Many critics of EOS have said that EOS is not a truly decentralized blockchain and will be open for manipulation and attacks. One of their main concerns is that there are only 21 Block Producers producing blocks for the EOC blockchain and these Block Producers are appointed by being voted in by the token holders. In their eyes this will make it easy for whales to manipulate votes and position Block Producers they want in the top 21. Another concern is that there is not an easy way to stop clustering of Block Procurers in one country or region – again opening the EOS blockchain to possible manipulation.
Now, 4 months after the launch of the EOS MainNet, these concerns are playing out.
There are currently 344k (1) EOS account holders and only 33k (2) of these account holders are voting. Only 25% (3) of EOS tokens are staked and it seems difficult to get the average person involved. This has opened the door for whales to manipulate the voting and get their preferred Block Producers into the top 21. Many of the whales are only voting for one or two Block Producers.
The clustering concern also seemed to come true. Currently 9 of the 21 Black Producers are from China with the 10th Block Producer from China sitting at the no. 22 position. With 9 Block Producers in the top 21, China controls 43% of EOS network. The concern is not with China per say, but will be the same if say the 9 Block Producers were all from the USA.
The EOS community needs to find ways to address these problems before it impacts the long-term viability of the project. Creative ways needs to be found to get the community involved – especially the smaller account holders. We also need to limit the negative impact whales have on the EOS ecosystem.
One way of getting token holders involved is to reward them – make it worth their while. In an article by Dan Larimer, dated 22 August 2018, he proposed a Resource Exchange (REX) where EOS token holders can rent out unused CPU and bandwidth. (4) He initially proposed the use of two additional tokens – REX and SEOS, but this got a lot of criticism being too complicated. A Telegram Group, EOS REX (5), has been created to get a discussion going and to refine Dan’s proposal. Dan is actively contributing to the discussion. The refinement of the proposal is underway and the current position is to create one additional token, REX. The EOS token holder will have to stake their tokens for a period, lend it to the REX and earn REX tokens in return. The smart contract will be terminated at the end of the period, the REX tokens will be returned to the REX and the EOS token holder will get EOS tokens in return. (6) The discussion is still in progress and there might be further refinements before implementation.
Rewarding token holders by staking and lending their tokens is a good way to encourage participation and involvement of the community. Unfortunately, I do not think that by introducing the REX by itself will be enough. The average user do not care about governance and we need the make the processes for staking, voting and renting as simple as possible. Furthermore the need for token holders to take action needs to be limited to as few times as possible.
In addition, the introduction of the REX still does not address undesired behavior by whales and Block Producers.
Below are some suggestions I propose for consideration:
- Introduce the REX as soon as possible. Allow staking and lending of tokens to the REX for an unlimited time. Follow the same 3 day process as for un-staking EOS tokens with the un-staking of the rented CPU and bandwidth. This will result in minimum involvement expected from the average token holder.
- Improve the way of appointing a proxy to vote on a token holders behalf. Currently token holder need to refresh the delegation to their proxy on a regular basis to stop voter decay. My recommend is to stop the decaying of votes delegated to a proxy. This will stop the need for the average user to regularly refresh their proxy delegation. This way the proxy can be set up once and the token holder can forget about it.
- The Telos community is working on interesting proposals to address some of the concerns regarding whales. The EOS community should seriously look at the work Telos is doing. For example, Telos will be introducing inverse weighted voting. Token holder will be able to vote for 30 Block Producers – the same as EOS. With Telos’ inverse weighted voting your vote will have more weight the more Block Producers you are voting for. Somebody voting for one or two Block Producers vote will carry proportionally less weight compared to somebody voting for 30 Block Producers. (7)
- New or improved rules should be introduced for Block Producers; e.g.
- Block Producers should not be able vote for themselves;
- All Block Producers should vote for 30 other Block Producers.
Governance is not a popular topic, but unfortunately is very important for the long term health of the EOS ecosystem. I will be interested to read you views on my suggestions and/or hear some of your own suggestions.