EOS Whitepaper walkthrough: Background.
Read the Whitepaper here
Last time we finished going over the abstract, note and disclaimer, and took a brief overview of the EOS whitepaper.
Today we'll be reading over the first part, background, of the whitepaper.
Here it is, reproduced with commentary.
Blockchain technology was introduced in 2008 with the launch of the Bitcoin currency, and since then entrepreneurs and developers have attempted to generalize the technology to support a wider range of applications on a single blockchain platform.
2008 was when it all started. Through a mailing list, Satoshi Nakamoto announced his idea of a system that allows people to make payment to each other without a trusted third party. He called this system Bitcoin, and launched a website with an accompanying whitepaper that laid out his idea.
Bitocoin was designed with a single purpose in mind: creating a secure payment system. The main focus was security, and everything was secondary.
This devotion to security placed severe handicaps on the Bitcoin system and what can be done on it. Other than simple sending and receiving transactions, not much else can be done.
As a matter of fact, the already limited number of operation codes has been further slimmed down to avoid potential exploits.
But Bitcoin began to gained popularity, the peer-to-peer network technology that underly Bitcoin caught the attention of observers.
It turns out, having a system that functions without a trusted third party is a quite useful for a number of other things. Thus people started to experiment with the network protocol that powered Bitcoin, the Blockchain.
They removed the security measures that were put into place and found that they could do so much more with the technology. They discover they could build applications on top of this decentralize network. Applications that would inherit the decentralized nature of Bitcoin and thus making it resilient to attacks and unilateral control.
Numerous new blockchain platforms arise to take up the challenge of building a network protocol that can power these applications.
These new blockchain platform borrowed many concepts from Bitcoin, though in hindsight, those concepts turned out to be unnecessary in some cases and in other cases, downright hostile to application development.
Recognizing that fact, some developers chose to deviate from the Bitcoin model early on with a new philosophy.
EOS is the descendant of this line of alternative blockchain technology.
Where the Bitcoin descendants carried the ethos of "Trust no one". What came to be called "Trust-less systems".
EOS' ancestors, BitShares and Steem, took the view of "Find those you can trust". And now, "Structured-Trust systems."
While a number of blockchain platforms have struggled to support functional decentralized applications, application specific blockchains such as the BitShares decentralized exchange (2014) and Steem social media platform (2016) have become heavily used blockchains with tens of thousands of daily active users. They have achieved this by increasing performance to thousands of transactions per second, reducing latency to 1.5 seconds, eliminating per-transaction fees, and providing a user experience similar to those currently provided by existing centralized services.
Of the "Trust no one" camp, Ethereum is the poster-child.
Ethereum was ambitious. They wanted to, as they put it, build a "World Computer". And to that end, they've created a blockchain network technology with an accompanying programming language that would allow any kind of application to be created on the Ethereum blockchain.
Though theoretically possible, when developers began to build these applications on Ethereum, they ran into problems that were results of legacy design choices that Ethereum inherited from Bitcoin.
Notable among these problem were: block time, transactions per block update, and transaction fees.
Block time
Both Bitcoin and Ethereum want to hold true to the vision that anyone anywhere can host a node and can be connected or disconnected to the network at will. However, this means that the network must be designed in a way that can handle nodes popping in and out of the network on a global scale, and the difficulty of bringing up-to-date these nodes with the rest of the network.
Connected to this is the issue of deciding which nodes can broadcast block updates.
Both Bitcoin and Ethereum uses a method call Proof-of-Work mining to determine which node will be the one to broadcast a valid update. This method is done to ensure that every node could in theory become the valid block broadcastor, thus preventing any one party from controlling the flow of information.
But all this unpredictability forces the network to take into consideration the possibility that the nodes are located at opposite sides of the world could broadcast a valid block, one after the other.
To make sure that each block update have enough time to propagate through the network, they needed to have a time-interval between each broadcast.
In Bitcoin this block interval in 10 minutes and in Ethereum this is around 15 seconds.
Transactions per block
This criteria is also sometimes described as a "Block Size" or "Transaction per second" problem.
Though it really comes down to how many transactions you can fit in a data-block. The more transaction you can fit in a data-block, the more activity can be performed on the network. When the amount of transaction that can be processed per block is low, everyone who wants to use the network has to wait a little longer for their transaction to be processed or pay a little more to have their transaction processed first.
In Bitcoin, this is a very divisive issue. So much so that it split the Bitcoin community into equally vocal camps. Dividing the network into two, forever incompatible, halves.
The core argument is that by increasing the block size, it makes it more difficult for the average person to run a node, and thus putting the network at risk of centralization.
Though it make sense on paper, as it stands today, the average person most definitely not have the resources to run a Bitcoin node, much less become a miner.
Ethereum has the same problem but on a different scale altogether.
While we are used to waiting a few minutes to have our transactions processed and authorized, what we are not used to is waiting for our applications take 15 seconds to perform actions.
Transaction fees
Transactions fees were originally envisioned as a way to incentivize people to run nodes.
This is because both Bitcoin and Ethereum operates on a deflationary model. This mean that there is a max supply on the underlying currency.
As of now Bitcoin and Ethereum miners are rewarded when they successful process a block. The reward comes from the blockchain itself. But this will slowly tail-off and leading to the point where successfully processing a block will not result in coins rewarded by the protocol. Instead, those who are using the network will have to pay a small fee to the miners to incentivize them to process their transaction.
The average transaction fee for Bitcoin last year was $23 and for Ethereum it was $0.33.
Ethereum complicates this further by having two fees: transaction fee and gas fee.
Existing blockchain platforms are burdened by large fees and limited computational capacity that prevent widespread blockchain adoption.
The two projects from the "Structured Trust system", BitShares and Steem do not have, or mitigate these issues by adopting a different model. One that is further refined in EOS which we will explore in this series.
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If you would like to know more about me and what I'm doing you can read my introduction post here.
Read my series on the Steem blockchain:
Steem: Welcome to the Matrix. Part One
Steem: Operating in the Matrix. Part Two
Steem: Construction of the Matrix. Part Three
Read my series on the EOS blockchain:
EOS whitepaper walk-through. Abstract
EOS whitepaper walk-through. Note and Disclaimer
EOS whitepaper walk-through. Overview
And you can contact me in the following way:
@bluabaleno on Steem.chat
Coins mentioned in post: