A Closer Look at this EOS Sister Chain
Several readers of my last article, in which I presented some concerns I have about the EOS Block Producer (BP) election process, responded with comments about the Telos Blockchain Network (Telos) and the steps that this EOSIO software fork is taking to address issues related to BP elections, among others.
With its first go/no-go launch vote scheduled for the end of this week, I’ve decided to take a closer look at Telos and summarize for tokenholders how and why Telos is different, and discuss the potential impact for the EOS and Telos communities. Please note that the rationale for Telos’ approach is based on my own interpretation of Telos documents and various interactions I’ve had with members of the Telos community during the research process. They may not necessarily represent the beliefs of the broader Telos community.
Once the Telos network is “live,” EOS tokenholders with a registered account in the EOS Genesis Snapshot (taken on June 2, 2018) will be able to import their Telos tokens (ticker “TLOS”) into their Telos wallet using the their registered Ethereum or EOS address from the snapshot.
A Little Background
Telos is being launched by a group of contributors known collectively as the Telos Launch Group (TLG). The TLG consists primarily of members of current and former EOS Block Producer candidates, as well as various other developers and blockchain enthusiasts. Many of the TLG were active participants in the EOS mainnet launch, and have remained active in EOS mainnet operations ever since.
However, some members of the group have been quite vocal of their concerns regarding the current state and trajectory of the EOS mainnet. Douglas Horn — formerly of EOS Americas, an early contributor to the TLG and drafter of the initial whitepaper — has gone on record saying that while he is a big believer in the potential of EOS and the EOSIO software, he has come to think that the EOS mainnet is on a bad path. And now, with the benefit of hindsight and experience, he and the rest of TLG see a unique opportunity for a “do-over” and chance to launch a version of the chain with several key structural and governance amendments.
So What is Telos?
Perhaps best described as a “sister chain,” the Telos Blockchain Network is a fork of the open source EOSIO software which was developed and released by Dan Larimer and Block.one in June 2018.
Like EOS, Telos will be a public platform for decentralized applications with incredible scaling potential owing to its advanced technology and delegated proof-of-stake (DPOS) consensus algorithm. Furthermore, it’s being designed to provide EOS mainnet interoperability. At a very high-level, its governance structure will also be similar and Telos will have the same crucial ability to enact the “intent of Code is Law” concept to help avoid critical failures that led to incidents like the Parity wallet hack in 2017.
If we dig a little deeper, however, we will find that a number of important differences exist at a structural and governance level which separate Telos and EOS. For a more complete discussion of these differences, I would recommend reading their whitepaper and also visiting their YouTube channel where you can find a lot of good information. However, for the purposes of this article, I am going to focus on what I consider to be the biggest differences between Telos and EOS, and what I think their respective communities are most likely to care about.
How is Telos Different?
(If you’re short on time, feel free to skip to the graphic at the end of this section for a side-by-side comparison of Telos and EOS that may be easier to digest.)
As mentioned above, the Telos Blockchain Network will be launched with a number of structural and governance changes versus EOS. In no particular order, here are what I consider to be the most significant changes that Telos is making:
- Token Distribution: Like EOS, Telos will rely on registered EOS Genesis Snapshot accounts to determine token distribution. However, Telos is also implementing a 40,000 TLOS token limit which may claimed by a single account. Eligible accounts may claim TLOS on a 1 TLOS : 1 EOS ratio based their Genesis Snapshot account balances, subject to this limitation. According to Telos, the intent of this change is to more broadly enfranchise their community by giving meaningful voting power to more tokenholders. Telos says that change this will impact only 0.67% of all registered Genesis accounts and will remove ~865,000,000 tokens from the total token supply.
- Block Producers: Telos will launch with a maximum of 21 Elected BPs and 30 Standby BPs (SBPs). EOS also has 21 Elected BPs, but has 100 SBPs. Telos’ rationale for this is that having fewer overall BPs enables the network the provide a higher level of baseline pay through Block Producer rewards. As a result, this will allow more BPs to maintain/optimize their equipment and retain key staff to a greater extent, while also providing enough BP depth to ensure network continuity.
- Top 21 BP Rotation: On EOS, rotation into the Top 21 BPs is entirely vote-driven. On Telos, however, there will be mandatory rotation of all SBPs into the Top 21 for a period of five hours every five days. Telos believes this will support network strength and security by requiring SBPs to regularly prove their readiness and competency.
- BP Rewards: BP rewards on the EOS mainnet are provided on a descending scale with a “step-down” that occurs between BP 21 and BP 22 (it’s essentially a fixed block rate plus, if you’re in the Top 21, an amount based on the percentage of votes you have received). The reward ratio between the top and bottom paid BPs on EOS is currently around 8:1. Rewards on Telos will also step down between BP 21 and BP 22, although rewards above and below these positions are “flat-lined” to ensure that the ratio of pay between all Elected BPs and all SBPs is always 2:1. Telos believes their approach will more justly reward Elected BPs and SBPs for performing substantially similar work.
- Non-Producing BP Time Limit: On EOS, three hours of inactivity are required before other BPs may begin the process to remove a failing BP (this would involve running unregproducer on a failing BP and needs 15 of 20 votes to be approved, assuming one BP is out of commission). On Telos, however, non-producing BPs are simply removed from the Top 21 after 30 minutes of inactivity. Telos’ rationale for this change is that faster rotation of non-performing BPs is important to reduce the likelihood of a network freeze which occurs if six of the Top 21 “go offline.”
- Token Voting Power: Each token held on the EOS mainnet represents one vote and may be cast in equal measure for up to 30 BPs. Said differently, each voted token on EOS carries equal weighting. On Telos, voting will be inverse-weighted for up to 30 BPs, meaning that if you only vote for one BP, the strength of that vote is 1/30th of what it would be on EOS. The logic behind this change is to dilute the power of very large tokenholders which may vote (possibly selfishly) for less than 30 BPs.
- Available RAM: RAM has been one of the most heavily debated issues in the EOS community since the launch. The EOS mainnet launched with 64GB of RAM, and now adds 1kb of RAM to the network per confirmed block. However, Telos is proposing to launch with between 8GB and 16GB of RAM (precise number is TBD as of writing) and add 0.5kb of RAM per confirmed block. Telos believes that this amount of RAM is sufficient to support dApp development and also reduce the incentive for speculators to “land-grab” based on perceived future RAM demand. Telos is also introducing other measures to curb RAM speculation, including the Telos Foundation’s ability to publish guidance on RAM prices and to buy or sell RAM in the open market to help moderate prices.
- dApp Development: All dApps built on the EOS mainnet are required to be open source. However, dApps built on Telos may be either open source or proprietary. Telos considers the option to develop proprietary software important for incentivizing commercial dApp developers to build on Telos by offering protection for their intellectual property.
- Annual Inflation: As it stands, annual inflation on EOS is 5% of the total token supply, with 4% going to the Worker Proposal Fund (WPF) and 1% going to BP rewards (although discussions around this are still ongoing). Telos will launch with 2.5% annual inflation with 1.5% going to the WPF and 1% going to BP rewards. Telos’ rationale here is that they want to slow the rate of token depreciation but still provide sufficient funds for projects around code development, new account creation and promotional activities.
- Token Supply: EOS’ total token supply stands at a fraction over 1 billion EOS. Telos will launch with a total token supply of somewhere between ~190 million and ~330 million tokens. The vast majority of the difference is due to the “hair-cutting” of EOS mainnet accounts that hold balances in excess of 40,000 tokens. The precise total TLOS supply is unknown as the extent of cryptocurrency exchange participation, and their willingness to airdrop tokens to individual users on their platform, is still unclear and will impact this number. The lower token supply is essentially a byproduct of the structural changes that Telos has made to the token distribution model. However, it also means that, relative to EOS, each TLOS token will have somewhere between 3x and 5x the network equity value versus each EOS token.
- Constitution: For legal reasons, EOS was launched with an unratified interim Constitution which has complicated the network’s ability to move forward with its governance responsibilities. The EOS Constitution remains a heavily debated item within the EOS community. Telos have said that they will launch with a valid and enforceable equivalent called the “Telos Network Operating Agreement,” which they believe will make legal and governance issues easier to deal with post-launch.
For reference, I’ve summarized each of the above items in this side-by-side comparison exhibit:
So… This is Bad for EOS, Right?
Ultimately, it’s up to each EOS tokenholder to decide how they feel about competing blockchains borne out of software forks, like Telos. I’ve heard and can understand both sides of the argument. This said, in my opinion, I think it will be a very good thing for EOS in the long-run.
When you think about market leaders in any industry, there are usually at least two entities which fiercely compete for market share: Coke and Pepsi, Apple and Samsung, Nike and Adidas, Visa and MasterCard, and Facebook and MySpace. Okay, well maybe not MySpace, but you see my point.
Necessity is the mother of invention, and I think that strong but healthy competition between the two networks will spur innovation and creative problem-solving, and hold each network more accountable for the decisions that they make (or don’t make).
Having spent time researching and gaining a better understanding of what Telos is trying to do, I will say that the changes it is making, particularly to the governance structure, are very intriguing. Telos is undoubtedly in a position of strength having been able to see what has (and has not) worked for EOS so far, and now has the chance the “start afresh.”
While Telos doesn’t have the financial resources or community size that EOS has, I could see it becoming a strong competitor to all smart contract platforms, assuming proper execution. However, if I had to pinpoint some areas of the Telos model that I’m still undecided about, they would be the following:
- While no single account may claim more than 40,000 TLOS upon network launch, there’s nothing to prevent accounts from building significant TLOS positions post-launch. Is this a bad thing? That’s for you to decide. But one thing that we can be sure of is that if Telos is successful, it will experience the same influx of “whales” that every other successful blockchain project has experienced. It’s worth noting, however, some of the other governance changes that they have made, such as inverse-weighted voting, should help mitigate their impact.
- Having spent my career in compensation and governance, I understand the importance of providing similar pay for substantially similar work. This said, meritocracies are powerful and I wonder if the 2:1 ratio of Elected BP and SBP rewards is sufficient to attract and retain top BP talent. Like EOS, my perspective is that the primary differentiator for ranking BPs should be their ability to deliver value to the community through value-add projects and tools — and the best way to do this is to incentivize out-performance. I am curious whether a 2:1 ratio of rewards between BP 1 and BP 51 is sufficient to achieve that, and would have perhaps considered a 3:1 ratio reserved for the “high-” and “low-end” of the range.
- It’s unclear to me how launching with less RAM necessarily reduces the incentive for speculators to buy RAM. Either the perception of future RAM demand is there or there is isn’t, and so buying/selling will adjust accordingly. I also wonder how much the Telos Foundation can realistically impact RAM prices given their resources of scope of responsibilities.
Overall, I think there’s a lot of good things to be excited about with Telos and I look forward to seeing how they develop the network going forward. I’d also be interested to hear others’ thoughts about Telos, so please leave a comment below if you have any. Finally, please let me know if you think I’ve misrepresented any of the technical or governance elements of the Telos network and I can update accordingly. Thanks for reading.
I am a long-time EOS supporter and advocate for decentralized technologies, and occasionally publish articles about EOS and EOS-related activities. I have also developed a Block Producer scoring methodology which evaluates EOS BPs based on governance best practices and community value-add tools. You can learn more about this here. I will be releasing updated BP rankings at the end of September on my website, Mereo.io. Thanks for reading and go EOS!
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