The Meteoric Rise of EOS Explained

EOS captured the attention of traders with an exceptional rise in price, up 58% from Apr 11-13. This article analyzes the root causes of the dramatic price increase, which is anomalous from the general market behavior of that period.

eosDAC Airdrop

eosDAC is a community-owned EOS Block Producer and Decentralized Autonomous Community (DAC) enabler that aims to bring together the EOS community. The DAC is controlled by its token holders and the board members vote to run its operations.

75% of the eosDAC tokens were set to be airdropped to the EOS token holders, with the remaining 25% to the team, advisors and community supporters. All Ethereum accounts that have 100 or more EOS tokens taken in a snapshot of 15 Apr 2018 will automatically receive the airdrop. This airdrop could have contributed to the flurry of demand for EOS tokens.

Elections of Masternode

The increase in EOS price coincides with the upcoming election of EOS Masternodes. Industry titans such as Bitmain's Antpool and JRR Crypto have recently thrown their hats in the fray. This brings the list of competitors to 22.

EOS consensus mechanism is based on Delegated Proof of Stake (DPOS). Characteristics include short block production times, high throughput and almost no bifurcation. DPOS is designed such that the continuing operation of the Blockchain relies on representative delegates. As of now, EOS has 21 masternodes, sharing 5% of the tokens created each year as a form of payment for maintaining the nodes. A back-of-an-envelope calculation estimates the annual gains for each masternode to be USD$1.5m, if the value of EOS remains constant. This lucrative venture has attracted investors to flock and participating in the voting of EOS masternodes.

An Alternative to Proof of Work (PoW) and Proof of Stake (PoS)

EOS employs the Delegated Proof of Stake (DPOS) consensus mechanism which is an option for traders looking to invest in coins with different properties. DPOS has managed to navigate past PoW and PoS consensus mechanisms shortfalls. PoW has been criticized for its extended period to reach consensus, growing centralization due to increasing computing power barriers to entry and environmental concerns of utilizing copious amounts of energy to prove that work has been done. On the other hand, PoS equity proof mechanism ensures that the "rich get richer" as parties with more equity have a higher chance to mine a new block.

DPOS manages to circumvent these issues by shareholder elections, where coin holders elect what are known as witnesses, who are responsible with maintaining the Blockchain and are rewarded for generating new blocks. The risks of centralization is controlled as shareholders' voting of witnesses is a continuous process, which means that shareholders can actively avoid centralization through votes. There are savings in energy costs as there is no need for computing-hungry calculations.

DPOS tries to achieve the best properties that makes PoW and PoS attractive. EOS claims that with DPOS consensus mechanism, it will be able to process transactions a few magnitudes higher than other public chains, reaching up to 100,000 transactions per second in tests. With this throughput, EOS will potentially be able to support thousands of distributed applications (Dapps).

Accessible Development

EOS provides application developers some commonly used functions and operation templates, which lowers the barriers for developers to create Dapps on EOS public chain. These templates are verified by multiple trusted parties and reduce the investment of time needed by developers to start on a project. This is in stark contrast to other platform-based public chains which requires developers to build and design from scratch.

Conclusion

The eosDAC airdrop fervor, elections of EOS Masternode, being an alternative to PoW & PoS and accessible development for Dapp creators may all play a part in the meteoric price rise of EOS in mid-April 2018.