The future looks bright for Web 3.0. Blockchain technology and DeFi have exploded into the mainstream over the past year. The IOST blockchain project sees itself as a leader in the next generation of blockchains, with many big plans for the coming years.
What is the IOST blockchain and what value does its native token, IOST, have?
Let’s take a look at how the token is being used.
What is IOST?
IOST or Internet of Service Token is a decentralized smart contract blockchain platform with focus on facilitating decentralized applications (dApps) and being able to handle huge volumes of transactions efficiently. It sees itself as a competitor to Ethereum without the scalability issues Ethereum is currently facing. IOST aims to be a provider of a range of online services, DeFi options and applications with mainstream appeal.
IOST has a focus on scalability and transaction speed. Unlike its competitors, IOST can handle up to 100,000 transactions per second. Ethereum can handle around 20 transactions per second and EOS, a similar smart contract platform, can handle about 4,000. This is done by the Proof-Of-Believability consensus algorithm and other technologies like sharding and micro scale blocks developed by the IOST team.
What is the IOST token?
IOST has a native token, IOST, that was originally launched on the Ethereum blockchain network but has since been launched on its own mainnet. Users were able to exchange their IOST ERC-20 tokens for the new IOST tokens. The token can be used within the consensus mechanism, as part of the transaction fee system and as a payment method for services online.
There are around 18 billion IOST tokens currently circulating and a maximum supply of 21 billion. The network mints 2% of total tokens every year to create a reward pool for users.
IOST was founded by Jimmy Zhong, Terrence Wang, Justin Li, Ray Xiao, Sa Wang, and Kevin Tan and developed in 2017 with an Initial Coin Offering that raised over $31 million in token sales. The IOST Foundation manages the development of the platform and has a team of over 50 people with backgrounds in technology, finance and blockchain. It was awarded “Most Influential Blockchain” in 2020 by a Chinese blockchain media company, Jinse.
IOST Use Case: Proof-of-Believability
IOST uses a form of consensus mechanism known as Proof-Of-Believability (PoB). This essentially works as a more decentralized Delegated Proof-of-Stake (DPoS) system. It has a rotating group of block producers or nodes called a committee that is elected through a voting system by staking IOST. This uses a lot less computational power than other blockchains and as a result enables IOST to handle a much higher volume of transactions.
The committee is made up of 17 members who alternate every cycle. A cycle runs for 10 minutes after which a new committee is formed. Each member of the committee produces a block and the other members approve it. The chances of being chosen to write a block is proportional to the votes received. Both the nodes and the voters receive IOST tokens in reward for participation.
Becoming a Node
Individuals and groups can apply to become candidate nodes for the election process and once they receive over 2.1 million votes they become a partner node and they start to receive rewards for taking part in the election cycle and contributing to the network and producing blocks.
Nodes receive rewards from a block production rewards pool (210 million IOST yearly), a voting rewards pool (210 million IOST split with voters) and a network contribution pool (240 million IOST). To become eligible to be a super node and earn more rewards, a user must have at least 10 million votes and have the hardware and resources to run 24/7 and validate blocks.
Voting is done by staking IOST where 1 IOST is equivalent to 1 vote. So a node can either receive votes from other users or have enough IOST to stake themselves to take part. Users can delegate votes to whatever nodes they choose.
Any node who has over 2.1 million votes receives voting rewards. These rewards are split 50-50 with the node and the voters. These voting rewards come from a pool of 210 million IOST paid out yearly. So users who delegate their IOST tokens in voting for a block producer earn IOST tokens in return for participating. Every 7 days the staked tokens are unlocked and returned to the user.
IOST Use Case: Transaction Fees
Running applications and smart contracts uses up network resources like CPU power, network costs or storage space. These resources have to be supplied by the nodes and users pay transaction fees to cover the costs. IOST has a unique method of dealing with the transaction costs of running dApps and smart contracts.
Unlike Ethereum where the gas fees are paid in its native token, ether (ETH), and can vary wildly depending on market value and network congestion, IOST splits fees into two separate utility tokens, iGAS and iRAM that can be bought or generated by IOST holders. Both the nodes and the developers of dApps receive a portion of these fees spent by users.
iGAS is used to pay the computational or network costs of the applications on IOST and is generated by staking IOST tokens. Users stake IOST tokens and iGAS is generated at a stable rate with no cost to the user. The user can then use iGAS to pay for transaction costs and spend more iGAS to move their transaction up the queue.
This means that users can stake a small amount of IOST and in turn generate a large amount of iGAS tokens to have access to many different dApps and create a large amount of transactions quickly at no cost to themselves.
dApps can often require a large amount of storage depending on their function. Storage costs are processed differently as once it is in use, the storage is no longer available to the IOS network.
iRAM tokens can be purchased from the network or from users using IOST tokens. Users who buy or sell iRAM also pay a small 2% admin fee which is burnt. Once iRAM is sold to a user it cannot be traded again or sold back to the network.
IOST Use Case: Online Payments
IOST aims to be an efficient way to provide and pay for online services. The IOST token can be used as a medium of exchange. They have focused on speed, scalability and cost, seeing these as the main barrier to mainstream adoption of cryptocurrencies.
Transaction fees on blockchains like Ethereum and Bitcoin can be high and vary depending on the price of BTC and ETH at the time. Fees can range between $2 to 70$ in both due to network congestion and price fluctuation. This can be a barrier for mainstream adoption as businesses cannot plan ahead in terms of costs.
IOST deals with this by having its main transaction fee iGAS be automatically generated by holding IOST so transactions are free for IOST holders. It also has the ability to handle up to 100,00 transactions per second which is much higher than any of its main competitors.
IOST benefits from the ability of decentralized blockchains to process transactions 24/7 globally. This means that transactions are not limited by banking hours or transfers between institutions. Using traditional fiat currency online can involve high fees or delays in transfers. This means that IOST users can transfer value online or pay for online services almost instantaneously with no cost to the user.
So an IOST holder can transfer money globally on a Saturday and have it arrive within seconds at no cost. In comparison doing this with fiat currency could take days and incur a significant fee. They can also pay for services through the blockchain with no transaction fees or high network congestion. This makes IOST an attractive form of cryptocurrency for mainstream online services.
IOST Going Forward
IOST is a relatively new blockchain project but has seen its adoption by many online service providers due to its scalability and ability to handle smart contracts and dApps. It has a range of DeFi, gaming, gambling and staking applications already on its network. Its token is used in a novel way to generate iGAS tokens to keep transaction fees free and pay for storage resources.
IOST is designed to be an enterprise-level blockchain platform. It has the ability to handle the transaction volume necessary for mainstream adoption. While still a smaller player than Ethereum in the smart contract landscape, IOST has the technology and developing team to help them innovate and grow.