Following recent allegations of collusion among block producers on the EOS network, Block.one, the company behind the record-breaking EOS ICO, has stated that it will use more than 100 million EOS to fight voting cartels which may be arising in its delegated proof-of-stake governance system.
The EOS network is protected by a consensus algorithm. It is through this consensus algorithm that block producers (BPs) are elected by the EOS community. The process is meant to be democratic and tackle scaling issues, but only 21 block producers are elected at any one time, resulting to the risk of anti-competitive practices.
Allegations of Collusion and Rigging
Starting last week, a series of rumours began making the rounds on WeChat based on an unverified document, said to have been exposed by an employee of one of the top 21 block producers. According to information presented on the document, an EOS ‘cartel’ has been created, and the network’s democratic process has been destabilized.
The document, which is in Chinese, says that parties have discussed with one another and have agreed to stake each other for joint reciprocation. One exchange is also alleged to be offering its votes for sale.
Block.one CEO, Brendan Blumer recently reacted to this on the company blog:
We are aware of some unverified claims regarding irregular block producer voting, and the subsequent denials of those claims. We believe it is important to ensure a free and democratic election process within EOS and may, as we deem appropriate, vote with other holders to reinforce the integrity of this process.
Blumer added the company is still working on its “potential involvement” with the goal of “empowering the intent of the greater community through a transparent process that incorporates community feedback.
If cartels develop on the EOS network, what this could mean is the emergence of agreements that enable a party beneficial access to the rewards that come with being a block producer. This would destabilize the network’s democracy and consequently, its security. For the network that some claim to be the “Ethereum killer”, such a situation would be disastrous as it compromises the security and decentralization of EOS.
Perhaps anticipating that such a problem could arise, Blumer stated that Block.one will use its cache of tokens to take part in the network’s on-chain governance. Essentially, their stake of about 10% of the entire network’s EOS will give them a massive voice in the election process and enable them to potentially deal with cartels.
Critics have pointed out that while this is a good goal, it does not so much reinstate democracy to the system as the company will merely fight cartels using tools similar to those wielded by said cartels in the first place.