Telos: The On-ramp to Third-generation Blockchain
by Douglas Horn
Blockchain technology has made an important leap toward mainstream acceptance with a revolutionary step called third-generation blockchain. Blockchain is finally ready for adoption from general computer users due to advancements like:
- Instantaneous, no-fee transactions
- Immediate transaction processing due to massive network capacity
- Accounts with short, user-friendly names instead of long, gibberish addresses
- The ability to recover lost and stolen keys.
The blockchain industry is on the edge of an explosion of activity that will finally reach the masses. It’s a very exciting time.
These important new developments are made possible by a change in how blockchains are operated. Ethereum, which ushered in the second generation of blockchain is operated on hundreds of thousands of computer graphics cards all over the world. This limits its speed and necessitates a “gas” fee for every single action it performs. In contrast, third-generation blockchains are operated by a small number of high capacity computers with top notch infrastructure which take turns validating blocks and are selected by the votes of system tokenholders.
This consensus mechanism is called delegated proof of stake (DPOS) and it is inarguably faster and higher capacity than proof of work (POW) which Bitcoin and Ethereum use. These charts from the blockchain transaction tracking site blocktivity.info illustrates this speed and capacity. The top three blockchains in terms of transactions per 24 hours are EOS, Telos, and WAX — all three DPOS third-generation blockchains based on the EOS.IO software. The next two fastest blockchains, Bitshares and Steemit are also DPOS chains built on previous versions technologies that EOS.IO grew out of. Only after these DPOS chains do Bitcoin and Ethereum appear. In fact, EOS is showing over 50X the transactions per day of Ethereum and its capacity of use index (CUI) is less than 25% of its maximum, where Ethereum is over its theoretical CUI capacity and has unprocessed transactions waiting. Together, EOS, Telos and WAX processed 89.9% of the transactions measured by blocktivity.info for that week.
The Cost of Power
So why haven’t the EOS.IO based blockchains taken over, then? Well, in many ways they are. Third-generation blockchain apps have been steadily pushing Ethereum apps off the charts at DappRadar.com. Not only are all of the top-ten Dapps on DappRadar all on either EOS or Tron, but there isn’t an Ethereum Dapp on the list until #30 (My Crypto Heroes).
But third-generation blockchain apps are not yet growing as fast as they could be because the speed and fee-less transactions essentially push the cost of performing transactions from end users to developers. EOS.IO developers need to purchase limited and sometimes expensive network RAM in order to store the important information tables for their apps. They also need to stake tokens to reserve network resources like CPU time and network bandwidth. None of this is necessary on Ethereum and its derivatives. So developers often still find themselves deciding to deploy on slower, less powerful, lower capacity blockchain technologies in order to eliminate this resource cost.
Creating an On-ramp
Fortunately, there is a very clear way for developers to gain all the advantages of a third-generation blockchain like EOS.IO without prohibitive deployment costs. Telos (token: TLOS) is a public, decentralized blockchain that is created from the EOS.IO reference software just as EOS is. For app developers, Telos is 100% code compatible with EOS, so any app deployed on EOS could instantly be deployed on Telos as well. But Telos adds clear advantages in the form of tokenomics, chain security and resiliency, and important developer-friendly features that reduce development time and cut costs to deploy.
Telos launched as a way to remove the hyper-concentrated token ownership and therefore plutocratic governance of EOS. Telos distributed its tokens to EOS holders as of the EOS genesis snapshot on a 1:1 basis up to a 40,000 TLOS per account cap. This change affected only 1,089 accounts but removed 66% of the Telos token supply and made Telos the most economically decentralized of all blockchains. Since EOS and TLOS tokens represent the ability to claim proportionate use of network resources, each TLOS token has the rights to use 3X more network resources than each EOS token.
Another advantage related to tokenomics is the cost of on-boarding new users. Each EOS or Telos user needs an account with at least a minimal amount of system RAM (3–4KB) and some tokens staked for CPU and NET. On EOS, each user or app that creates the account must bear this cost. Telos has reserved enough tokens to create 2 million accounts for new users and allows apps to access these funds in order to create accounts for their own users, provided they show they are taking reasonable anti-abuse measures. This new user fund is expected to be continually renewed from the Telos worker proposal system. This creates a major savings for app developers.
Finally, as a new blockchain, Telos is deeply undervalued compared to EOS. Even at per-token parity, Telos would still be valued at one-third the market cap or utility value of EOS, but at the moment, the price is far lower than this. This creates an excellent opportunity for app developers not only to benefit from inexpensive deployment costs, but also possibly benefit from a rising priced token, should basic economic forces move towards equalizing the values of the chains.
App Deployment Costs
An example helps illustrate how much more affordable Telos deployment currently is. For this example, we assume an app with CPU needs of 90 seconds and bandwidth (NET) needs of 1GB. (These resources are not consumed and renew over three days.) We’ll further assume that the app needs 100MB of system RAM and intends to onboard 20,000 new users who do not currently have accounts.
At the prices as of February 5th, 2019, the app would cost over $23,000 to deploy on EOS and less than $900 to deploy on Telos. This only considers resource costs, however, not the cost of on-boarding new users for the app. If the app needs to create accounts for 20,000 new users, then the cost to deploy on EOS goes up to over $98,000 while the Telos price remains less than $900 because apps need not bear this cost on Telos.
There must be some reason why deployment costs are so much lower on Telos than EOS. The first possibility is that the Telos network is not as fast as EOS. Fortunately, there is a common benchmark test that is run on several EOS.IO blockchains to compare the speed at which each block producer node can process a CPU benchmark. It is hosted by AlohaEOS.com. The chart below is normalized from the AlohaEOS output to compare the block producers on each network for the same 7-day period.
It’s clear from the chart, that aside from negligible differences, the two networks are comparable in speed. EOS had 23 block producers produce blocks during this period and 21 of them were consistently below 2 milliseconds on the CPU benchmark. Similarly, Telos had 34 block producers produce blocks during that time and 29 of them were less than 2ms. (Telos requires its standby block producers to rotate in weekly to prove readiness as improvement in network resiliency.) Both charts are showing broad bands between 1ms and 1.8ms with a few outliers. The networks are running at the same speed and power, then, which makes sense because they are running essentially the same software on the same types of infrastructure.
Reasons Telos Resource Costs are Lower
The lower deployment cost for Telos does not stem from any network inferiority (in fact, in terms of resiliency, and anti-collusion measures, Telos is arguably superior). The cost differential is most likely a function of two things. First, the value of the apps already deployed on EOS and its larger user-base. Telos was launched less than 2 months ago, and apps are only now beginning to deploy. And second, the fact that Telos, as a grassroots project with no ICO or token sale is only listed on a few exchanges at the moment and therefore is only charted by services like Blockfolio and CoinGecko, but so far not the industry leader CoinMarketCap.
Improved Chain Security and Resiliency
Telos has innovated improvements in chain security and resiliency over EOS. To be brief, since this article is focused on developer advantages, Telos applies common sense network management practices that have not been adopted by any other decentralized DPOS blockchain.
Telos has minimum requirements that block producers must meet prior to registering for service on the Telos mainnet. These are around basic infrastructure as well as disclosures about ownership and contact information. More importantly, Telos requires that the top 30 standby block producers regularly rotate into block production to prove readiness. All block producers must also participate in the testnet and staging nets. Due to these higher requirements, Telos standby block producers are paid much better than their counterparts on any other EOS.IO chains — receiving one half the pay provided to the top 21 block producers. Telos automatically removes any block producer that misses 15% of its blocks in any given schedule. These coordinated protections help prevent a network lockup which could occur any time 8 or more top-21 block producers leave the network. Further, the staging net mentioned earlier is a temporary network spun up for at least 24 hours of operation in advance of deploying any network change to the Telos mainnet. This is also a Telos-only innovation. Taken together, these measures make the Telos network better protected than any other DPOS blockchain.
Telos Developer Advantages
Telos has its own group of core developers who build, test, document and maintain additional functionality on top of the EOS.IO reference software that Block One develops. The Telos Core Developers (TCD) group is distributed around the world and is the largest such group among the EOS.IO blockchains. The developers are paid via user-voted worker proposals, which fund the growth of the chain and ensure that token holders drive this evolution. Telos is the only EOS.IO chain to have a functioning decentralized worker proposal system. The combination of a robust group of core developers and a dependable funding mechanism lead to several Telos-only features that benefit developers.
Because Telos has numerous user-voted governance functions, the TCD needed to build its own voting service, which is called Trail. Anticipating that other developers would also benefit from these voting functions for their own apps, The TCD designed Trail to be usable by any app. Developers only need to follow the well documented instructions in the Telos Github repository, trail.service.
Trail voting is quite robust and is in ongoing development. These features let any developer quickly implement standard elections, leaderboard elections (multiple candidates for multiple seats), and yes/no issue voting — based on their app’s own tokens. There are parameters for setting necessary quorums or voting thresholds and for handling run-off elections. This type of voting is already being used by the Telos Foundation for its tokenholder and board of directors voting.
Blockchains process smart contract data as a single type of storage — essentially, everything must be RAM to be stored and processed. However, RAM is limited and expensive. Any smart contract blockchain would greatly benefit from a form of decentralized, persistent, highly accessible file storage that could store files needed by the app, but not needed by the smart contract itself. At present, there are few options for this and companies end up using centralized servers for their files and assets. However, this will not be acceptable to many users for long. The answer to this is IPFS or Interplanetary File System, which is a decentralized swarm of file storage nodes.
Telos is the first EOS.IO blockchain to implement IPFS controlled by on-chain data and smart contracts. TIPFS has been a part of Telos since launch and is how many governance documents such as worker proposals are stored. The feature is in the process of being rolled out for Q1 2019 deployment using a system resource token to incentivize TIPFS nodes while cutting storage costs to 1/10,000th or less the cost of RAM. As an additional benefit to app developers, TIPFS adds the preservation of document metadata, which is lost in other IPFS implementations.
TIPFS makes Telos the first EOS.IO blockchain that can provide secure, inexpensive, decentralized storage for app assets. And by preserving file metadata TIPFS makes it easier to present files to users in their proper format, resolution, and codec. This is a game-changing advantage for developers.
As a service to developers performing airdrops or airgrabs, Telos has an ongoing monthly snapshot service where it regularly records the Telos accounts that have been used and their token values. These snapshots are then stored on-chain in tables for two months each so that developers do not have to acquire and use system RAM to perform airgrabs. There are also airdrop and airgrab contract templates to further simplify this process.
Free New User Accounts
As previously mentioned, the free accounts for new users greatly reduces the expense of on-boarding users for any app. Many apps have little interest in the existing user base of the underlying blockchain and intend to bring in the majority of their users as new users. For these apps, the cost of paying for all of these new accounts is prohibitive and can easily become one of the largest ongoing expenses of growth. This is particularly challenging for pre-breakeven apps that are racing to increase the size of their user base, often below the actual cost of on-boarding users.
Telos believes that the expense of on-boarding new users can be borne by the blockchain through its worker proposal funds. The Telos Launch Group promised to make the first one million new user accounts free and to allow apps to integrate with the smart contract controlling these funds to extend the reach into myriad user communities. At present, the new user fund is funded to create over 2 million free accounts and the contract for deploying this is well documented on the Telos Github repository, telos.free.
RAM and Resource Grants
While deploying on Telos has a clear cost advantage over any other third-generation blockchain, Ethereum and its derivatives are cheaper still because they push these costs onto users. To further reduce the cost of deploying on Telos to where it is directly competitive with second-generation blockchains, Telos has instituted grants to further defray deployment costs.
The Telos Foundation offers full or partial grants of an app’s initial RAM costs to incentivize Telos deployment. The GoodGrant is a 5,000,000 fund that delegates resource staking to new Telos apps for their first year (or more) of deployment. Neither of these programs seek any stake or value in the app as compensation. For TF grants contact firstname.lastname@example.org. For information on GoodGrants, see https://goodblock.io/goodgrant.
Telos User Engagement
Telos has an enthusiastic and supportive community. According to the figures recorded on the first Telos snapshot, 29 days after chain activation, the number of Telos accounts that had been used at least once was 14% and comprised about 25% of all circulating tokens. Of the accounts that had been capped at 40,000 TLOS, 19% had already engaged with Telos.
Telos has four apps fully deployed and in use. Two token airdrops for soon-to-deploy apps have already been issued and two more are scheduled for the next few weeks. And it appears that at least eight more apps have announced their intention to deploy on Telos in the near future.
Telos Makes Third-generation Blockchain Affordable
Telos creates an on-ramp to third-generation blockchains for developers who want the speed, capacity and fee-less transactions of EOS.IO at an affordable price. Grants like Telos Foundation RAM grants and GoodGrant Resource Staking grants further reduce the deployment costs. Free account creation on Telos for new users drastically reduce the operational and on-boarding costs for these apps — particularly because the network funds can be directly integrated. Telos has an engaged user community, leads other blockchain projects in both governance and economic decentralization, and adds numerous innovations and tools to help developers make better decentralized apps.
Any developer considering deploying a decentralized app in 2019 should be looking at Telos as the most cost-effective and feature-rich blockchain available.
About the author: Douglas Horn is the Telos architect and whitepaper author, and the founder of GoodBlock, a block producer and app developer for the Telos Blockchain Network.
More about GoodBlock can be found at: www.goodblock.io
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