Post EUA and REX vote-buying are more rampant than ever. We have seen new BPs appearing among 21(NewDex and Soon Token Pocket) by sharing rewards with the community members. NewDex currently promises an annual yield of 3.81%, whereas StartEOS indicate around 6% returns. Recently, TokenPocket introduced a similar model to giveaway return to the community.

Vote-buying has started a new round of discussions within active community members. Following the NewDex model, new ideas for creating free vote-buying markets are introduced to level the playfield which received resistance from a few community members. There has been a lot of philosophy, theory and assumption involved which community members should understand before they make their next voting discussion. 

The Past and The Present. 

Though Vote-Buying currently is the hot topic and triggering a lot of debate, this allegedly has been happening since the beginning. The only change that occurred post-EUA/REX is prominent wallets/exchanges are now following this model openly. 

Reportedly, first Huobi exchange started giving rewards for depositing and staking EOS with their exchange (at that time EOS had “interim constitution” in place). There were also accusations made by EOSOne of Huobi running sock-puppet BPs and voting them in 70-76 BPs ranking. Huobi denied all the allegations. We have come a long way from there, the debate has died, and Houbi is still one of the top BPs on EOS Network. 

Exchanges like Huobi, Bitfinex, and others, presumably, use the rewards collected from EOS Network as the customer acquisition cost. The investors who are not willing to go through all the hassle of withdrawing funds to a wallet, stake their tokens with exchange proxies. The exchanges in return reward them a percentage of earned rewards divided equally in exchange tokens and attract new users. To keep themselves away from community concerns exchanges like Bitfinex and Huobi developed an internal portal which users may use to vote the BPs of their choice. (It was nothing more than a facade which gave exchanges enough control under the hood)

Slowly, exchanges started trading votes with other exchanges or whale supported nodes (a vote could be traded 30 times with or without users knowledge). There were concerns raised by the wider crypto community of exchanges controlling the EOS network and news was covered by prominent news channels. 

To incentivize users for withdrawing fund from exchanges, REX with a compulsion of voting either for a proxy or 21 producers was introduced. Instead of helping with reducing the power of custodian exchanges, a new set of custodians appeared. Leading Wallets, exchanges found a way to accumulate votes to their proxy by giving their users an easy way to delegate tokens and earn REX rewards. The proxy helped them to trade votes with the vote-trading syndicate. 

Following the vote-buying concerns, incentivizing the voters to act and earn rewards was suggested by EOS NewYork. Blumer, in addition to incentivizing the voters also suggested 1 Token 1 vote, intending to kill vote-trading guild. 

Vote-buying leading to Cartels. 

There is a set of individuals who would say it’s free-market competition in play, and such a model will make the EOS network more cost-efficient. Well, there are perks as the community gets rewarded for voting (fire once and done), but it would have its consequences which might end up killing dPOS. 

Lack of network education – Outside of the EOS echo-chambers, very few token holders are aware of the voting mechanism. The truth is it’s not the decentralized vision which has attracted many investors to this space, but quick money. Ignorance of network knowledge and individualistic nature of investors, perhaps not acting in the best interest of the network, have resulted in the degradation of many Blockchain projects like Steem, Lisk and Bitshares. 

It won’t be wrong to suggest that 80% of token holders will either ignore or fail to understand the fundamentals of dPOS and vote for BPs offering the highest rewards. This has and will result in vote exploitation by tools, exchanges and other User Interfaces. 

Incentivizing will not bring any significant changes. 

There are arguments that incentives will help with improving the voter apathy, which could further help with sorting BPs ranking issues. 

Post-REX voters percentage did improve a little, but few wallets, UIs manipulated the votes offering simple REX staking methods like TokenPocket and NewDex. Taking the learning from the past, it’s clear that something similar will happen once we have more incentives for stakeholders even on the base layer as NY suggests. Any BP, for example, NewDex will add the returns given away from inflation and returns by BPs to showcase final rewards. Even exchanges will develop a tool internally to forward the incentives to their users. 

Race to the very Bottom – Voting Bots. 

Thankfully we haven’t seen any voting bots yet. Once the open market for vote-buying establishes, we would see bots helping stakeholders to calculate the maximum rewards shared by BPs, and help them to vote those BPs. 

That would be a complete failure of dPOS governance where stakeholders will overlook every aspect of governance, and the focus shifts on the highest rewards. It has started to happen; we didn’t see any outcome of m-sig proposed by Meet.One to remove inflation. No decision made by active BPs bring any change in top 21 or get replaced by BPs supporting it. (Remove 4% Inflation referendum was among the highest voted ones after EUA.  EOS User Agreement was approved by Majority citing the high voter percentage supporting it; sadly same arguments failed to make any changes in inflation.)

More sock-puppets replacing independent BPs. 

If you have followed the chart carefully, we are moving towards stagnation in Block producers ranks. Top positions could only be challenged by Block Producers offering a high percentage of rewards or connection with a proxy of approximately 30m tokens(currently) to trade. 

As more votes get accumulated BPs, they will be able to kick-start new nodes in lower-ranks, vote them in and offer a competitive return to their users. Sadly, even 1T1V won’t prevent BPs from running sock-puppets. Instead, 1T1V will better incentivize exchanges and custodians to offer the best deal to delegators by voting lower-rank sock puppets with surplus votes.  

It will start the displacement of a few of the independent BPs in lower ranks, making network centralized in the hands of active BPs offering better rewards. 

(As mentioned above, there were accusations that Huobi was running sock puppets, we have seen similar allegations against StartEOS running eoszhizhutop and games.eos, previously.)

Hasty EOS dPOS Generalizations 

DPOS dependents on the stakeholders voting in the long-term interest of the network. Ideally,

1. BPs running a poor infrastructure, missing blocks, not updating infrastructure or codebase,  overcharging CPU/Net, not taking charge of the governance, will get voted out of top 21. 

The reality is far away from this, currently, BPs like cochainworld, Bitfinex, eoswikibp, overcharge CPU/NET from the users (have very poor benchmarks). Only a few among the top BPs provide reliable history solution APIs which could be used by dApp developers. Majority of dApp developers are reliant on GreyMass API nodes. 

In terms of governance, we seldom get an m-sig approval from nodes run by exchanges among top 21 (, bitfinex or huobi). Do they have anything to lose if they don’t participate at all? Or any incentives for them to participate? 

 2. Standby BPs running resilient infrastructure should be voted in by the community if they feel the top nodes aren’t working accordingly. 

Incentives model have changed the top 21 for worst. We are seeing the network degrading where standbys, in comparison to active, provide the most value (run globally decentralized infrastructure, history API nodes). Sadly, BPs like EOS Tribe are pushed to downgrade their infrastructure and no longer supporting the network with history nodes. 

Block Producers like Cryptolions, EOS-Aloha, GreyMass, Detroit are stuck in the same ranks and relatively new BPs have surpassed them. 

3. Stakeholders should use proxies when they don’t find the time to research and vote. The argument was, informed voters are better than uninformed ones. 

Proxies, especially exchanges and REX related, are able to attract uninformed voters who delegate trust to them to earn quick money. Also, the same proxies helped BPs to exchange/trade votes with others easily. 

There are only a few registered proxies which don’t have much impact on ranks of the BPs. 

4. BPs in top ranks get high rewards which act as a carrot for standby BPs to perform better and get the support of the community. To receive token holder’s support and trust, most BPs work for the community developing tools, marketing, running as per the code of conduct transparently. 

Some individuals might suggest, tools development was never the responsibility(undefined) of the BPs.

The reality is BPs are better incentivized (high rewards for the top 21) to develop tools and do the marketing for the network. I don’t think standby BPs running poor infrastructure in comparison to top BPs was the idea behind reward difference. 

Without proper functioning of WPS structure, which has its governance issue, we are heavily dependent on the development of tools by BPs. Every update goes through testing by BPs like Authority/CryptoLions which requires testing done by strong technical teams.

The sensible decision should prevail.

Governance is the way rules, norms and actions are structured, sustained, regulated and held accountable.

The governance structure we have today on EOS Network is reliant on many false assumptions. Exchanges (Huobi and Bitfinex – with a collective representation of many token holder’s accounts on-chain) have more influence than independent stakeholders. For successful functioning of governance, we need to have a robust structure in place, which helps to make a practical, efficient decision considering all the parties involved.  

Projects like Cosmos, HashGraph, Polkadot, Tezos have a good step by step governance structure. We could integrate those features into EOS. 

Better voting Structure

1T:30V isn’t the way forward and will end up killing EOS with vote-buying and trading. 

Different forms of voting methodology have been discussed and could be implemented to fix the current situation like 1T-1square vote as suggested by Daniel Larimer. 

Differential rewards incentivize individuals to expand and get the most. We could opt for single pay for every block producing node collecting rewards(limited to certain rank), and selecting active BPs(top 21) based on the number of accounts voting. No incentives to reach among the producing nodes will stop BPs from creating multiple accounts and getting themselves voted in. For a resilient network, we could also adopt last rotating Block Producer (integrated in Telos). 

Term Limits and Referendums Cycles

It’s hard to keep with the updates on the network. We all have our day jobs, and few aren’t comfortable to delegate to proxies. We may or may not agree with proxies decision and check referendum polls from time to time. Looking into referendums, reading different opinions takes time.

Few ideas-

Include Term Limit for BPs set to 3 months, followed by a referendum cycle. We may also incentivize voters to cast a vote and complete the drill in this period (unlike vote and keep earning model). 

BPs are judged based on the decision made in one cycle and executing the results of referenda. It would give time and data for stakeholders to plan and cast their next vote. 

Mandatory for BPs to stake EOS for regproducing

Sock Puppet BPs like Voldemort, monkeyeos, eosboost, rapidbesteos show up from time to time and get voted in by the partnered exchanges/custodians. We might not be able to solve the Sybil attack or a single entity running different two or three nodes. But a deposit of maybe 100k EOS without voting powers, and subject to % deductions if they are not compliant with regproducer agreement would discourage many participants from running nodes. 

(Having a constitution would never work as it would be very difficult to get an evidence and file a dispute)

The Council

HashGraph and PolkaDot have a council which acts when a) Network fails to reach the quorum. b) Oversite different layers and act as an advisory board. 

The debate, hence the execution of “remove 4% inflation” referendum proposal died. We no longer see people discussing this subject or trying to come up with the solution. Few individual stakeholders couldn’t do anything as active BPs ranking is much reliant on exchanges voting, rewards, and trading. 

Individual members for the Council should be voted by the community to address such matters (with term limits). Carrying out fair referendums, BP voting for every cycle, helping BPs to reach consensus on subjective issues should be their responsibility. 

Because of social pressures, it will be pretty hard for BPs to revert any transactions or attack the blockchain in any way. But if this happens, the Council should have the power to interrupt, maybe leading to separation of governance hence msig managed by Council.  

Is it too late for testing new ideas? Perhaps, for fixing Governance issues? 

Looking at the current trends, one could say we won’t see many changes get approved on EOS Blockchain currently, on the governance side. The game for incentivizing stakeholders with the maximum rewards included with vote trading (1T:30V) will just be making it worse. On the technical side, EOS is the most advanced blockchain out there and will continue to grow. 

Thankfully, we have a few impressive EOSIO based chains coming up with great teams. Many of the learnings taken from EOS could help to create a better-governed blockchain. Telos has been doing great on governance front but still have its issues of proxy centralization(GoodProxy and Knight could displace the top 21, TEDP might help bringing new BPs and proxies). LynxChain is working towards including few features like Term Limits and including a council, which will be pretty exciting to see. 

“Governance is necessary, not because man is naturally bad but because man is by nature more individualistic than social”

Thomas Hobbes

Written by Tanish.

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