The EOS EOS community is growing anxious that its blockchain is really being controlled by a select few. A petition has been drafted to introduce voting limits to protect small-time token holders against the influence of whales.
EOS runs on Delegated Proof-of-Stake (DPoS) to determine who validates blocks on its blockchain: instead of miners though, it uses so-called block producers (BPs).
The idea is that those who have invested more money should have a stronger voice when it comes to making important decisions, as they have more to lose – but there is currently no limit to the amount of votes that can be controlled by any one party.
“Currently, Bitfinex is voting between 10 million and 40 million EOS for up to 30 other BPs,” the petition reads. “These votes go a LONG [sic] way to ensuring the recipients are among the Top 21.”
What makes EOS particularly unique is its election system, which asks users to use their tokens as means of selecting who should be maintaining the blockchain. Users will lock their tokens up (stake them), and nominate candidates who they think should be trusted with the responsibility of maintaining the blockchain.
The 21 candidates that receive the most votes are the chosen ones: they produce blocks and keep things running smoothly. They are paid in EOS, along with the rest of the candidates, who are given tokens to remain on stand-by, should they be needed.
The petition asks that EOS introduce a limit to the amount of votes any one entity can control. This is due to recent concerns over the influence of cryptocurrency brokerage firm Bitfinex, issuers of the controversial Tether stablecoin.
Almost a dozen Bitfinex wallets with more than three million EOS staked, each, were used to vote in the initial round of elections. Collectively, they were worth 40 million votes. There have only been around 370 million votes in total.
Three are known to be official Bitfinex wallets. The rest were controlled by Bitfinex whales delegated to vote on its behalf. As this as happening, concerns grew that Bitfinex was using EOS stored on it’s exchange by users was being leveraged to increase its voting power. This was later denied by Bitfinex.
It is important to note that the voting does not get split between candidates. The amount of votes each candidate receives is equal to the amount of EOS the voter has staked. In Bitfinex’s case, it currently has around 11 million tokens staked – if they vote for 30 candidates, all 30 will receive 11 million votes. But that number is fluid; the process of staking coins is fast, and any funds locked up are able to be freed after 72 hours.
Where it gets interesting is that because of the massive amount of weight Bitfinex pull – small startups are making considerable cash. Take Genesis Mining for instance, which recently stated that cloud mining was no longer profitable and has been ‘restructuring’ contracts. Due to Bitfinex’s vote, Genesis Mining is making nearly 300 EOS ($1,500) per day. It isn’t even producing blocks, it’s on stand by, having just enough votes to make decent passive income.
In fact, it had the lowest voter diversity of the top 100 candidates. Without Bitfinex’s help, they might have been in even more financial strife.
These effects are compounded by EOS’s “voting decay” mechanism. Simply, votes count less if you don’t participate in elections regularly. Due to both users unstaking their EOS and a general disinterest in the process, the voting power of the overall network is down over 4 percent just a few months after launch.
In order to address calls for massive overhauls to its constitution, EOS is activating a “referendum contact” that would make implementing things like voting limits possible.
EOS Dublin is one BP candidate who is eager for the new system, as it would make petitions like these obsolete.
“The main point here is that on EOS we have the ability to make changes when things can be improved,” an EOS Dublin spokesperson told Hard Fork. “Bitfinex have so far been an honest player in the community and have given some of their larger token holder customers a way to cast votes through proxies. The good news is that we are weeks away from having a referendum contract so anyone in the community can put forward a proposal like this and if it attracts enough support it will be passed. If not it won’t.”
Beyond potential conspiracies, this is certainly indicative of the influence whales have over blockchain tech. There’s no doubt that most of the cryptocurrency in the world is owned by a small group – last year, just 1,000 individuals owned 40 percent of the Bitcoin market.
Certainly, the EOS community, by design, has influence, but if voters continue to leave and limits aren’t set, it will surely fade – all to the benefit of the whales.
Published August 17, 2018 — 13:51 UTC
Jessica spends 12 hours a day on the internet managing security for web assets and loves her macha tea
