Wow what a day in the world of EOS and blockchain governance. We started off with EOS New York releasing their long awaited proposal followed by Dan Larimer surprising us all with his own governance proposal. This article focuses on Dan’s proposal.
The main thing I love about Dan’s proposal is the fact it rewards true believers of EOS through the use of time sensitive staking pools. If you want the highest token rewards and influence over the network you must not only own, but stake your tokens for long periods of time of up to 10 years!
“Therefore, I propose the creation of 6 staking pools: 3 month, 6 month, 12 month, 2 year, 5 year, and 10 year. In a network with a token supply of 1B, each pool will receive 5M tokens per year on a minute by minute basis (assuming network is operating at 100% reliability). Users can buy into the pool to receive their pro-rata share of that pools income. A user’s vote-weight is based upon the sum of their percentage ownership of each pool. This represents a 3% annual inflation paid to the different staking pools.” – Daniel Larimer
What do these staking pools achieve?
- Exchanges will struggle to wield influence over the network as most tokens will be tied up in long term staking contracts.
- Creates a long term, stable and secure network which big business demands.
- Allows smaller token holders to have more of a say/influence over the network.
- Increases the bandwidth per token for all tokens in REX.
One Token – One Vote (weighted)
Dan suggests a 1T1V mechanism which is weighted by the percent of pool tokens staked. With only 1 token to vote, block producers will vote for themselves, removing the option to share votes and collude with other BPs and create a vote swapping cartel. Because voting power is weighted by percentage of pool tokens staked, BP’s are incentivised to lock their tokens up for long staking periods.
“Once everyone has staked and voted, 21 block producers will be selected on a “one token one vote” basis (weighted by percent of pool tokens are staked in). These producers will be paid proportionally to the votes they receive instead of on a per-block basis. Paying block producers anything other than a linear relationship to their votes will incentives a sybil attack and result in increased centralization of power instead of 21 distinct parties, there may only be 20 or less with one person attempting to control two or more slots.” – Dan Larimer
BP Pay Cut?
As Dan mentioned in the proposal, “Ultimately, the largest stakeholders will likely control who the producers are; therefore, the yield paid to the staking pools is likely flowing to most of the same people who are running the producers.”
Under this proposal BPs and whales will actually be able to earn MORE than the current system. This should incentivise EOS whales to get behind Dan’s proposal.
Block Producer Reliability
“All the decentralization in the world helps no one if the network cannot ensure that blocks are produced reliably” – Daniel Larimer
The number 1 role of a block producer is to produce blocks, lately we have seen certain producers failing to do so, missing in one instance over 100 rounds of blocks! this is unacceptable. Under Dan’s proposal if a producer starts missing blocks, all token holders will be punished with a reduced return from the staking pools. This will incentivise voters to choose the most reliable block producers they can find.
“all inflation is scaled by the 7 day average availability raised to the 10th power. At 99% reliability the total inflation will be 90% of the max inflation of 3.5%. If a producer starts missing blocks and reliability falls to 97% then everyone’s yield falls to 73% of maximum yield. This means that voters (stakers) are punished if they don’t vote for reliable producers.” – Daniel Larimer
Overall I think Dan’s proposal is simple, effective and elegant in design. It will be interesting to follow the debates within the community over the coming weeks, and see which proposal or maybe a combination of the two rises to the top and is favoured by the community.
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