After some big moves in December, the cryptocurrency market has cooled off and the market capitalization of all cryptocurrencies has fallen 45% since Jan. 1.
You may know the names of the four biggest cryptocurrencies: Bitcoin, Ethereum, Ripple and Bitcoin Cash. However, unless you read InvestorPlace contributor Josh Enomoto’s recent article, you probably haven’t heard of the fifth-most valuable cryptocurrency: EOS.
According to CoinMarketCap, EOS currently trades at $12.42 per token and boasts a market capitalization of $11 billion.
EOS was unveiled at Consensus 2017, an annual cryptocurrency conference. Block.one, the company behind EOS, has been selling EOS tokens for almost a year now, raising nearly $4 billion. Dan Larimer helped create two other cryptocurrencies, each worth over half a billion dollars. He currently serves as Block.one’s chief technology officer.
This yearlong initial coin offering (ICO) ends on June 1, 2018, shortly before EOS launches. There will be 1 billion tokens in circulation, with 100 million reserved for Block.one. Each EOS token is a share in the capacity of the EOS network. If you aren’t using the network, you can earn “rent” on your EOS tokens.
Some think EOS could become an alternative to Ethereum, the second most valuable cryptocurrency. Ethereum offers more functions than Bitcoin and people have begun releasing apps on the Ethereum blockchain. However, Ethereum’s capacity remains limited, and a simple app called “CryptoKitties” strained the Ethereum network in December.
Can EOS Overtake Ethereum as the Top Cryptocurrency
In April, Larimer announced that EOS could handle between 1,000 and 6,000 transactions per second. Ethereum, on the other hand, currently handles only 15 transactions every second.
And EOS comes without transaction fees, unlike Ethereum. If it succeeds in taking market share from Ethereum, the demand for EOS tokens will increase, and so will the price.
EOS: The Bull Case
The bull case for EOS begins with the people involved. Its creator, the aforementioned Dan Larimer, has an impressive background. Larimer founded BitShares, a decentralized exchange, in 2014. BitShares claims that it can “handle the trading volume of the NASDAQ, while settling orders the second you submit them.”
Users pay transaction fees with the BitShares cryptocurrency, which currently boasts a market capitalization of over half a billion dollars.
Larimer then developed Steemit, a social media platform based on blockchain technology. Steemit claims over 1 million registered accounts. Steemit users can reward content creators with the Steem cryptocurrency. The Chinese government recently ranked Steem as the world’s second-best blockchain network, ahead of all others except Ethereum.
Take a look at some of the other people associated with EOS.
Block.one’s chief operating officer, who joined just two weeks ago, previously served as chief financial officer of Australia’s largest bank.
Prominent venture capitalists will be managing the $675 million that Block.one has set aside for growth.
One firm, Galaxy Digital LP, will help manage the $325 million EOS.IO Ecosystem Fund. Galaxy’s founder, Mike Novogratz, is a former macro trader who invested early in Bitcoin and Ethereum, netting around $250 million.
Tomorrow Ventures, a venture capital linked to former Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) chairman Eric Schmidt, is also involved. John McAfee, who I mentioned in a previous article, is bullish on EOS, predicting it will reach a price of $32 by the end of July.
And, as Josh Enomoto mentioned, there are rumors that Coinbase may add EOS. Coinbase is one of the world’s biggest crypto wallets, with over 20 million users.
EOS: The Bear Case
Let’s look at the case against EOS.
In April, Ryan Selkis noted that EOS traded at “a nosebleed pre-launch valuation of $12 billion, 50x from where ETH started.” In his view, “the risk-reward profiles for ecosystem participants skews to the downside.”
As I mentioned earlier, EOS comes without transaction fees. But there is no free lunch. You must either hold enough EOS tokens for the transaction to go through or, if not, you can rent tokens from people who aren’t using the network.
Matteo Leibowitz thinks EOS’s inflation makes it a poor store of value in the long run. EOS inflation rates can run as high as 5% annually.
Overtaking Ethereum will not be easy. The Ethereum community is looking at a variety of methods for increasing its capacity. And EOS isn’t the only potential “Ethereum Killer”. Many other altcoins, including Lisk, Cardano, Tron, and Zilliqa, are also described in a similar manner.
Finally, the EOS Token Purchase Agreement actually discourages US and Chinese citizens from purchasing the token. If you currently hold EOS tokens, you must register your address before EOS launches on June 2. If you don’t, your tokens could lose their value.
As of writing, Lucas Hahn was long BTC, ETH, and BCH.