TokenGazer Crypto Review | EOS: Overall Rating: 4.5, Indicator Trend: Underperform
Overall Rating: 4.5, Indicator Trend: Underperform
Name:EOS
Ticker:EOS
Date of Establishment:Jul.2,2017
Total supply:1,000,000,000(5% increase per year)
Circulation Ratio：90%
TokenGazer Indicator
Technology:4.5
Community:4.6
User:4.5
Market:4.3
Technology: Neutral
EOS code development on Github is very active. [Bullish]
The coming implementation of the resource leasing program REX may bring more attention to EOS project, but it has the same abnormal fluctuation expectations as RAM. [Bearish]
The coming development of the hardware wallet APP will improve UE. [Bullish]
The WASM virtual machine helps EOS stay ahead of the competition in the long run. [Bullish]
There is not a very clear official medium and long-term roadmap. Some of the short-term plans that may be suddenly released in the future may not be in line with people’s expectations, leading to market fluctuation. [Bearish]
The top ten whales control 19.4% of allocated memory out of the total EOS memory, but the memory effective utilization rate is only 1.67%. Memory centralization and speculation may become an unfavorable factor restricting DAPP development. [Bearish]
A group of executives left in September 2018. Due to the lack of significant changes in the way of internal governance in recent months, internal differences may still exist in Block.one. [Bearish]
Community: Neutral
The team has sufficient funds and ecosystem growth has strong financial support. [Bullish]
EOS has great compatibility and is less difficult to develop, which contribute to the increasing number of developers. [Bullish]
There are bribery and mutual voting behaviors in the election of BPs, and there is a possibility of scandals from time to time. [Bearish]
$1 billion of the officially raised funds is for EOS ecosystem expansion, and the purpose of the remaining $3 billion is unclear, which may cause long-term doubts. [Bullish]
User: Outperform
The number of EOS 24-hour active addresses has been increasing with time-to-time fluctuation. [Bullish]
The DAPP ecosystem is in a period of rapid development, and the number of DAPPs is increasing rapidly. [Bullish]
DAPPs are mainly speculative ones, and the popularity is difficult to sustain. [Bearish]
The long-established exchange Bitfinex is developing a decentralized exchange EOSFINEX based on EOS.IO, which may bring some traffic. [Bullish]
Over the past year, Chinese users’ investment enthusiasm for EOS has decreased from the highest in the world to a low level, and the harsh market environment has helped to eliminate speculators and retain users with stable enthusiasm. [Bearish]
Market: Underperform
Under the current governance model, EOS is less likely to be launched on Coinbase in the short term. [Bearish]
There are about 370 million EOSes in circulation, and only millions of EOSes stay in the DAPP contract. The rapid growth of DAPPs has no real impact on liquidity. [Bearish]
1 Technology Assessment
1.1 Technology Vision
The target of the EOS project is to become the strongest infrastructure for decentralized applications, aiming at millions of transactions per second (TPS), no fees. The highest TPS on current EOS network is 3996, and the highest TPS of ETH is currently only a few dozen.
1.2 Consensus Algorithm
EOS uses DPOS consensus and Byzantine Fault Tolerance and has a total of 21 BPs （block proposer） and 100 candidate nodes. Due to the small number of nodes, the performance of a single node is strong, and the network performance is thus greatly improved.
1.3 Impossible Triangle
Scalability has improved, but decentralization has declined. Due to the small number of BPs, the power of the project and the BPs is relatively large, which often causes controversy.
1.4 Virtual Machine
EOS has a built-in WebAssembly Virtual Machine (WASM) that has improved speed and performance and can develop smart contracts in familiar languages without the need to learn new languages. According to the technical white paper, the implementation of scripting language and virtual machine are mostly independent from the design of the EOS.IO technology. Any language or virtual machine that is deterministic and properly sandboxed with sufficient performance can be integrated with the EOS.IO software API.
1.5 Influence on Github
According to CryptoMiso website, EOS ranks 4th in code activity. EOS code development is very active, but ETH still has an absolute advantage in the number of developers. EOS has a very large influence on Git, which once brought the development boom of DPOS mechanism.
1.6 Technology Roadmap
The EOS main network was launched on June 15, 2018. It will be implemented and optimized and then comes the cluster implementation. The resource leasing program REX and hardware wallet App will be implemented in the near future. REX has expectations of causing market fluctuation, similar to RAM, and the hardware wallet app may enhance user experience. EOS’s follow-up plans are mostly discussed in the Telegram group, and a clear official plan has not been issued.
1.7 Memory Centralization
The current total EOS memory is 85.76G, 45.29% of which has been distributed. The used memory accounts for only 4.14%, and the effective memory utilization rate is 9.13%. The top ten whales occupy 7.55G of memory, accounting for 8.8% of the total memory, equivalent to 19.4% of the allocated memory, but only uses 7.51M. The effective utilization rate is only 1.67%. Merely 1 out of the 10 whales uses a comparatively large amount of memory. This indicates that serious centralization and speculation problems exist in memory allocation. The current memory is relatively sufficient, and the problem is not serious. If EOS’s DAPP ecosystem develops to a certain extent, memory centralization and speculation may become an unfavorable factor restricting DAPP development.
1.8 Technology Review
The technical architecture of EOS helps to improve performance. It is 5 months since the main network was launched. The code development is very active and new versions keep coming out. The implementation of the resource leasing program REX may bring more attention to EOS, but it has the same abnormal fluctuation expectations as RAM. The hardware wallet app will be developed in the near future to help improve the user experience. The WASM virtual machine helps EOS maintain its advantage in long-term competition.
The medium and long-term roadmap for EOS is not clear enough, but given the active code updates and the team’s strong development capabilities, there is not expected to be too many negative impacts. Another hidden danger is that some suddenly released short-term plans may be inconsistent with people’s expectations, leading to market fluctuation. The EOS memory has centralization and speculation problems, and the more prosperous the DAPP ecosystem is, the more serious the problems may be.
2 Governance and Operation
2.1 Investment Institutions
The parent company of EOS is Block.one, and the fund-raising process was quite smooth. EOS also received support from Li Xiaolai during its early promotion.
2.2 Core Members
① CEO: Brendan Blumme (BB), co-founder of okay.com、Gamecliff.
②CTO: Daniel Larimer (BM), also the founder of the blockchain projects Bitshares and Steem, both of which have entered the top ten of market capitalization. Daniel Larimer has a continuous entrepreneurial experience in the blockchain sector. Because of his unique personality, there is a possibility that he may resign from Block.one again.
2.3 Governance Mechanism
The financial situation of Block.one is not transparent, and the team’s underselling of ETH once became a short-selling speculation target. In the EOS governance structure, BPs and Block.one have great power, and Daniel Larime has modified the rules several times, causing controversy in community. For example, Daniel Larime once drafted the EOS Constitution but soon proposed a new version after the account suspension. In the RAM debate, he left the telegraph group.
The officially announced management team of Block.one has 8 members and does not include investors. The role of the investment institution in Block.one is unknown and may exist as a consultant. Considering that Block.one itself is well funded, the team is less likely to be interfered by investment institutions. The purpose of Block.one’s equity fund raising when there is no shortage of funds should be to obtain more quality resources and even avoid some policy risks.
In late September 2018, the second, third, fourth and fifth employees of Block.one left and the reason was that the company did not really meet the market demand, indicating that there were differences within the company. Due to the lack of obvious changes in the way of EOS governance in recent months, disagreements within the company may still exist.
2.4 Token Supply Mechanism
Initially supply 1 billion with 900 million distributed and 100 million retained by the team. An additional 5%is issued each year as a node reward and proposal fund.
2.5 Cash Flow for Organization and Operation
The EOS team has raised about 7.21 million ETHs, worth about $4 billion, and retained another 100 million EOSes. The team is well funded. The team has converted most of the ETH tokens into fiat money and spent $1 billion on EOS VC to invest in companies established on the basis of the EOS.IO agreement. According to the CEO, the remaining $3 billion was not distributed to developers, but rather used to expand the team. In order to maintain a competitive advantage, high information transparency can not be guaranteed. It is expected that the funding transparency problem of EOS will still exist.
The EOS code has a total of 170 developers and the total number of Block.one members is estimated to be about 200 including marketing and other staff, so the fund is $22.75 million per capita. The team will not have financial problems for a long time.
Sufficient fund helps EOS expand its ecosystem. Currently EOS VC is investing in and implementing Everipedia, the next generation Encyclopedia, High Fidelity, a Virtual Reality solution, Funding, a fund that promotes EOSIO software utilization and EOS Global Hackathon .
2.6 Governance and Operation Review
The EOS team still has many problems in governance. The balance of power between BPs, developers, and communities has not yet formed, and disputes often occur. The initial funding of the team is very abundant, but the finances are not transparent. There are about 370 million EOSes in actual circulation, and the recently popular DAPPs have little effect on net liquidity. Due to the unique personality of CTO Daniel Larimer (BM), it is possible that he may resign again. Under the current governance model, EOS is less likely to be launched on Coinbase. A group of old employees left Block.one, indicating that there are differences within the company.
3 Community and User
3.1 Number of Community Members
The number EOS’s Twitter fans surpasses that of 98.65% of the primary market projects and they are extremely active. But compared to ETH, the community of EOS is still weak. The ETH developer community has become very strong through years of development, while EOS is still in its infancy, and there is still a long way to go to compete with ETH. From a community perspective, if the EOS DAPP ecosystem is not distinguished, then the EOS market value is less likely to surpass ETH before the EOS community power approaches ETH.
3.2 Investor Distribution
The price trend of EOS has a significant positive correlation with its key word density and relevance, and the current EOS searching activity is at a low level. Google Trends shows that China was once the hottest region for EOS searching, but in the past year, the search volume of Chinese users has gradually decreased, and the enthusiasm for investment in EOS has gradually cooled down, while the enthusiasm for EOS in other regions has been relatively stable. Actually, the harsh market environment helps to eliminate speculators and retains users with stable enthusiasm, which contributes to the healthy development of EOS.
3.3 Ecosystem Development
Since the launch of the main network, the number of DAPPs has grown rapidly with a full range of types. The number of EOS active addresses is increasing. The current transaction amount of EOS DAPPs has surpassed ETH, but DAPP’s activity is mainly concentrated in speculative games. There are constant reports of DAPPs’ serious fake transaction problems and the so-called prosperity is only man-made illusion, but the speculative DAPP’s dominance is true.
At present, there are not many merchants or websites that accept EOS payments. The activity of DAPPs has caused many hacking incidents, mostly because of the loopholes in the DAPP code which are exploited by hackers. Some DAPPs claim to be blockchain projects but reject code opensource, showing that the EOS ecosystem is still in the barbaric period.
The long-established exchange Bitfinex is developing the decentralized exchange EOSFINEX based on EOS.IO. If the project is successful and the user experience is good, it is expected to bring a certain amount of traffic after being launched.
3.4 Community and User Review
EOS users are on the rise and are very active, but community power is still weak compared to ETH. It is expected that EOS’s DAPP ecosystem growth rate will be higher than ETH before the ETH is sharded and launched. The current EOS DAPP ecosystem is in a period of rapid development, and the transaction volume has surpassed ETH, but it is dominated by speculative DAPPS. Since there is no practical application scenarios launched, short-term popularity may not last long. The data shows that Chinese users’ investment enthusiasm for EOS has changed from the highest in the world to almost disappeared. The harsh market environment helps to eliminate speculators and retain users with stable enthusiasm.
4 Market
4.1 Transactions and Active Addresses
The number of active addresses of EOS fluctuates greatly. Since the main network was launched, the median of active addresses has been slowly increasing and the number of payments has been growing rapidly. The above two groups of data show that the number of EOS users has not decreased under the downturn market environment, and the usage amount has increased rapidly.
4.2 Sortino Ratio
The higher the Sortino Ratio, the higher the excess return on the funds in the same downside risk. The retracement rate is used to observe the relationship between risk and return. The 90-day return of EOS has been in decline since 2018, which is still negative, indicating poor investment performance.
4.3 Transaction Volume
The peak of EOS trading volume appeared on April 29, 2018. Almost all major exchanges have launched EOS, but there are not many exchanges that have launched the EOS trading zone. There is a clear positive correlation between EOS market trading volume and price. In the future, if mainstream trading exchanges launch the EOS trading zone, there is a great probability that the EOS market value will rise.
4.4 ROI
The ROI fluctuations of EOS gradually becomes consistent with overall fluctuations of cryptocurrency, and the recent ROI is near zero, which is related to the overall market downturn.
4.5 Trading Market
EOS has 195 trading pairs on 79 exchanges, 18 of which are fiat trading pairs. The number of trading pairs of this project exceeds 99.80% of cryptocurrency projects.
4.6 Market Review
EOS usage is increasing rapidly, and the correlation between EOS price and that of the mainstream cryptocurrencies such as BTC and ETH has increased significantly. The current Sortino Ratio is still negative and the investment performance is poor.
5 Valuation
5.1 NVT and Transaction Volume on Chain
Comparing EOS with other mainstream cryptocurrencies, we can see that the NVT value of EOS is very close to several other cryptocurrencies. There is a certain correspondence between the ranking of the transaction volume on chain and the market value of mainstream cryptocurrencies. The current market value ranking of EOS is basically consistent with the ranking of its trading volume on chain. From this perspective, the ranking of EOS is basically reasonable.
5.2 TokenGazer Model
According to the TokenGazer valuation model, based on the data of November 22, 2018 (total market value 150B), the odds of EOS market value being in the range of 1107M~4447M are 95%. The current EOS market value is above the median of the estimated value range.
5.3 Market Value Trend and Strategies
Referring to the above analysis, the market value share of EOS is already above the median of the estimated value range, and will be mildly bullish subsequently. The market value share of EOS is less likely to rise sharply in the short term.
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