EOS transaction throughput doesn’t matter, future cartels could tear its blockchain apart

The slow transaction throughput and higher fees are painpoints of both Bitcoin and Ethereum and it harms mainstream adoption plans for both networks. That is why both top cryptocurrencies are diligently working on solutions: Sharding, Plasma on Ethereum and Lightning Network on Bitcoin.

On the other side of the story is the new blockchain that is in process of launching, EOS. The platform alleges it will support thousands of transactions per second, competing with the likes of VISA and Mastercard easily.

EOS.IO’s internal testing has shown that their blockchain can support thousands of transactions per second which is is couple of orders of magnitude better than Bitcoin and Ethereum, which can only support 9 and 30 transactions per second, respectively.

However, internal testing should not be given too much weight as it doesn’t mean much for distributed systems performance. In case of EOS it is easy to do internal testing – all you need to do is setup 21 nodes (BPs) and spam them with transactions. You will get more or less accurate results.

Also, the comparison between EOS and Bitcoin and Ethereum makes little sense as the latter ones are permissionless blockchains which are harder to scale. While EOS is permissioned blockchain, that is easy to scale – just gather around 21 block producers and connect them, they can do fast transactions as this is almost the same as a centralized system.

Permissionless competitors to Ethereum would be Zilliqa, Thunder, etc.

EOS is not a distributed blockchain and its confirmations are not the same. EOS is a group of workers put up together from a white list voted by human.

The point we are trying to make here is that EOS deliberately did the tradeoff – scalabality for decentralization.

So, Is 21 BP’s enough to be decentralized? Thijs Mass covered this in his Hackernoon article:

If the block producers were fully anonymous and had no way of communicating with each other, then maybe. But this is not the case.

First, it is necessary to understand how the BPs are chosen. In essence, anyone who has any EOS can stake their tokens to vote for candidates that wish to become a BP. The 21 that are voted into office are allowed to create blocks, and, as such, they also receive block rewards.

Being a BP is awesome. At the EOS’ current price (at time of writing), a BP will be awarded $1.64 million USD in block rewards per year. Moreover, another +- $102 million USD will be divided among BP’s running in the election by ratio of their received votes. On average, let’s say that a BP will be rewarded about $2.5 million USD a year.

The problem EOS will face is not number of transactions it can do, but cartels that will tear each other apart and perhaps EOS’ blockchain along the way while they fight for the very profitable spot among the 21 “chosen ones”.

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CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Rene Peters

Rene Peters

Rene Peters is editor-in-chief of CaptainAltcoin and is responsible for editorial planning and business development. After his training as an accountant, he studied diplomacy and economics and held various positions in one of the management consultancies and in couple of digital marketing agencies. He is particularly interested in the long-term implications of blockchain technology for politics, society and the economy.

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