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ICO Analysis: EOS

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EOS.IO software by block.one wants to “Decentralize Everything”. Mr. Larimer has already put two notable blockchain systems live: BitShares and Steem. Both of these systems remain online and recently benefited from increased interest in the crypto-asset space in general. To this date, EOS has raised $200 million in revenue from token sales.

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Brock Pierce, co-founder of block.one, told Reuters that EOS is designed to be a foundation for blockchain business applications. Attendees heard a lot about EOS at last month’s Consensus conference put on by Coin Desk. Block.one claims its platform has eliminated transaction fees and can process millions of transactions per second.

The startup, which recently started selling the EOS token to create a decentralized distribution of tokens to be used with the EOS.IO software has introduced the concept of automating business processes, monitoring assets, and creating multiple applications based on prior technology introduced by Mr. Larimer, who is the inventor of the “Proof of Stake” and the “Decentralized Autonomous Corporations” concepts.

According to its website,

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(…) block.one provides end-to-end solutions to bring businesses onto the blockchain from strategic planning to product deployment.

The Team

Block.one CEO, Brendan Blumer, has been involved in the blockchain industry since 2014. Mr. Blumer’s businesses include virtual currency trading in MMORPGs in the US, okay.com in Hong Kong and 1Group in India.

Partner Brock Pierce has raised $200 million for companies he founded, according to his biography. A former child actor, the well-connected Pierce founded Internet Gaming Entertainment in 2001 and ZAM two years later.

Many of Pierce’s companies operate in the virtual currency space. Active in the Bitcoin blockchain ecosystem for nearly a decade already, and a former Director of the Bitcoin Foundation and founder and managing partner of fintech focused venture capital firm Blockchain Capital, Mr. Pierce mentors startup accelerators.

Pierce serves as a founder, board member or advisor at several bitcoin companies: GoCoin, Tether, ZenBox, Blade Financial, Expresscoin, Noble Markets, BitGo and ChangeTip.

Partner Ian Grigg is a financial cryptographer working on cryptographic ledger platforms for over 20 years. He is known for naming the Ricardian Contract, “a method to identify and describe issues of financial instruments as contracts”.

Mr. Grigg’s focuses have revolved around digital contracting. Ricardian Contracts “express all the salient details of an issuance as an unforgeable contract, unforgeably linked into every action within a payment system.”

The Ricardian white paper contract goes on: “By translating the institution of the contract into the digital domain, we build upon centuries’ and even millennia’s worth of experience in documenting, sharing and disputing the meaning of agreements between parties.”

The Ricardian Contract allows clarity in legal and customer support questions. “The user benefits from lower overall costs, and better presentation of information, within a more consistent framework.” Mr. Grigg’s work on triple-entry accounting incorporates Signed Receipt and standard, double entry bookkeeping.

Mr. Larimer is known for his work with BitShares and Steemit. He is credited with inventing delegated proof-of-stake and the concept of decentralized autonomous organizations. (modified by Ethereum)

BitShares’ market-pegged asset platform was described as a hedge against cryptocurrencies by placing fungible fiat derivatives backed by cryptocurrency on a blockchain. Larimer left the project due to lack of funding. In 2016 he joined Steemit, where he created a social content platform based on blockchain.

Larimer says BitShares’ innovation lays in its vertical scalability, which allows transactions to be processed up to as many as 100,000 per second. Mr. Blumer cites horizontal scalability, parallel execution of smart contracts and the simultaneous processing of transactions as EOS strengths. Block.one likely represents the most professional outfit with which Larimer has worked.

The Platform

The software is called ‘EOS.IO’. There is then the ‘EOS Token’ and the ‘EOS Platform’. EOS’ “asynchronous proof-of-stake blockchain” platform is designed to enable applications as user-friendly as centralized alternatives. Making use of delegated proof-of-stake (DPoS) consensus protocol, EOS describes its project as a republic wherein community members of the community delegate verifying transactions to elected block producers.”

Transaction as Proof of Stake (TaPoS) will be implemented on EOS.io software to require that each transaction includes the hash of a recent block header. This hash serves two purposes:

  1. prevents a replay of a transaction on forks that do not include the referenced block; and
  2. signals the network that a particular user and their stake are on a specific fork.

According to the EOS white paper: “Over time all users end up directly confirming the blockchain which makes it difficult to forge counterfeit chains as the counterfeit would not be able to migrate transactions from the legitimate chain.”

The EOS.io software ensures there are no gaps in its transaction history by assigning a sequence number to every message delivered to every account via “proof of completeness.”

The project’s white paper, available on GitHub, notes: “A user can use these sequence numbers to prove that all messages intended for a particular account have been processed and that they were processed in order.”

Integration

EOS, like many proposed distributed ledger platforms, intends to integrate various blockchain platforms. The startup intends on doing this by ensuring clients that they do not need to process all transactions.

After all, an exchange only cares about transfers in and out of the exchange and nothing more,” reads the white paper. “It would also be ideal if the exchange chain could utilize lightweight merkle proofs of deposit rather than having to trust its own block producers entirely. At the very least a chain’s block producers would like to maintain the smallest possible overhead when synchronizing with another blockchain.

In implementing Merkle Proofs for Light Client Validation (LCV), EOS hopes to enable “the generation of relatively light-weight proof of existence that can be validated by anyone tracking a relatively light-weight data set.”

The EOS white paper describes solving latency problems by breaking blocks into “cycles” divided into different threads and transactions containing messages for delivery. “This structure can be visualized as a tree where alternating layers are processed sequentially and in parallel,” according to the white paper.

It concludes:

The EOS.IO software is designed from experience with proven concepts and best practices, and represents fundamental advancements in blockchain technology. The software is part of a holistic blueprint for a globally scalable blockchain society in which decentralised applications can be easily deployed and governed.

“Every single account operates like its own chain, and supports interoperation between all other accounts without locking, so determinism is preserved,” according to Mr. Larimer.

Mr. Larimer calls EOS an “incremental improvement” over his previous projects, describing it as a “general case” of BitShares and Steemit. EOS could support applications like Bitshares and Steem, but it’d be up to those teams.

Our Rating

Now, whether or not EOS will offer infinite scalability and free transactions has yet to be seen – after all, there isn’t much code to go on. As for the latter claim, a basic foundation of pop-economics is that there is no free lunch. The question for EOS, then, and any blockchain project, is whether or not what it offers outflanks its predecessors and contemporaries.

Thanks to its experienced team, and its track record of success, as well as in-production use cases for the technology itself, we give EOS a 6.75 out of 10.

Investment Details

EOS digital token distribution opened up Monday, June 26. EOS’ token distribution follows a participation model that will transpire over the course of one year, “creating the fairest token distribution project on Ethereum to date,” according to the company. Pierce told Reuters that

The goal of the EOS token sale is to make it truly democratize and provide equal access to everyone (…)

Mr. Blumer said: “To ensure inclusivity, EOS

To ensure inclusivity, EOS are not sold for a fixed price, but sold at a price determined by market demand; this mimics mining, but does not offer unfair advantages to large purchasers.

The EOS token sale, which is set to take place over the span of nearly one-year on the Ethereum blockchain, will see 1 billion tokens allocated. 20 percent of the EOS tokens will be sold during the first days, with 70 percent split evenly into 350 consecutive 23-hour periods of 2 million EOS tokens per, beginning July 1. The 10 percent leftover, reserved for block.one, cannot be traded or transferred on the Ethereum network. According to Blumer, EOS will be priced on market demand.

The crowdsale has appeared in New York Times, Reuters and VICE and other noteworthy outlets, as well as hosted info sessions, sponsored events, given out free merch, and advertised on Time Squares jumbotron. Like so many blockchain-based token sales, EOS today is little more than a concept, a white paper, and new code.

Critics levy criticism at Larimer for having left his prior projects, but the developer was free to leave the projects on his whim. He has said publicly that building up the platforms to be self-sustaining was his goal on both platforms before handing over responsibilities. Faces of developers, even on the bitcoin blockchain, often change.

Criticism of DPoS paints it as a winner-take-all arrangement which results in ‘whales’ who can control the system. Some compare it to proof-of-work in bitcoin, where holders of more currency may act as an ‘elite’ in the system.

Bitcoin and Ethereum can be thought of as Delegated Proof of Work where miners elect mining pools, Mr. Larimer told Hacked.com. Less than a dozen mining pools control the vast majority of block production, but Delegated Proof of Stake ensures there are over 20 producers “mining pools” elected by the stake (“hash power”). Like proof-of-work anyone can produce blocks occasionally by voting for themselves. Steem has over 50 unique individuals who produce blocks every single day, more than Bitcoin or Ethereum.

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6 Comments

6 Comments

  1. godtrader

    July 5, 2017 at 5:48 pm

    Thanks, that was an interesting read. I managed to make some profit selling my first windows ICO tokens at $4.29. Its interesting where the price of EOS token will go in next days/weeks. Looks like its just speculative demand.

    • Justin OConnell

      July 7, 2017 at 5:26 pm

      Speculative demand will fuel many ICOs. There seems to be a misconception that tokens should have an inherent value. In my opinion, public blockchains themselves are where inherent value and utility can be found. Token sales are often a vote of confidence in the wherewithal of a specific project. In the case of EOS, it evokes confidence thanks to Mr. Larimer’s experience and the capital behind the project.

  2. choikech

    July 6, 2017 at 1:29 am

    EOS anaylsis published too late. The heat is already gone.

    • Justin OConnell

      July 7, 2017 at 5:27 pm

      It is likely that, at least, a finished platform will come of this considering Mr. Larimer’s coding experience. I would be surprised, in this case, if nothing came of this.

  3. AsTi

    July 6, 2017 at 8:17 am

    EOS ICO SCAM and you know it. 170 million to build the Bitshares fork? Really? Where this invested money? Definitely on the exchanges.

    BTW, almost every second post is ‘to late’ or has info like this.

    • Justin OConnell

      July 7, 2017 at 5:28 pm

      It’s likely, due to Mr. Larimer’s experience, a project will come of this. Further, the company’s partners are well-connected.

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Analysis

Bitcoin’s Record-Breaking Rally Continues as Prices Cross $8,100

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Bitcoin surged to new highs on Sunday, as the world’s largest crypto by market cap continued to generate bids following the cancellation of Segwit2x.

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BTC/USD Price Levels

The value of a single bitcoin reached a daily high of $8,110.59, its best level on record. At press time, BTC/USD was valued at around $8,002 for a gain of 4%.

With the gain, bitcoin’s market cap now exceeds $133 billion. That’s roughly $100 billion greater than Ethereum, the market’s second most valuable cryptocurrency.

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Bitcoin has added more than $1,100 over the past five sessions. It was down around $5,600 just one week ago.

Bitcoin Cash (BCH), a digital currency alternative that broke away from the original blockchain Aug. 1, was down 5.1% at $1,185. BTC and BCH locked horns earlier this month after the Segwit2x hard fork was abandoned.

$10,000 and Beyond?

Institutional clearing platform LedgerX has initiated its first long-term bitcoin futures option, which is set to expire Dec. 28, 2018. In setting up the option, LedgerX is assuming a price of $10,000 at the time of expiration. That’s a 25% premium on current levels.

Investors who buy the option are essentially saying they believe prices will exceed $10,000 by the time of expiration.

Bitcoin is being helped by growing institutional demand for the digital currency, as hedge funds, day traders and other mainstream investment outfits look to access this burgeoning asset class. CBOE and CME Group have each announced plans to integrate bitcoin into more conventional investment vehicles in the coming months.

The rush of institutional money into bitcoin is a sure sign that the digital asset class is becoming too big to ignore. The value of all cryptocurrencies in circulation has already exceeded $230 billion, with more than a dozen coins valued at $1 billion or more. Nine others have a market cap of $500 million or greater.

Coinbase Responds

The rise of institutional capital has also compelled Coinbase to introduce a custodial service targeted at account holders with more than $10 million in assets. This service targets hedge funds and other institutions that have remained largely on the sidelines of the crypto revolution.

In a recent blog post, Coinbase CEO Brian Armstrong announced that the new service will launch sometime next year.

“When we speak with these institutions, they tell us that the number one thing preventing them from getting started is the existence of a digital asset custodian that they can trust to store client funds securely,” Armstrong wrote.

In addition to maintaining the minimum $10 million asset requirement, institutions must pay a $100,000 setup fee to gain access tot he Custodial program. In response, institutional investors will receive assurance that their assets are secure.

The Coinbase Custody website lists broad support for bitcoin, Ethereum (ETH) and Litecoin (LTC), as well as ERC20 tokens. The ERC20 protocol has emerged as the favorite for startups launching initial coin offerings (ICOs), a controversial crowdfunding model that has already overtaken early stage venture capital.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

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Cryptocurrencies

Is Ethereum Ready to Play Catch Up With Bitcoin?

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In mid-June of this year, the difference between the market capitalization of bitcoin and Ethereum had narrowed down to less than $8 billion. This had many market participants excited. They expected Ethereum to dethrone bitcoin as the leader, a move popularly termed as flippening.

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Key observations

  1. Ethereum has hugely underperformed bitcoin
  2. The chart pattern suggests that Ethereum is likely to play catch up in the next few months
  3. Stay on the long side of Ethereum to benefit from the bullish setup

However, fast forward five months and the difference in the market capitalization of the top two cryptocurrencies has increased to about $96 billion. This shows that while bitcoin has raced ahead in the past few months, Ethereum has hugely lagged behind.

However, is the underperformance about to end?

The chart pattern shows that Ethereum is likely to embark on a rally of its own that can carry it to $645 to $670 levels in the next few months. Let’s see how we arrived at these levels.

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Ethereum opened trading at $8.16 on January 1, 2017. It started its rally in March and by June 12, it reached a high of $420, an astronomical rally of about 5047%. Thereafter, it entered a period of consolidation, digesting the gains.

On the charts, Ethereum has formed a large symmetrical triangle, which usually acts as a continuation pattern. The breakout is generally in the direction of the long-term trend, or the trend that was prevailing before the pattern formed. In this case, the sharp move from January to June confirms that the cryptocurrency was in an uptrend before forming the triangle.

However, this is not a fool proof trade because sometimes the symmetrical triangle acts as a reversal pattern. Therefore, the best way to play this trade is to wait for a breakout of the triangle before initiating any trade.

Where can we take an entry?

Currently, the resistance line of the triangle is at about $378 levels, a level close to today’s intraday highs. The bears are likely to strongly defend this level. However, if the bulls breakout of $378 and manage to close above the resistance line, the trade on the long side will set up.

Different traders use different methods to confirm whether the breakout is valid or not. Some wait until price moves 3% above the breakout level, others wait for three consecutive closes above the resistance level.

However, we have observed that the best breakouts never look back, hence, waiting for three days may lead to a missed opportunity. Therefore, we can wait for a closing above the resistance line of the triangle and initiate the long positions on the following day.

The breakout can face resistance at $400 and $420. However, we expect the virtual currency to scale both these resistances and rally towards its pattern target zone of $645 to $670.

Notwithstanding, even the most reliable patterns can fail. Therefore, our stop loss will be kept at $340. We don’t want to hang on to the trade if it falls back into the triangle. We shall raise our stops to breakeven as soon as Ethereum breaks out to new lifetime highs. From thereon, we shall trail the stops higher to protect our paper profits.

Note

The chart pattern suggests a resumption of the long-term uptrend in Ethereum. However, this will not get confirmed until the cryptocurrency breaks out and sustains above $380. Therefore, please initiate positions only on a breakout and close above the triangle. Entering presumptive trades may result in losses.

Featured image courtesy of Shutterstock. 

 

 

 

 

 

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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin Flirts with $8000 as Altcoin Bull Persists

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Bitcoin’s swift recovery was the main topic of the week, as the most valuable coin not just regained its steep losses, but hit a marginal new high towards the end of the period. The entire segment is experiencing capital inflows as the total value of the coins climbed above $230 billion for the first time ever after finally leaving the vicinity of the $200 billion mark.

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BTC breached the $8000 level before turning slightly lower on Friday, but despite the severely overbought daily chart, it is still trading near its all-time highs. As the long-term picture still suggests a deeper correction, investors should wait with opening new positions and traders should also control position sizes here. Key support levels are found at $7700, $7000, and $6700, while the recent key break-out level at $5000 still hasn’t been re-tested.

BTC/USD, Daily Chart Analysis

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Dash is still the most bullish altcoin from a technical standpoint, despite this week’s short-term correction, as the coin is trading above its prior all-time high, and this weekend, it looks ready to test the break-out high near $500. Support levels are still found at $400, $360, and $330, and as the long-term picture is approaching overbought territory, investors should only hold on to their positions here.

DASH/USD, Daily Chart Analysis

The other major altcoins are also mostly in bullish setups, with some of them already in the latter stages of this cycle, like Monero and IOTA, but elsewhere in the segment, there are still opportunities for both traders and investors. Let’s see the detailed long-term view.

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