EOS (EOS) is a computing and smart contract platform designed to host a myriad of decentralized applications (dapps) and decentralized autonomous corporations (DACs). The asset has gained almost 300% since the December lows, but remains down 76% from the all-time high established in April 2018. The market cap currently stands at US$4.911 billion with US$1.339 billion in trade volume over the past 24 hours. The crypto asset is ranked 5th on the Brave New Coin market cap table, just above Litecoin (LTC).
The EOS platform, created by Block.One, is a global computing network running smart contracts on Virtual Machines and looks to rival other dApp or smart contract enabling blockchains, like Ethereum (ETH), Tronix (TRX), and NEO (NEO). The ETH and NEO platforms use gas to pay for units of computing power while EOS uses RAM.
EOS went live on June 14th, 2018, after raising ~US$4.2 billion in a year-long ICO, where the average token price was US$5.74. The EOS blockchain uses a Delegated Proof of Stake (DPoS) consensus mechanism, which was pioneered by EOS and Block.One CTO Dan Larimer. DPoS is also currently being used by BitShares, Steemit, Lisk, Ark, and Tezos.
With DPoS, users vote for delegates, or Block Producers (BPs), who are considered trusted and good actors. The top 21 EOS BPs validate the blockchain, collect a passive income, and are expected to help further protocol development by proposing changes or improvements.
While the top 100 BPs are paid for their services, the top 21 BPs earn the highest reward. Should any of these BPs go against the community’s wishes, they can immediately be replaced. To encourage voting participation, EOS has implemented a vote decay system with newer votes initially carrying the most weight and have zero impact after two years.
The governance structure is similar to that of a two-layer representative democracy with landowner suffrage. Each stakeholder has influence proportional to their stake in the system. BPs can also offer reward sharing to encourage votes from stakeholders. However, this can encourage the election of BPs offering the highest reward to stakeholders, and does not necessarily encourage what is in the network’s best interest. The current reward for staking on EOS, beyond voting on network proposals, is use of the Virtual Machine (VM) components, including; bandwidth, RAM, and storage.
Another arm of the EOS governance system is the EOS Core Arbitration Forum (ECAF), a volunteer-led tribunal. Thus far, ECAF has given nine public notifications of arbitration and has facilitated 23 orders or rulings since June 2018. The process often involves blacklisting accounts, which only works if all of the 21 producing BPs use the blacklist.
Earlier this year, a newly rotated top 21 BP, games.eos, failed to apply the blacklist correctly, thus allowing 2.09 million EOS, or about US$7.25 million, to move out of a blacklisted account. Due to the incident, games.eos is no longer a top 21 BP. Going forward, there are plans to cancel out the keys on the blacklist entirely, so they can never be used on the EOS blockchain.
On the network side, the EOS blockchain has grown to 4TB over the past eight months, with only five BPs, Greymass, EOS Sweden, CryptoLions, EOS Tribe, and EOS Canada, running a full archival node. These nodes are essential for fully-functional dApp activity as 20% of blockchain lookup requests involve observing the entire blockchain history.
Currently, 54% of all circulating EOS tokens are being staked, and the network is confirming around 36 transactions per second. The record number of transactions on the network at one time stands at 3,996 per second. The current number of total transactions per day on the network (line, chart below) stands at 5.38 million, which has increased substantially since June 2018, and is likely related to sustained dapp activity. The average transaction value (fill, chart below) is currently US$21, which is down from a May high of US$38,000 and is also likely related to dapp activity.
The 30-day Kalichkin network value to estimated on-chain daily transactions (NVT) ratio (line, chart below) fell rapidly from November to January but has been rising this year. A clear downtrend in NVT suggests a coin is undervalued based on its economic activity and utility, which should be seen as a bullish price indicator, whereas an uptrend in NVT suggests the opposite. NVT is difficult to compare between coins that use different transactions types, but the ratio can be used to assess a network’s relative utility over time. EOS’ NVT, at 57, is currently higher than TRX, at 41, ETH, at 48, and NEO, at 44.
The number of daily active addresses (DAA) reached a new high of almost 95,000 in mid-January but has since begun to decline slightly, and is currently just under 70,000 (fill, chart below). EOS currently has a clower DAA count than ETH, but higher than TRX and NEO. DAAs are important to consider when determining the fundamental value of the network based on Metcalfe’s law. Grassroots interest on meetup.com shows almost 61,000 people in 150 EOS groups worldwide and over 64,000 subscribers on Reddit’s /r/eos.
Transaction volume across most EOS Dapps has fallen slightly over the past few months. Gambling dapps continue to be the most used application, likely because gambling activity is normally a highly regulated activity. These dapps are currently outside of legal purview, at least for the moment. EOS Knights, a mobile role-playing game, has also seen sustained user growth since being launched in August 2018 with daily active users exceeding 4,000 since December.
Transaction costs are also very minimal, or non-existent, when interacting with EOS dapps. Several dapps have migrated from ETH or NEO, or have chosen EOS over ETH or NEO, in recent months citing concerns over scalability or transaction costs. These dapps include; Effect.AI, Tixico, Unico, Medipedia, Sense Chat, Billionaire Token, EOSBet, HOQU, Everipedia, and Insights Network. Additionally, Tapatalk, a forum app with 300 million registered users, is building a reward system using the EOS blockchain.
Turning to developer activity, the EOS project on GitHub contains 54 repos, with the main repo accruing a cumulative 3,664 commits over the past year (shown below). Larimer’s commits dropped off precipitously after June 2018, with his last EOS commit occuring in August 2018. Despite this, incremental protocol updates continue.
Most coins use the developer community of GitHub. Files are saved in folders called “repositories,” or "repos," and changes to these files are recorded with “commits,” which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.
EOS REX (Resource Exchange), first proposed by Larimer in 2018, is also set to go live within the next two weeks. The exchange will allow users to lease EOS tokens to dapps, or others, for a variable fee.
EOS exchange traded volume in the past 24 hours has predominantly been led by the Tether (USDT)
and Ethereum (ETH) pairs, with Bitcoin (BTC) accounting for a smaller but substantial percentage of the volume. Huobi, along with owning the top EOS BP, launched an EOS dedicated exchange on January 12th. EOS/USD, EOS/EUR, and EOS/BTC pairs were added to Coinbase on April 9th. An EOS/USDT pair were added to Bitfinex on April 12th. There are no pairs currently on Bittrex. Bitfinex is also a top EOS BP and plans to launch EOSfinex, an EOS-based DEX, which is currently in beta.
On March 30th, the Korean exchange Bithumb reported a hack resulting in the loss of three million EOS, or US$15 million. Earlier in March, the exchange cut 50% of its staff, or 150 people, due to declining trade volumes on the exchange. ChangeNOW, a non-custodial exchange service, reportedly intercepted and returned US$500,000 worth of the stolen EOS tokens back to the exchange. Bithumb also reported a hack in August 2018 resulting in the loss of US$18 million after various coins were stolen.
EOS has bounced significantly from the December lows and is firmly back into bull market territory. As the nascent bull trend forms, exponential moving averages (EMAs), Pitchforks (PFs), Ichimoku Cloud, and Volume Profile of the Visible Range (VPVR) can be used to find optimal entry and exits. Further background information on the technical analysis discussed below can be found here.
On the daily chart, price currently sits just below the average ICO price. The 50-day EMA and 200-day EMA crossed bullishly last week, ending the 250+ day bear trend. Despite this bullish cross, known as a Golden Cross, price is likely to retest the 200-day EMA as support some time in the near future. These mean reversion actions happen frequently throughout the duration of any given trend. If price is able to surpass the current resistance, price action towards US$8.15 is likely based on VPVR (horizontal bars, chart below).
Bitfinex EOS/USD open interest is currently 65% long with long interest ranging near record highs (top panel, chart below). A significant price movement downwards will result in an exaggerated move as the long positions begin to unwind. There are no active RSI or volume divergences.
The current spot price continues to reside within the boundaries of a bearish PF with anchor points in December 2017, and March and April 2018. Price cleanly broke the median line (yellow) on March 27th, signifying that price will most likely reach for the opposite edge of the PF, currently at US$12. Throughout this process, price may also attempt to return to the median line as a mean reversion test. Historically, price has not yet explored the upper boundaries of this PF with the exception of May and June 2018.
Turning to the Ichimoku Cloud, four metrics are used to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.
The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30), for more accurate signals, are 100% bullish; price is above Cloud, the Cloud is bullish, the TK cross is bullish, and the Lagging Span above Cloud and above price. A traditional long entry signal triggered on March 27th. This is the first sustained bullish Kumo breakout since April 2018. Based on the Kijun, mean reversion towards the US$4.50 zone is possible in the near term.
Lastly, the EOS/BTC pair continues to show significant bullish momentum. Both the EMAs and Cloud show a sustained bullish trend, beginning in February. VPVR (horizontal bars) suggests very little resistance above the 0.001 BTC zone. The lack of overhead resistance will likely bring EOS to retest the previous all time high at ~0.025 BTC over the next few months.
Bitfinex EOS/BTC open interest is currently 72% long (not shown). A significant price movement downwards will result in an exaggerated move as the long positions begin to unwind. There is a significant bearish RSI divergence between the most recent local highs, which suggests declining bullish momentum. The daily Kijun and 50-day EMA currently, sit at 96,000 sats, and will likely provide significant support on any pullback.
Network fundamentals show sustained dapp activity over the past year, more so than any other blockchain. However, user metrics have begun to decline in recent months. Continued rise in dapp activity may lead to significant blockchain bloat, as a full node now requires over 4TB of storage. All dApp activity is reliant on five full node BPs, most of which are not in the top 21 highest paid BPs. Nevertheless, there continues to be a migration of dapps from other blockchains to EOS thanks to the low or negligible transaction costs. Sooner rather than later, EOS will need to deal with the growing burden of both blockchain size and bandwidth requirements.
The ECAF and governance system of BPs shows a centralization of power which is not apparent in many other blockchains and, for many, is antithetical to crypto ideology in general. Even when functioning as intended, unless all 21 of the BPs have an updated blacklist, a compromised account can still slip through the cracks. No action was able to be taken on the most recent Bithumb hack because the funds were quickly dispersed, highlighting another weakness in the ECAF system.
Technicals for both the EOS/USD and EOS/BTC suggest sustained bullish momentum. The average EOS token price during the ICO was US$5.74, suggesting additional confluence with the current horizontal resistance. If this level is exceeded, moves toward the US$12.00 zone are possible within the next few months. EOS has outperformed most of the other top 10 coins since December, suggesting that there may be some rotation out of EOS and into other coins which have not risen as significantly from previous lows. The trend suggests that pullbacks should be snatched up quickly by buyers at the US$4.50 and 96,000 sat levels.