EOS Block Producer Offers Rewards For Token Holders' Votes
Decentralization supporters within the EOS community were quite angered once more this week after one of EOS' official Block Producers — Starteos — offered token holders financial rewards in exchange for votes.
What Is EOS?
As many already know, EOS is a blockchain-based project with a strong focus on smart contract and dApp creation. It is a relatively young coin, which was launch in 2017, although it only got its own MainNet working in June 2018. It was created by block.one, which is a startup led by Brendan Blumer and Dan Larimer.
EOS is also known for having the most successful ICO in the history of cryptocurrencies, which lasted for almost an entire year, and it raised around $4.1 billion. Its native coin is also called EOS, and it is currently the 6th largest coin by market cap.
The project uses a consensus model named DPoS, meaning that its investors get voting power, and can decide who can mine EOS blocks. In other words, the ecosystem consists of two entities — the ECAF (EOS Core Arbitration Forum), and Block Producers, who are creating blocks, just like Bitcoin miners.
EOS BPs earn different amounts of tokens, with some estimates saying that the biggest ones get around 1,000 coins per day. There are always 21 of them, and they are elected via the constant voting process. Now that we understand how the process works, let's see what the problem is.
EOS Block Producer Tries To Buy Votes
The source of the issue is Starteos, a China-based startup that claims to have entered the blockchain industry as far back as in 2013. The company issued several large products since then, two of which — a digital wallet and a cold storage wallet — came out this year.
The company is currently EOS' fourth-largest Block Producer, which means that it gets a big portion of the revenue. However, a little over a week ago, on November 27, they published a post on their Medium page that started the new wave of controversy. The post was titled “We Gonna Share BP Proceeds With You — This Is the Way We Warm You Up in This ‘Winter’!”, and in it, the company offered a stable and continuous EOS revenue in return for voting for the company.
All that the voters need to do is select Starteos as a proxy and pick a revenue model, which can be either stable income or random revenue. The community quickly stood against this offer, as it goes against democratic blockchain policies and decentralization itself.
The Community Reaction
As mentioned, the community was not happy with this development. Not only does it openly defy decentralization, but the BP did it without even trying to hide their intent. About a month ago, on November 8th, Starteos announced the launch of a dApp that would act like a slot machine. They stated that users can earn tokens by using this dApp and that the tokens will be coming from their EOS BP rewards. At the time, it was believed that there is no bad intention behind the project, although it came really close to offering block rewards for votes.
Soon enough, these suspicions were confirmed, as the company tried to make the same offer via Medium, this time more directly. The move quickly spread through different social networks such as Twitter, Reddit, and even YouTube. Before long, the community demanded Starteos to be removed from the ranks of BPs.
Some of the other BPs also left statements against vote buying, although they never openly mentioned Starteos. EOS New York, the eight largest EOS BP, stated that EOS lacks a document that will outline some basic system of governance. Despite the community, and at least one other BP turning against it, however — Starteos still holds a high position among the BPs.
Previous EOS Centralization Incidents
Unfortunately, this is not the first time that there were signs of centralization within EOS. Another example came only a few weeks before the latest ones, and it includes ECAF moderator reversing already confirmed transactions. The community was outraged on this occasion as well, and many started claiming that EOS is failing in its mission to remain decentralized.
Some comments on Reddit even accused EOS of raising $4 billion just to recreate the legal system that uses tokens, while it is neither immutable nor resistant to censorship.
Before that, in October 2018, Huobi and a few other major BPs were accused of mutual voting. The claims were that a Huobi spreadsheet leaked information that indicates that several nodes are intentionally voting together in order to remain in power. Interestingly enough, Starteos was mentioned as well.
Even before that, in June, another BP scandal occurred, when BPs went against ECAF decision and have frozen seven accounts believed to be connected to a phishing scam. While this was later considered to be the right call, the BPs taking matters into their own hands was still heavily criticized.
There was also an incident where suspicious ECAF orders were received, and BPs decided not to obey them as they were unsure if the orders truly came from the ECAF.
On November 1st, a blockchain testing firm called Whiteblock released results of testing EOS software. The report surprised everyone with claims that EOS is not a blockchain, but a distributed, homogeneous database management system. This was due to the fact that its transactions were supposedly not cryptographically validated.
The list goes on, and EOS has been going from one controversy to another, with more suspicion regarding the quality of the project and its decentralization rising each time when a new issue hits. While EOS is doing its best to go through this rough period and save whatever it can, many believe that a few more incidents such as these might damage project's reputation beyond repair.