Starteos, a block producer for the EOS blockchain, has openly offered to share part of its income with users. This is significant because it suggests that the EOS network, which is one of the most valuable blockchains in the world, is not, in fact, decentralised or democratic at all, contrary to its own claims.
It is also significant because of the size of the company. EOS, an Ethereum-esque blockchain network, raised $4 billion during its initial coin offering, and its token, EOS, has a current market value of $2.5 billion.
Concentration of Power
EOS claims to be a decentralised, democratic network. However, all transactions and governance decisions are processed/approved by only 21 users.
For context – on the Bitcoin blockchain, all users can compete to verify transactions, which is what makes the system decentralised. This system is called proof-of-work. It is foolproof unless more than half of the users are controlled by a single entity, which at that point could corrupt the network. In a network of significant size, this is unlikely to happen.
EOS runs on a system called delegated-proof-of-stake, which basically means that the only power users have to verify transactions and make decisions regarding system updates is by voting for a representative to do it for them. Like with other cryptocurrencies, processing transactions brings in an income. Unlike other cryptocurrencies, these 21 nodes are the only ones that can process transactions, and so earn approximately $10,000 a day.
EosAntPool https://t.co/0nLuAsxhKN has become one of the 21 #EOS block producers. Thanks so much for all your support, vote and trust. EosAntPool will keep working on #EOS community development and construction. Let’s rebuild the world together. https://t.co/nTkoEDgjOW pic.twitter.com/xHcj6ZyHcw
— AntPool (@AntPoolofficial) July 3, 2018
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This raises a number of issues. For example: the risk of a ‘51% attack’ moves from being unlikely to imminent; only already-wealthy companies can ever hope to be block producers (they advertise like politicians, and one of the block producers is block.one, the Cayman Islands-based company which set up EOS and which holds 10 percent of all EOS tokens); and these block producers could use their exclusive income to ensure future votes by offering financial incentives to users. This last point is what appears to be happening now. If this seems normal to you, imagine politicians paying people to vote for them.
Starteos published a press release in Medium entitled “We Gonna Share BP [block producer] Proceeds with You – This Is the Way We Warm You Up in This “Winter”!”
Explaining that this decision is because of the recent market downturn (“How much faith do you left to have?[sic]”), the company promises that users that delegate Starteos as a proxy will receive “continuous and stable EOS revenue” and the chance to win extra money on a game called ‘Lucky Fruit Slots Machine’.
The company says that its motivation is to ” show our determination and confidence on EOS,” and that “The expenses of labor and servers are all borne by Starteos temporarily.” It also wants to “stimulate more people to participate in the voting process.”
It goes on to explain exactly how to vote, and ends with the sentence “Vote for games.eos – Vote for yourself”.
According to its website, Starteos was created in early 2018, from an earlier company called Chongqing Yuhao Technology. It offers a cryptocurrency wallet, which, according to a promotional video, has passed a security verification test set by Starteos’ own research centre (the ‘Blockchain Technology Research and Application Joint Laboratory’ at the University of Electronic Science and Technology in Chengdu, China).
In October, another EOS block producer – Huobi – was accused of accepting bribes for approving certain decisions. Huobi, which is one of the biggest cryptocurrency exchanges in the world, denied the accusations, with support from EOS which said: “We believe it is important to ensure a free and democratic election process within EOS…”
In late November, research from BitMEX concluded that EOS is not really a blockchain, more of a database and that there are serious flaws in the setup of the system.
Finance Magnates has reached out to Starteo, but no reply was forthcoming as of press time.