EOS network's governance issues continue to haunt them as Weiss Ratings recently downgraded the network from B category to C-. Weiss Ratings also posted a Twitter thread explaining why they had to downgrade the project which was once hyped as “Ethereum Killer.”
Weiss Ratings in its tweet claimed that although the public sentiment was right behind the project in its hayday and the platform was known for being a fast, efficient and most important a decentralized ecosystem. However, in the past year, there has been a continuous decline in the decentralization aspect where major whales control the majority of the token flow which could be of a deep concern.
Weiss Ratings claimed that the top 100 EOS token holders who represented a meager 0.01% of the total token holders on the platform, has a whopping 68% of the voting power on the network. This means these whales can easily manipulate the network as per their will.
One of the main reasons that the EOS network was lightening fast compared to the likes of Bitcoin or Ethereum because the platform has locked the number of block producers to just 21 which means any update on the leader had to go through these 21 block producers. Compare it to Bitcoin which has over 9,000 nodes, thus each transaction on the network has to run through all these leaders to verify the authenticity of the transactions.
However, this feature which was considered as a boon for the network soon turned out to be a bane as it leads to centralization in governance. The recent case where it airdropped EIDOS token, which led to great congestion on the network. The congestion led to a very high operational fee and thus the whales who had the EOS tokens were able to pay for high transaction fees and hoard the EIDOS tokens.
Whales could Diverge Resources to Fake Activity
The Weiss Rating tweet also speculated that since the resources and control of the network are concentrated in the hands of very few, they could easily fake activities like doing a series of fake ghost transactions to heighten activity on the network.
1/6 We’ve had great respect for work and thinking that went into the #EOS project. But the Weiss Crypto Ratings model is not based on opinion. It’s driven by data. And that data has now caused a downgrade from B to C-. Here's why (full article to be published soon):
— Weiss Crypto Ratings (@WeissCrypto) December 6, 2019
This was even proven during the EIDOS airdrop when the network was registering transaction activity as high as 43 million per day, most of which were done towards gaining more free EIDOS. The EIDOS airdropped required users to send a minimum amount of EOS to an EIDOS wallet address and in return, an unspecified amount of EIDOS was sent back to users' accounts.
EOS was trading at $2.75 at press time and has lost most of its gains from its yearly highs of $6.0. Looking at the string of controversies surrounding the altcoin, the team behind it would really need to rethink their strategy for the long run.