EOS = Empty Optimism Surfacing
A $4B+ dollar raise for a pre-traction, open source protocol never ends well…
Disclaimer: This is not financial advice nor should anyone take my thoughts as financial advisements. These are mere opinions, you should consult with your financial advisor before entering into any transaction.
In what was arguably the most hyped ICO of 2017–2018, EOS and its $4B+ raise seemed to burn as bright as the sun in the crypto-verse. But it’s already becoming clear that EOS is more like a dwindling supernova…
Early Fractures
EOSIO, the open source protocol of EOS, has already experienced six distinct forks. By looking at EOS as a whole (still an early stage, overfunded startup), this is analogous to the early employees of a company splitting in six different directions…aka an outright implosion. To be clear, even if you view EOS as an unstoppable behemoth, this is not the equivalent of having a theoretical opportunity to “fork” an established tech giant like Facebook or Google for example. Both of these companies have already spent years building and extracting their mountainous value from network effects, thus fortifying their very wide moats. Early blockchain forks simply add more competitors and everything from the dApps to the user base are anyone’s game…
Mounting Tech Challenges
While UX/UI challenges remain with Ethereum-based dApps to include gas fees, one of the primary premises of EOS was to allow free services for users thus encouraging widespread adoption. But it’s naive to think crypto was exempt from basic economics in that there is no free lunch. What has been made free for the user with EOS has become costly for the developers. Between the network resources required (RAM, CPU, & NET) to develop on EOSIO, the costs to onboard a dApp user are currently $3.12. That totals to a $30M customer acquisition cost before marketing efforts just to reel in 10M users, raising some serious doubts for scalability. In order to achieve a sustainable business model for a theoretical must-have dApp (still waiting…), these costs will eventually have to shift back to the user, thereby diluting early claims of EOS. As one of the many challenges going forward, one would think that development activity would increase. But in fact, it is just the opposite with a dramatic drop-off in activity right around June 1st, which marked the end of the ICO!
Team Track Record
The team track record behind EOS is IMHO one of the most overlooked characteristics of why a current EOS HODLer should be a bit concerned. Most notably is Dan Larimer, CTO of Block.One, who is the tech lead behind EOS (we won’t even touch the CEO’s severe skills gap as a real estate SaaS founder). Just looking at Steemit alone, Larimer’s previous company, he has abandoned it in what looks to be a permanent beta phase and provides a classic example of building a product before finding product-market fit. If you haven’t already, go take a look at the content published there and then ask yourself honestly that if you could only pick one source to find quality content for the rest of your life, would you ever choose Steemit? This is not even taking into account the tokenomics…but don’t just take my criticism to see how the incentive structures are eerily similar for a select few. While a startup failure can be leveraged as a lesson for a follow-on company, a $4B+ pre-traction and easily replicable open source protocol is a bridge too far…
Between the fractured ecosystem, rising resource costs, and questionable team, the cracks of crypto’s largest ICO are already beginning to show. Despite the series of red flags from the beginning, hopefully unsuspecting investors catch themsevles before the signs turn into sirens. In reference to the $4B raise, here is a graphical reminder of what a wise man once stated…
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