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The big EOS freeze

June 26, 2018 2:14 pm Published by

Less than 48hrs after its launch, the EOS blockchain froze. The cause of the freeze was resolved within a few hours of being reported. However, this momentary hiccough was sufficient to spark another emotional debate about security in the crypto arena.

EOS blockchain was set up to rival Ethereum. It boasted BPs (block producers) to replace cryptocurrency miners and eliminated transaction fees. Its ICO raised a record $4bn, but when reports that it had frozen less than two days after its launch emerged on June 14 2018, commentators were quick to pass judgement.

According to EOS developers, the blockchain software was automatically paused when a bug was detected – the freeze was a security measure built into the system. It occurred to prevent a hard fork (a new cryptocurrency protocol) after invalid blocks appeared on the chain. The freeze was not, as speculated, paused by the BPs.

Although EOS is back on track, three important questions have been raised by the incident:

  •       Is enough attention being paid to whether the product of an ICO actually works and is the shine of marketing campaigns blinding investors’ judgement?
  •       Is more money invested in marketing an ICO than in its business and software development?
  •       Are commentators too quick to look for negatives in new software releases?

When investing in an ICO, special attention should be paid to its credibility – an impressive marketing campaign may seem appealing, but quality software and developers are more important. While critics may be quick to judge when hyped software fails, the prevalence of scams, hacks and poor coding means that criticism isn’t necessarily unwarranted. Certain parallels could be drawn between the EOS incident and the DAO hack of 2016.

The DAO system was also the biggest crowdfunded project of its time. The creation period allowed investors to send Ether to a unique wallet address in exchange for DAO tokens. 12.7 million Ether were raised (at the time valued at $150m) valuing the DAO at approximately $250m. On 12th June 2016, a bug was detected. Developers began the fix, but a hacker found a loophole in the code, and stole 3.6 million ETH totalling $70m. Due to the structure of the DAO requiring tokens to be held for 28 days before transfer, the hacker could not access the tokens, but it caused a significant drop in the DAO’s value.

As a solution, the Ethereum community decided to hard-fork, creating Ethereum Classic which allowed them to redirect the funds to a separate account, making the stolen Ethereum accessible to the theft victims.

We have given just two examples of issues with tokens, so how does one evaluate the strength of an ICO beyond its marketing campaign? Here are some pointers:

  •       Research using the forum – read investor concerns and high ranked writers’ comments carefully to assess the ICO.
  •      The development team – find out who’s involved to ascertain whether or not their experience is sufficient and relevant.
  •       Community coverage – what’s being said by media and crypto commentators?
  •       What stage is the product at – how far beyond the white paper has development reached?
  •       Is there a legitimate need for the new token?

Alternatively, we know an easier and more secure way to get involved in the world of crypto.

Downloading the Wirex app or registering on your desktop gives you secure access to Bitcoin and Litecoin wallets (with Ethereum and Ripple coming soon). You can also use any of 50 altcoins to fund a Wirex account. Wirex’s GBP wallet is linked to a Visa debit card, whilst the EUR and USD wallets have prepaid currency cards available for EEA users. When paying in-store by chip & pin, swipe or tap & go, Wirex’s exclusive feature, Cryptoback™ also gives users 0.5% of each transaction back in Bitcoin.

Wirex’s Payment Card can be used anywhere Visa is accepted, making it a great tool for crypto-enthusiasts, globetrotters, and absolute beginners.

Download now from Google Play or the App Store.

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