EOS Blockchain Governance on Brink of Failure Due to Vote-Buying Scandal
Maple Leaf Capital, a Twitter user related to EOS and its community, showed some pictures in which it is possible to see how the cryptocurrency exchange Huobi is accepting money for deciding about the future of the EOS network.
However, Huobi denied all the accusations and they were not proven by any other specialist in the space.
EOS has 21 block producers that are elected to maintain the history of the EOS blockchain and keep it distributed. Those companies receive rewards in cryptocurrencies as an incentive for doing so.
Clearly, this scandal has also reached the company behind the EOSIO software, Block.One. They released a statement on Tuesday in which they inform that they were aware of these unverified claims and that it is important to ensure a free and democratic election process.
The statement reads as follows:
“We are aware of some unverified claims regarding irregular block producer voting, and the subsequent denials of those claims. We believe it is important to ensure a free and democratic election process within EOS and may, as we deem appropriate, vote with other holders to reinforce the integrity of this process.”
This is quite important because EOS has also been criticized for having an incomplete approach towards governance. EOS is one of the first networks that has searched a solution for extreme decentralization that does not allow projects to find consensus about how to grow the project.
Block producers on EOS earn tokens and have the interest of keeping the protocol with good health since they would continue to be voted and earn more rewards.
There have been some comments in which users claim that the EOS protocol was too early to be launched since the governing system was not yet properly tested. At the moment, EOS has an on-chain governance in which users can decide who will be the 21 block producer at EOS.
One of the many things that these block producers can do is to block accounts that are operating maliciously. In EOS’ constitution is clearly forbidden to buy votes, but the problem is that the constitution has not been ratified by the community. That means that the current EOS software has no way to agree on rules.
There is a third important issue that is affecting EOS’ governability. It is related to the fact that most of the users have their tokens on exchanges. These platforms control the private keys of these users, thus, they have the right to vote for all the users that sored their coins in their platforms.
As voting works at the wallet level, a person cannot vote if they do not have custody of their tokens. Each of the wallet available can vote for one to 30 block producers. Each block producer receives an equal amount of votes related to the number of tokens held by the user on its wallet.
Cryptocurrency exchanges should also create a way to allow EOS token holders to vote for the candidates they want. At the moment, the only exchange that is doing something to allow users to vote with their EOS tokens is Bitfinex.
The EOS community has several times urged users to move their tokens to other wallets in order to be able to vote for their candidates.
Since EOS wallets are anonymous, it is impossible to know what is happening behind. It is not easy to discover who is sending money to whom.
There are some allegations that say that EOS supporters knew about this issue but htey did not do enough to solve the problem. Vitalik Buterin, Ethereum’s co-founder has also pointed out that there were some vulnerabilities to vote on EOS, even before it was launched to the market.
On the matter, he wrote:
“The average voter has only a very small chance of impacting which delegates get selected… their incentive is to vote for whoever offers the highest and most reliable bribe.”
Additionally, the issues related about Block producers have reached the geopolitical landscape with the China-US conflict related to a trade war. There are several groups in Telegram in which users say that they would not vote for Chinese block producers and vice-versa.
This problem related to Huobi can take a long time to be solved, but the issues will remain in the network for a long period of time. According to the block producer known as Aurora EOS, those that invested in the long-term success of teh network would be able to combat issues such as vote manipulation that degrade the security of the network.
EOS remains in the market as the five most valuable virtual currency with $5.15 billion dollars market capitalization. Each EOS token can be bought for $5.68 dollars.