Due to the rapid growth of decentralized finance (DeFi) this year, it’s clear that the Ethereum blockchain is dominating the digital-asset industry around decentralized applications. But a lot of digital-asset investors are diversifying their portfolios, investing in challenger protocols that could potentially compete with the Ethereum network. In the same way that Ethereum is preparing its transitions to Proof-of-Stake (PoS), most of these networks are using PoS approaches.

The Block Research has recently ranked major PoS chains regarding the value already staked in these networks. This enables us to prioritize the most used PoS networks regarding the value of staked assets. It’s a different ranking method than using the associated market capitalization of these networks, but it’s well highlighting the effective interest from major crypto-assets investors looking to participate in emerging protocols.

In this ranking, Polkadot appears as the most popular network when it comes to staking. As of mid-November, nearly $3 billion worth of DOT, Polkadot's native token, were at stake. Cardano follows as the second most popular network, with $1.79 billion worth of ADA staked. Tezos (XTZ) and EOS are ranked third and fourth by staking value, each having roughly $1.4 billion within their networks. Overall, around $12 billion in total is staked across the top ten networks. In this article, we will present the specificities and differentiators of Polkadot, Cardano, Tezos, and EOS networks.

Polkadot

Polkadot was founded by Ethereum co-developer, Gavin Wood. The project concluded a successful ICO in October 2017, raising over $140 million. But due to a vulnerability found in wallet service Parity where the team was storing its funds, 60% of it has been lost in late 2017.

But this turbulent start didn’t avoid the project to emerge as a major competitor to Ethereum. Following the explosive decentralized finance (DeFi) cycle from July to September, the demand for high-capacity smart contracts protocols has increased. Polkadot and Cosmos have always been at the forefront of the discussions, given some of their similarities with Ethereum.

Polkadot, in particular, has a similar conceptual infrastructure design as ETH 2.0. They both divide their blockchain networks into many sub-pieces so that verifying transactions could become more efficient. Under ETH 2.0, the blockchain gets divided into 64 pieces, called shards. This system can theoretically optimize how Ethereum processes information. Rather than an entire community going through every piece of information together, a designated community or validator verifies data on every shard.

Polkadot uses a similar approach, with these independent blockchains being called ‘parachains’. Parachains can process more transactions than a single blockchain because the transactions are spread across multiple computers, similar to parallel processing. In terms of infrastructure and technology, these two protocols would likely be in direct competition over the long term. But for the growth of the broader smart contracts and DeFi ecosystem, the emergence of a proper competitor against Ethereum remains a net positive development. Moreover, Polkadot features an on-chain governance model, allowing for updates to the protocol to occur through transparent on-chain voting.

Cardano

In the same way as for Polkadot, Cardano’s founders, Jeremy Wood and Charles Hoskinson, both worked on the Ethereum project previously. The platform earned international media attention as the first blockchain to incorporate a peer-reviewed research strategy into its core principles. The project was funded via an ICO-like pre-sale of tokens to raise around $62 million in late 2017.

Cardano differs from the competition in its close collaboration with the academic sector. The platform’s design was built from the ground up utilizing evidence-based methods grounded in scientific philosophy, academic theory, and finalized via peer-reviewed research.

Cardano also introduced a new consensus mechanism. It relies on randomly chosen validator nodes to approve blocks. It was the first protocol to introduce a provably secure proof-of-stake protocol.

To enable more accountability and visibility of the financial processes on the blockchain, Cardano aims to add transaction metadata. One of the most prominent uses for metadata is in a supply chain. The supply chain involves parties such as factories, customers, suppliers, and delivery services. To enable efficient data tracking, participants must provide confirmation of services that are interlinked, and these must be accessible by everyone for verification. In this case, metadata can provide a complete picture of supply chain processes with fixed recorded data on the blockchain ledger. This grants transparency, immutability, and trust to all stakeholders. Cardano’s transaction size is around 16KB, which is substantially higher than earlier blockchains that supported 40 to 80 bytes of metadata. For these reasons, Cardano should remain a staple in the blockchain industry.

Tezos

Tezos also utilizes proof-of-stake to facilitate smart contracts and decentralized applications. But its core value proposition concerns its self-amending capacity, which formally utilizes on-chain mechanisms for proposing, testing, and activating protocol upgrades. Tezos conducted an initial coin offering in July 2017, raising $232 million in the largest ICO ever made.

Tezos has created its own consensus mechanism, called Liquid proof-of-stake. It’s also using both an Imperative and Functional language. Imperative languages such as Solidity are ideal for smart contract programming in terms of flexibility. Whereas, functional languages are more adept at mathematical reasoning, making them more secure.

Tezos uses the combination to ensure its smart contracts are both robust and secure. Notably, the Tezos ecosystem relies on Ocaml for blockchain programming and Michelson for the coding of smart contracts. This strategy also improves transaction speeds across the network.

The Liquid PoS consensus mechanism is an upgrade to the Delegated Proof-of-Stake (DPoS) systems found in blockchains like EOS. This mechanism is exclusive to Tezos at this time. It offers users more control compared to DPoS systems. Users can vote directly or delegate their voting responsibilities to another party.

This consensus mechanism provides a balanced and inclusive approach to decentralized network security. It ensures that the network has the capabilities to upgrade passively in a decentralized manner via self-amendments.

Moreover, Tezos appears as the first blockchain to get institutional actors within its community. The French electricity supplier EDF has been the first to join this network, through its subsidiary Exaion, which is a provider of cloud solutions and blockchain-as-a-service. It has been followed by Switzerland-based crypto bank Sygnum.

EOS

EOS is a blockchain-based open-source software released on June 1, 2018. It took a novel approach with a one year long ICO period. 200 million (20%) of tokens were initially distributed during a five day period from June 26, 2016 to July 1, 2017. Followed by a sale of 700 million (70%) tokens distributed on an ongoing basis of 2 million per day for the 350 following days. The strategy paid off in a major way with EOS securing over $4 billion during the event.

The EOS ecosystem is built on top of the EOS.IO software. It’s the operating system that manages and controls the EOS blockchain network. It uses blockchain architecture that is built to enable vertical and horizontal scaling of decentralized applications.

EOS attempts to solve the problem of speed, scalability, and flexibility. It claims to be able to support thousands of commercial-scale dApps without hitting performance bottlenecks through the use of parallel execution and asynchronous communication methodology across the network.

EOS.IO uses delegated proof-of-stake and a role-based permissions concept, which allows flexibility to make instant high-level decisions, like rollback, freezing, and bug fixing of broken apps, through a majority accord among designated stakeholders. EOS.IO provides Dapp developers with both server hosting and cloud storage as part of its all-inclusive approach to the market.

The major concerns surrounding the EOS ecosystem point out a significant centralization within its delegated-Proof-of-Stake system. This system creates 20 main block validators within the network, elected by the EOS investor community.

Sources:

As DeFi Grows, Investors Look to Polkadot to Be the Next Ethereum - Coindesk ; Nov 17, 2020 [1]

Polkadot is the most popular network for staking, nearly $3 billion worth of DOT tokens are at stake - TheBlock ; Nov 15, 2020 [2]

Tezos upgrade reduces smart contract fees by 75% to attract DeFi - Cointelegraph ; Nov 13, 2020 [3]

Polkadot could become an Ethereum killer—but one analyst is skeptical - Cryptoslate ; Nov 10, 2020 [4]

This Swiss bank is now staking Tezos (XTZ) for its clients - Cryptoslate ; Nov 06, 2020 [5]

Cardano to Revolutionize the DeFi Industry with New Platform and Metadata for Transactions - Blockchain.news ; Oct 30, 2020 [6]

Investing in Tezos (XTZ) – Everything You Need to Know - Securities.io ; Oct 25, 2020 [7]

Investing in Cardano (ADA) – Everything You Need to Know - Securities.io ; Oct 25, 2020 [8]

Investing In Polkadot (DOT) – Everything You Need to Know - Securities.io ; Oct 25, 2020 [9]

Investing in EOS – Everything You Need to Know - Securities.io ; Oct 25, 2020 [10] ;

EDF, via sa filiale Exaion, participe à l’écosystème blockchain Tezos - Cryptonaute ; Oct 23, 2020 [11]