$EOS Block Producer Collusion: A Full Research Report (Part 2)
Here’s an excerpt from the $EOS whitepaper:
“A blockchain that adopts the EOS.IO software will award new tokens to a block producer every time a block is produced. In these circumstances, the number of tokens created is determined by the median of the desired pay published by all block producers. The EOS.IO software may be configured to enforce a cap on producer awards such that the total annual increase in token supply does not exceed 5%.”
Here are the focal points of how this protocol works that we should pay attention to:
- Every block producer is guaranteed a reward on the chain (that they can keep).
- Block producers are selected via tokens being staked on the protocol (yes, of the same kind they’re rewarded with; nonsensical).
- Because of #2, those that already have a large accumulation of tokens only increase their voting power over time.
- However, there is probably no one single entity that can leverage the protocol for their sole benefit.
- The issue in #4 can be circumvented by aligning with a network of high resource individuals (i.e., ones with a lot of $EOS) and colluding with them by combining one another’s resources in order to ensure that there are certain block producers that are consistently selected on the protocol; thus creating a never ending cycle of wealth creation and power.
Another Major Overlooked Issue Here With $EOS
A lot of people might look at this and say, ‘So what? Its centralized like most of crypto, right?’
It’s not just that. On the $EOS protocol, block producers have a lot of authority to make material changes to some of the rules (per the whitepaper).
Check out this excerpt from one of the block producers themselves (EOSCanada; this information is corroborated by the whitepaper but they have a simpler, cleaner explanation):
- One of the features that EOS offers is that BPs are capable of revisiting a previous transaction should the need arise. If there is a dispute, it is sent to ‘arbitrators’ (not sure if external/internal honestly), and when a judgment is made, the decision must ultimately be approved by 15 of the BPs (out of the T21 I’m assuming).
- BPs can replace “faulty code” when needed. According to EOSCanada (one of those colluding nodes ironically), “EOS Canada will be releasing an article explaining Ricardian Contracts…They wiull also have the ability to immediately freeze accounts or contracts should any emergency situations arise, such as a major hack.
- “The allocation of inflation is determined by a bid that all BPs make, and the median value of the top 21 becomes the allocation amount between Block Rewards and Worker Proposals.
- Individuals must rely on these BPs for any and all ‘DApps’ (haha at decentralized here) that someone would launch on $EOS [assuming that’s possible].
- “As a BP, they would be in possession of block signing keys. If enough of these keys became compromised, someone could claim control of the network should they choose to. They would have the ability to do a lot of damage in a very short amount of time.”
Some of These Centralized Measures Have Received Support From Daniel Larimer Himself
Ironically, Daniel Larimer himself was also a strong proponent of “Ricardian Contracts”. He wrote about it here:
What’s even more problematic about the whole $EOS situation is that this information is not hard to source and the collusion is pretty detectable if you trace the flow of votes among BPs.
In an article written by CoinDesk back in July, they stated that Block.One (the enterprise that created $EOS; headed by Daniel Larimer the lead dev) would be taking a “greater role” by voting directly for BPs on the protocol:
In that article, it states that Block.One is in possession of 10% of all total tokens that $EOS has (at the time of the article’s release). This means that they had and have the power to effectively break up this collusion. However, they haven’t.
In fact, the collusion is so thick among the T21 BPs, its hard to imagine that $EOS is not a direct participant in all of it.
Go ahead and read the CoinDesk article, I urge you. It will force you to ask yourself how its possible that Block.One publicly announced that they would step in and start voting for BPs in an effort to prevent some of the toxicity coming on the platform, yet fail so miserably at doing so despite clearly having the resources to fix these issues with ease.
I can’t go as far as saying that Block.One is contributing, but they damn sure aren’t doing anything about it. And we can’t say that they aren’t aware because they made it publicly known that they were aware of these problems when they announced that they would be voting directly.
Thus, this all begs the question of — what is really going on?