EOS Investors Warned
EOS investors cannot say they were not warned.
What was foretold at a March blog article by Ethereum founder Vitalik Buterin might have come to pass on the world’s fifth-biggest blockchain, with a bout of vote buying play rocking the $5 billion protocol.
That is when a Twitter accounts called ”Maple Leaf Capital” produced screenshots from a leaked Excel spreadsheet that allegedly demonstrate the China-based exchange Huobi, among the world’s oldest and biggest, accepting money for its support of particular entities in the charge of ensuring that the network’s distributed decision making.
The allegation is notable as EOS has just 21″block manufacturers,” trusted entities occasionally elected to keep the history of their blockchain and that get rewards in the kind of cryptocurrency for doing this.
Huobi immediately denied all of the accusations.
However, that does not mean damage control is not being done.
“We know of some unverified claims concerning irregular block manufacturer voting, and the following denials of these claims. We believe it’s important to guarantee a free and democratic election process inside EOS and may, as we deem appropriate, vote along with different holders to reinforce the integrity of the procedure.”
At the simplest level, the debate is over whether block manufacturers should be permitted to pay others to vote for them. The EOS interim constitutions, files created to set forth principles for participants on the community, obviously prohibit vote buying, but that constitution hasn’t been ratified by EOS users.
Yet, at the exact same time, EOS seems designed for block manufacturers to support other block manufacturers.
Block manufacturers earn tokens and are interested in the long-term health of the protocol, so some assert it seems natural that they’d (and need to ) use those tokens to encourage other block manufacturers they’ve collaborated together and feel to be good stewards of their network.
Kevin Rose, community control of EOS New York, a block manufacturer since launching, acknowledged the point but advised CoinDesk:”Profit sharing and vote trading that compromise an organization’s ability to remain independent is the situation.”
Block One declined to give additional comment.
Regardless of the absence of conclusions, but the episode has increased claims that the condition of the EOS program was possibly too crude at launch, so it’s well worth revisiting these claims that have now renewed.
First, EOS has on-chain governance, albeit a method where only 1 decision can be produced from the EOS token holders. In other words, they can choose which businesses have those 21 block manufacturer seats that control EOS’s ledger.
Every other choice is up to those 21 block manufacturers. They can even (as we have previously reported) lock accounts they think to be functioning maliciously.
Second, EOS has a constitution which prohibits buying votes, but it has never been ratified. (It is not even clear what ratification means in the software was published without a way to agree on principles.)
This point is related to a current Moderate post by Ethereum programmer Vlad Zamfir, where he discusses the need for a governance strategy to achieve legitimacy with the consent of the governed.
In the event of EOS, whether that aim is fulfilled remains unclear.
The interim constitution was assembled by a committee of block manufacturer hopefuls leading up to the EOS launch. Its last article acknowledges it is an interim constitution before a new one could be ratified, but not only has ratification not jumped: there is not a legitimized way to ratify it.
Since launching, new block manufacturer hopefuls have entered the area who do not know about or do not care about the process that yielded the interim constitution, and a number of them have managed to acquire one of the top spots.
Third, EOS government as written doesn’t work well with exchanges, which have custody over a huge quantity of user cryptocurrency.
EOS governance is done via the wallet. Perhaps more importantly, there is no way to stop exchanges from voting that the tokens of the users who do not care to vote.
Voting works in the pocket level, so a person can only really vote should they have custody. Anyone who would like to express their view about who should be a block manufacturer needs to stake their tokens on EOS, which locks them up for three or more days.
Each wallet can vote for you to 30 block manufacturers. However many they select, each receives a vote for each token that the user staked. There’s no extra nuance.
Voting is also constant.
Since users place their tokens into a market’s wallet (or pockets ) to use them, an exchange would need to go to great lengths to present their EOS holders a way to vote (like creating another wallet for every permutation of votes). We don’t know of any other exchanges which have implemented it or anything similar.
It is not as if a variety of block manufacturers accused of paying Huobi would need to pay some of their block benefits to the famous Huobi wallet, after all.
So, even if Huobi has not accepted any such obligations, the current conversation reflects widely shared fears that something like this could occur.
However, some allege that those financing the EOS protocol have known about the matter, but been slow to meet concerns. Buterin, for instance, articulated the vulnerability to vote to purchase before EOS launched.
He wrote: “The average voter has only a tiny probability of impacting which delegates get chosen… their incentive is to vote for whoever gives the highest and most dependable bribe.”
At the moment, he also observed the strain around deciding who has been block manufacturer” has become another frontier of US-China geopolitical economic warfare.”
Scanning various EOS-affiliated Telegram stations, we saw EOS holders declaring that they had no longer vote for any China-based block manufacturers in any respect. Even though it may be more accurate to state the faultline is a tension between block manufacturers who participated in the people launching and people who didn’t.
But it does reflect a deeper problem ravaged by a failure to specify principles at the outset.
Some users have been handling the interim constitution like so much (electronic ) paper. Aside from the interim constitution, there is also a block manufacturer’s agreement, where block manufacturer candidates commit to have sites and disclose anyone who owns over 10 percent of the company.
Some haven’t done so, and there is little the community could do besides fork the protocol.
“If a coordination mechanism is valid, people will (justifiably) behave like it’s true that individuals will use it. … If it is illegitimate then they’ll act like it is true that individuals will not use it.”
Some people with clout on the community are not behaving like the interim constitution and obstruct manufacturer agreement are legitimate. We already know that, since they do not all do the things that agreement requires them to perform.
So, even if Huobi is not buying votes today, finally someone probably will unless rules are set in place that the entire community views as valid.
To put it differently, it is an issue that may take the time to sort out.
This was the take off a block manufacturer calling itself Aurora EOS, which composed on its own blog:
“As EOS supports and grows more use cases, those spent in the long-term success of this network will fight the forces, such as vote manipulation, that hamper the long-term safety of their network.”
In other words, if a decentralized neighborhood such as EOS has become fragmented, the built-in incentive for the community to succeed should encourage solutions.
As Zamfir’s article points out: it will not be sufficient for it to vote something through.
But one whale pushing apart others might not hold up as valid governance strategy over time.