EOS Centralization: Top 1.6% of Holders Own 90% of Supply

David Azaraf

EOS Centralisation and Distribution CryptoGlobe Research

After a year-long, $4bn ICO, the anticipated EOS mainnet finally went live in early June 2018. The migration of EOS tokens from the ERC-20 standard to the independent EOS blockchain has brought with it increasing scrutiny regarding the true extent of decentralization on the EOS network.

In an effort to ensure an even spread of token holdings across investors, EOS ran a phased ICO with no hard cap.

Wealth inequality on the EOS network sees the top 1.6% of token holders controlling 90% of the supply while the bottom 44% have to make do with a mere 1% of EOS.

The nature of EOS’s consensus mechanism exacerbates the centralization issue as new token supply is distributed exclusively to the delegates in the delegated proof-of-stake system. These delegates are voted in by EOS token holders, with the top 5 wallets owning a third of the tokens and therefore a third of the votes and serve as block producers on the network.

In return for their service, they are remunerated by the increasing token supply. At an estimated 5% annual inflation, the inflation pool used to reward delegates is expected to total 4.5 million EOS tokens, currently valued at $45million by the end of the year.

EOS has the highest level of centralisation in comparison to its peers. CryptoGlobe Research recently looked at the unnatural distribution of masternode coins such as DASH and NEM (see chart below), however, these cryptocurrencies are still more distributed than EOS.

DASH and NEM distribution CryptoGlobe Research

As blockchains look to scale to the point of accommodating mass adoption, projects will have to find a way around the scalability trilemma. For EOS, that means preserving their platforms transaction speed and security while ensuring a fairer distribution of wealth and power on their network.

Electric Capital: 'Monetary and Fiscal Stimulus Is Hastening' Crypto Adoption

  • Early stage crypto venture firm Electric Capital says government monetary and fiscal policies are expediting mainstream adoption for cryptocurrency. 
  • The firm highlighted a long term erosion in trust for fiat currencies coinciding with an increase in trust for cryptographic processes. 

Early stage crypto venture firm Electric Capital claims that recent monetary and fiscal stimulus has hastened bitcoin’s adoption. 

In an investor update, the firm argued governments around the world are hastening adoption for cryptocurrency with their unprecedented monetary and fiscal stimulus initiatives. 

The firm explained that bitcoin is emerging as a potential store of value versus the U.S. dollar. While some detractors say bitcoin’s short term correlation to U.S. equities has undercut its potential as a store of value asset, Electric Capital called this a “straw-man argument.”

The report reads, 

As we regularly state: Bitcoin is not a store of value today relative to USD. It is a potential store of value, as it has many (though not yet all) of the characteristics of an excellent store of value.

The report continued, highlighting bitcoin’s value as a hedge against inflation, fiat devaluation and government seizure. The firm also pointed to bitcoin’s proven track record as a store of value relative to distressed emerging market currencies, emphasizing its popularity in the hyperinflation zones of Latin America and Africa. 

The investor update claimed to be optimistic about bitcoin’s long-term potential as a store of value and argued recent market developments have increased the likelihood of bitcoin’s broader adoption. 

According to the report, government monetary and fiscal stimulus policies are trending towards a long term "collapse in trust" in existing financial markets and fiat currencies. Simultaneously, Electric Capital reports a long term trend increase in trust in cryptographic systems, on which a new store of value can be developed. 

The report reads, 

Trust in governments is at all time lows, a global recession looms, unemployment will hit historic highs, government debt-to-GDP is at all time highs, dollar denominated debt payments in emerging markets loom, and many are worried about the scale of government stimulus.

The investor update concluded by saying long term data suggests an increase in global concern over an unsustainable economic path, which may drive people and institutions to consider cryptocurrencies as an alternative. 

Featured Image Credit: Photo via Pixabay.com