How RAM Speculation Affects The State of Current Technology in EOS.

EOS splashed into news in June for the largest initial coin offering held to date, a stunning USD$4bn raised over the span of a year. EOS aims to bring forth a public Blockchain using the Delegated Proof of Stake (DPoS) consensus mechanism, that promises to have extremely high throughput to handle thousands of decentralized apps (Dapps). EOS is available for trading on Huobi Pro, paired against USDT, BTC, ETH and HT. Huobi Pro has been actively following the developments of EOS and educating users on EOS capabilities and challenges through Huobi Talk.

Proof of Work (PoW), Proof of Stake (PoS) and Delegated Proof of Stake (DPoS) Consensus Mechanisms

Proof of Work burst into the Blockchain scene by being the consensus mechanism for Bitcoin. Mining is achieved through burning through energy to compute a puzzle and hashing random functions till a certain criterion is met. This energy wasteful method brought Proof of Stake into the fore, where users stake their coins to mine new coins. Delegated Proof of Stake (DPoS) is where users vote in delegates, called Block Producers who will maintain the technical requirements of a full node among other things. DPoS typically has higher throughput than PoW and PoS because the degree of decentralization Is less, since only a number of full nodes are required.

Is EOS RAM Market the New Gold Rush?

Full nodes are expected to have an pre-configured amount of RAM for maximum performance. The RAM is required to store account information such as ledgers, keys and contract state.

EOSIO adopts a free-market approach to allocating RAM. EOSIO system contract allows users to purchase RAM from the system and sell RAM back to the marketplace in exchange for EOS Tokens. This provides liquidity in the RAM market while facilitating price discovery.

The algorithm used in this marketplace is known as a Bancor Relay. A Bancor Relay does not preset the price of RAM. It merely offers to buy and sell at previously decided market rates. Anytime the current market rate deviates from the current price offered by the Bancor Relay, traders will sell or buy RAM, nudging the price closer to the market determined price, in effect, arbitraging.

💽 What is the RAM for?

When users want data, the user cannot query the entire Blockchain because it takes too long, so it will have to be stored in RAM and be accessed from the memory. Every single piece of data is replicated in the RAM of every node and that’s why keeping data in RAM will be expensive. As Dan Larimer quoted “RAM is meant to be used for developers who want to build real things to make everyone’s lives better”.

CTO of EOS, Dan Larimer, designed the system such that the free market may decide on the value. This is a point that eosDAC vehemently disagrees. eosDAC claims that the RAM market is not a free market. There is no futures market; no way to short the market. He opined that the reasonable price should be one that is benchmarked on competitors’ transaction prices like that of Ethereum.

Speculators have started to hoard RAM and in turn drive the prices in the ecosystem. Block Producer EOSHuobiPool insists that long term price stability is needed so that developers can predict the cost of operating.

eosDAC is a Dapp on the EOS ecosystem. Their point of view may be reflective of how developers feel over the entire RAM speculation debacle.

💾 Are Sidechains the Way to Bring RAM Prices Down?

EOS Asia proposed that adapting to the towering RAM prices through sidechains may work. EOS Asia shared that they are exploring a plan in getting some Block Producers to run the sidechains. eosDAC added that the proposal may allow the standby Block Producers to contribute in creating sidechains. This is a novel idea, although there still does not exist a befitting smart contract architecture to allow sidechain-mainchain integration on the EOS ecosystem.

EOS Block Producers panel discussion on Huobi Talk discussed that Dan Larimer wants to adjust the algorithm to increase slippage and dissuade speculators and keep the price more stable while controlling RAM trading.

EOS may be able to weather the RAM prices storm through technological innovation and demand management. Yet one must be overly-optimistic to think that they are able to solve an issue this formidable — human greed.

Follow EOS prices live on Huobi Pro.

This episode panellists include the following:

EOSHuobiPool — Denny Wu — Operations Manager

EOS42- David Packham — Head of Strategy and Community

EOS New York — Kevin Rose — Co-Founder and Head of Community

EOSeoul — Eliot Dongwon Shin — CEO of EOSeoul China

eosDAC — Luke Stokes, eosDAC Launch Team

EOS Asia — DaFeng Guo — Co-Founder

EOSphere — Ross Dold, Co-Founder

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Written by Ronald Chan, Guest Writer

Ronald Chan is a published academic writer in Blockchain. He specializes in Blockchain consensus mechanisms and the socio-economical aspects of the technology. An avid diver, he intends to log manta rays sightings into a Blockchain, although a simple notebook would suffice.