What is IOST Token? (Beginner's Guide)
IOST is a cryptocurrency similar to Ethereum, where it's described as an 'operating system' which applications can be built on through smart contracts. It aims to solve problems like scalability much faster than Ethereum, and claims to offer a much more egalitarian consensus mechanism vs EOS though Proof of Believability (POB).
Below we go through what IOST is, how it compares against coins like Ethereum and EOS, and how Proof of Believability works.
Clearing up confusion
Just to clarify a few areas of confusion. IOST has nothing to do with Apple as far as we're aware, where many people assume this becase of the coin's name - where you'll sometimes see it written as 'IOS Token' or 'IOST Token'. It's also a separate project to EOS. The 'IOS' part of IOS Token stands for 'Internet of Services'.
Team behind IOST
The team behind IOST is the group of people writing the code for the project, the group 'building the ecosystem' around IOST. This team looks to be very impressive, some highlights:
- On May 15th 2018 IOST had 18 engineers.
- Excluding the co-founders the team has 4 PHDs majored in distributed systems with blockchain experience (2 from Cornell, 2 from Princeton). The rest of the team are 'from some of the best Universities in the world', and have won things like National Olympiads.
- The team doesn't consider itself bound to a specific country, e.g. they're not the Japanese Ethereum. This argument is supported by their team's offices, which look to be spread across Tokyo, Beijing, Singapore and San Francisco, with offices soon to open in Vietnam, India & Russia.
- Co-Founder Jimmy Zhong has sold a company in the past for $40M.
Should I buy IOST?
Right now in late July 2018, IOST is an ERC20 token. They plan to launch their mainnet at the "end of 2018/beginning of 2019", and recently launched their testnet on the 29th June 2018. See a recent Reddit AMA for more info.
With this in mind, buying IOST before the mainnet launch would be a speculative investment, where announcements related to the project and its launch would drive the price up or down. Once it's launched your investment would then be more based on if their platform is good and if many people use it (although crypto trends in general would heavily effect its value). We've seen some speculate that because of the project's very ambitious goals, the lead up to their mainnet launch could allow for significant gains, but even if they meet all planned goals this should still be considered a high-risk investment.
IOST vs competitors?
An interview with one of IOST's co-founders Jimmy Zhong gives lots of great insights into what differentiates this project from Ethereum and EOS, where he claims that these platforms both have serious problems either in scaling or decentralisation.
A good quote from Jimmy is that 'no existing platform can support secure smart contracts on top of sharding', where sharding is a technique in the distributed systems space for scaling data processing that's been around for 20 years or so, way before blockchain became popular.
An example of sharding might be to think of a taxi driver with 5 passenger seats in their car, and they need to drive 50 people from A to B. They can only fit 5 at a time, so they need to make 10 trips. Sharding this might be to instead have 10 drivers each with 5 passengers, where if all of them go at the same time the passengers can be moved in a fraction of the time. But at any point in time it can be difficult to work out which passengers have been delivered yet, so although sharding improves scalability it also increases complexity. IOTA seems to be the closest project to offering sharding and smart contracts, but smart contracts on IOTA are very basic.
IOST vs Ethereum
Jimmy describes Vitalik's vision for Ethereum as 'revolutionary' (Vitalik was one of Ethereum's co-founders), but he suggests that the development team behind it, the Ethereum Foundation, doesn't have enough control over it to scale it fast enough. Unlike Bitcoin, which is primarily used for sending money between people and storing money, Ethereum is a smart contract platform which other applications are built on. So it needs to handle a much higher number of transactions per second than Bitcoin, or these applications won't function correctly (with several examples in early 2018 where projects overloaded the Ethereum network's capacity).
IOST takes several approaches to scaling, including sharding like Ethereum, but one of these they expect to work much sooner, what they're calling 'Proof of Believability' (see the below section for details on this). They hope that this will allow IOST to handle enough transactions for a high volume project such as a decentralised exchange (which are currently very limited by this scaling problem when compared to centralised exchanges like Binance).
Jimmy suggests that Ethereum's approach to scaling, sharding, has been in development for 2 years as of May 2018, and that 'very little progress has been made'. On top of this, he's concerned that planned developments for Ethereum like a transition from proof-of-work to proof-of-stake will split the community in half, where many people invested in Ethereum mining will want to fork off a new coin that they can continue mining (the mechanics for a proof-of-stake coin are completely different, where you don't mine them like you do 'proof-of-work).
IOST vs EOS (Delegated Proof of Stake)
EOS is a popular project in late 2018, where to allow them to scale fast they use a consensus mechanism called Delegated Proof of Stake, which has a component called a 'super nodes'. In this system rather than giving every node on the EOS network the ability to validate transactions, they instead allow people to vote on which nodes should be super nodes, with 21 maximum. These super nodes are then used to validate all transactions on EOS.
The principle is that by limiting the nodes involved in validation, the throughput of the network can be increased significantly. On principle this makes perfect sense, but the team behind IOST is critical of this, claiming that it's not a centralised way to scale, where only 21 nodes are involved for validating any transactions. If an entity was able to influence more than one of these super nodes, you could potentially have 3 or 4 entities controlling all transactions on EOS. To make this worse, this system is also prone to DDoS attacks, and the method for determining new super nodes is to allow people to decide rather than an algorithm, so this system is prone to bribes. More critique of DPOS (Delegated Proof of Stake) can be found here.
What is Proof of Believability?
Proof of Believability, sometimes called POB, is the consensus mechanism IOST uses (proof-of-work and proof-of-stake are alternative mechanisms commonly used). Looking at this interview, the team behind IOST seems to be very aware of how many 'proof of X' terms have been throw around, with many projects using this as a buzzword to gain attention. They think POB stands out from all of these, and based on our research it looks to be very promising, potentially offering a very egalitarian system.
POB isn't a new mechanism built from scratch, but rather it tries to solve problems that proof-of-work and proof-of-stake haven't solved yet in the area of decentralisation/abuse. It does this though its voting mechanism, where unlike proof-of-stake it doesn't allow users to vote based on how many coins they hold, as this is prone to abuse by very wealthy people, where a few wealthy people can gain a majority of voting power just by buying lots of coins.
IOST has a reputation system that's determined by an algorithm, where through a second-layer protocol called 'Servi' it determines the voting power of coin holders based on how much they're trusted. Trust is determined based on 'past contributions' and 'behavioural patterns'.
Key aspects to Servi:
- It's self-generated.
- It's untradable, so you can't just buy it to gain voting power.
- It's self-destructive, where it goes down over time to avoid an individual getting too overpowered.
On top of being very decentralised, IOST's team suggests that POB offers similar performance to a super node-based system like EOS.
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