on DeFi aim to bring all the services provided by our current financial system onto blockchain. (You can read more about DeFi on what is DeFi).
Investors are still interested in the Ethereum platform and are continually investing in different Dapps. Investors that are interested in investing in DeFi need to stake or lock their crypto into the Ethereum platform.
The chart for the value locked in DeFi is looking great. At the moment there is an astounding $83 billion locked in DeFi. Especially considering there was only $4 locked back in August 2017.
Sourced from DeFi Pulse
Improvements to Ethereum
One of the draw backs of being a first mover is that products that come after you are better. Other projects recognise the problems and improvements that could be made with Ethereum. As a result they organise, manage and optimise things on their own platforms.
Ethereum has suffered from network congestion. There are a lot of users on the platform and it has made it run slower. As a result the gas fees (fees you pay to execute transactions) have gone up a lot.
This is especially considering that for crypto to go mainstream it needs to scale. Scalability is a teething problem that needs to get resolved to encourage more people to join the crypto community. This is not true just for EOS vs Ethereum. Whichever crypto/s are adopted need to support many millions of people transacting and interacting with the blockchain constantly.
For this reason Ethereum needs to scale to keep ahead. In fact Ethereum is going to be upgraded to Ethereum 2.0. The upgrade will be able resolve the issues it has and make additional improvements to the platform. One of the improvements would increase the amount of supported transactions per second from 30 to 100,000.
All there is to know about EOS
Now let us go through EOS, the start, fund raising, FUD, bad news and other problems.
The Start of EOS
From the start, the team at EOS set out to prioritise scalability over centralisation. In fact EOS garnered a lot of attention for this reason. Investors saw a lot of potential for EOS if it could increase the transaction speed.
As a result EOS received a huge amount of funding. EOS’s ICO (initial coin offering) raised $4 billion in EOS sales by Q2 of 2018. The ICO was a great success and provided EOS with a great boost. It showed investor confidence in the project.
Second Round of Fund Raising
Unfortunately the EOS network became congested quickly. As a result computing expenses for Dapps became expensive. So to decrease expenses, LiquidApps set about creating a second-layer protocol for EOS.
LiquidApps launched an ICO that ran for a year. Unfortunately it only managed to raise $2.8 million by the end of August 2019. It is a fraction of the initial amount that got invested initially in EOS.
It is not surprising that the second round of funding for EOS did not go anywhere. $4 billion in EOS sales for a first round is a large amount of funding. The amount dwarfed the amounts most other projects received from their ICOs.
In fact it seems rather odd that EOS would go for a second round of funding. It may be an indication of mismanagement of funds. Investors picked up on this. Hence their justified lack of interest in the project.
FUD You Should Take Heed Of
Crypto advocates are always talking about the benefits of decentralisation. There are some that are not happy with the amount of centralisation at EOS. This is because there is a limit of 21 block producers (BP) at any given time.
These BP’s make governance decisions and establish consensus. For their role on the network they also gain substantial rewards. Unfortunately having a maximum of 21 BP’s makes EOS very centralised.
Decentralisation is always a good thing. Firstly because it is open to anyone that would like to participate. In so doing it discourages monopolies. Additionally decentralisation is censorship resistant.
It is true that crypto commodities have more centralisation than cryptocurrencies. Between each crypto commodity there can be more or less centralisation. However it would depend on a lot of things. Apart from the platform itself, it would also depend on the way the Dapps on top of it are being built.
In a way this is the same critique that can be used for Ethereum. Ethereum is also centralised to some degree. There are Dapps that can be completely decentralised. However some smart contracts for some services will always need to have some human input. There is just no getting around this fact.
However EOS is much more centralised. Placing a 21 cap on BP’s regardless of how large the network grows is not good. In fact this has led to some problems for EOS.
Bad news for EOS
Here is an important point in the EOS vs Ethereum debate. In late September 2019 one of the major supporters of EOS called EOS Tribe left EOS. EOS Tribe had been a major supporter of EOS from the very beginning. They helped EOS get its blockchain up and running.
When EOS Tribe left, it raised more than one eyebrow. This is not only because of its history with EOS, but also because it was a BP. Hence it should have been one of the major benefactors of the EOS ecosystem. For any business deal, it is unusual for major beneficiaries to leave unless something is wrong. Clearly not everything was rosy.
“We at EOS Tribe have never participated in the game of vote trading and stayed true to our principles, and hence while we leave EOS as Block Producer, we are also free to speak truth and give warnings to the rest.”
Unfortunately it seems that other BP’s were gaming the system in the EOS ecosystem. The system suffered from both a lack of democratic principles and censorship resistance. As a result EOS became even more centralised and undermined the foundational principles for using blockchains.
At the end of the day, blockchain started off as a reaction to fraudulent governments and central banks. They game the fiat system to suit themselves. The whole idea behind blockchain is to create a more honest system. A system that works for the many and not the few. To go from a botched system to another botched system does not make sense.
Additionally the core issues had a domino effect and created other problems. One main challenge for any crypto is whether it has a good team behind it.
Unfortunately for EOS there was no sense of meritocracy. It ended up undermining the integrity of the team. The most competent members on the EOS network got assigned menial tasks that had little or no rewards.
EOS Tribe ended up in a situation where they were not earning any funds. This was because of a lack of support from major EOS token holders. As a result EOS suffered from brain drain. Competent members like EOS Tribe in the end do not stick to an unfavourable system, but seek rewards elsewhere.
EOS vs Ethereum percentage gains
Price Gains Table for EOS
|Jul – Dec 2017||119%|
|Up to 23 Sep 2021||65%|
Valuations sourced from CoinMarketCap
Ethereum Price Gains Table
|Aug – Dec 2015||-22.5%|
|Up to 23 Sep 2021||330%|
Valuations sourced from CoinMarketCap
Just by looking at the price gains tables there is no comparison between EOS vs Ethereum. EOS has not done well, even in comparison to other cryptos. Ethereum has outperformed EOS even though Ethereum has had a few down years.
EOS was going down or not going anywhere for 3 straight years from 2018 all the way till 2020. Ethereum had a couple of down year in 2018 and 2019. However 2020 was a fantastic year for Ethereum. It had an amazing 467% percentage gain.
So far in 2021 EOS is lagging behind Ethereum. The only reason why EOS is up is because this is one of the best years in the 4-year crypto cycle. If you are curious to know more about the 4 year cycle you can read about it in the Bitcoin halving.
EOS vs Ethereum Conclusion
To sum up, there are many challenges for crypto commodities to do well. For example funding, the team, the amount of feedback from the community being some factors.
When you compare EOS vs Ethereum, there is no debating that Ethereum is doing much better than EOS. The Ethereum team was sharp and quick to develop Ethereum and get the first mover advantage. They created the first crypto commodity that became the industry standard.
The Ethereum team is continuing to develop Ethereum in a positive way. Investors have noticed this and have invested heavily over the years.
Unfortunately EOS is not in the same situation. Although there was keen investor interest at the start, it looks like there was some serious malinvestment. As a result it ended up shaking investor interest in EOS.
Additionally EOS is suffering from centralisation and lack of democracy that are causing a domino effect. Other issues are cropping up because of these issues.
In fact if you compare the percentage gains of EOS vs Ethereum there is no comparison. Investors have picked Ethereum as one of their preferred projects. Ethereum is doing well thanks to its team. They have been able to run the platform well overall which has boosted investor confidence to invest into the project.
The only reason why EOS is doing well at the moment is because it is a good year. The 4 year cycle is lifting all cryptocurrencies up. Outside of this year EOS is likely to chug along. That is unless the team realises that drastic changes need to be made to the EOS eco system.