One of the most important and underrated features of the EOS governance process is the use of proxy voting. This post will explain the role of proxy voters within the EOS ecosystem to encourage their use by a wider range of token holders.
What is a Proxy?
Liquid democracy, or delegative democracy, is a form of governance where individuals can lend their voting power to other individuals who vote on their behalf. One of the most useful features of blockchain technology is that we can design a system that allows this delegation process to take place transparently and trustlessly on-chain.
In the EOSIO software, proxies are accounts that participate in governance using voting power from other users. Proxies register specifically to offer other users the ability to delegate their voting power to the proxy account. These proxy accounts then vote for block producers and other referenda, using the combined voting power of every individual user that has delegated its voting power to the proxy. This process is completely transparent: All proxy-user relationships are logged on-chain and are publicly auditable. All of the proxy’s voting activity is transparent. Even more importantly, however, this process is trustless. Users can delegate their voting power to a proxy without giving the proxy any control over their private keys or account. The proxy only receives the ability to direct the user’s voting power toward block producers and other voting initiatives, but the user can revoke their voting power from the proxy at any time.
At first glance this seems quite simple, but it is a very powerful setup. We believe that proxy voting will continue to become a bigger part of the EOS voting ecosystem.
The Role of Proxies in EOS
Proxies play a very important role in EOS. They are the parties that actively contribute to network oversight and decision-making on behalf of token holders who do not wish to do so themselves. The existence of proxies adds a layer of involved oversight to the EOS governance ecosystem, and it also allows decisions to be made more efficiently.
EOS is a system of on-chain governance, meaning that decisions about the network ultimately lie in the hands of token holders. Not every token holder is fully incentivized to dedicate time and resources toward overseeing block producer diligence, changes to the network, and other voting initiatives. Many token holders, especially those with a small stake, find that doing so simply takes up too much time and energy to be worth their while. Others would like to actively contribute, but simply don’t have the time to follow different initiatives, research various proposals, conduct diligence on block producers, or do the other work required to stay abreast of every development in EOS.
Proxies are the users who volunteer to do that on behalf of other users. In essence, proxies lead EOS voting blocs. It is up to the proxies to communicate to users how and why they will make decisions. If a user agrees with a proxy’s reasoning and methodologies, they can delegate their vote to that proxy. If at any point they disagree or feel that the proxy has not represented them well, they can revoke their vote in a single transaction.
Benefits of Proxies
Proxies form an extremely important layer of EOS governance and network oversight. One problem that plagues all on-chain voting systems is voter apathy; often there are large chunks of voting power that simply don’t participate. Proxies remove one important barrier to entry for everyday users (the time and resources required to actively participate in informed voting) and allow larger amounts of voting power to be put to work. They provide an effective way to increase the total voter participation without requiring too much work from individual users.
With increased voter participation comes more efficient decision-making. For example, if a block producer were to behave maliciously, it may require a large number of votes to mobilize in order to vote out that producer. Relying on thousands of individual users to stay abreast of updates and to then cast or revoke votes may simply take too long to be efficient. With proxies, large numbers of votes can be mobilized quickly and efficiently in a way that helps the network move forward faster. Proxies have whale-like influence while still representing the interests of many smaller token holders.
Another major benefit of proxies is that they form voting blocs to represent the collective interests of groups within the EOS ecosystem. The EOS token holder base is made up of many different groups — users, developers, enterprises, funds, block producers, and many more. At times these groups may have divergent interests and may disagree about the direction of the network. Through proxy voters, these groups can pool votes in a way that represents specific interests. As this scales, it creates a healthy ecosystem of governance that widely represents the many different subsets of EOS community members. It also creates a natural system of checks and balances that limits the power that any individual party within the ecosystem can have over governance.
Types of Proxies
There are many different types of proxies, as the role of a proxy account can serve many different interests. Proxies, in general, are not paid positions. So why would anyone choose to serve as a proxy?
- Altruistic or Ideological Proxies
Some proxies are created simply for altruistic or ideological reasons. Some members of the EOS community have strong opinions about the direction the network should take or the principles that should guide decision-making. Thus, they are willing to take on this role in order to help shape the future of EOS. Some proxies focus on supporting developer interests, while others focus on free-market principles or transparency and compliance. The entities running these proxies sometimes do so anonymously, while others run proxies as a way of leveraging or building up social capital.
- Block Producer Proxies
Another form of proxy that currently exists is a block producer proxy. Several block producer candidates run their own proxy accounts that vote not only for their own block producer, but also for other block producers whose views they support. Some users may only know or have diligenced a few BPs — they know they support those BPs but aren’t sure who else to vote for. Instead of just casting their vote for a single producer, they can proxy their vote to that BP, allowing the BP to vote for other producers on their behalf.
- Enterprise, dApp, and Investor Proxies
We are just starting to see the emergence of proxy accounts run by dApp developers or other enterprises building on or invested in EOS, but this is one trend we expect to grow significantly as time goes on.
Applications built on EOS form the lifeblood of the network. The developers, businesses, and other enterprises that choose to invest in and build on EOS have a lot at stake in the health, security, and future of the platform. Unlike individual users, they are often highly incentivized to participate in the governance of the network, and to leverage as much voting power as possible to side with their interests. Thus, running proxy accounts, to which their users and supporters can delegate voting power, makes perfect sense.
Additional parties that have vested interest in the EOS protocol, such as crypto hedge funds, index funds, or individual investors, may also choose to run proxies as a way to help steer the direction of the network and protect the value of their investment. These parties also make perfect sense as proxies. Crypto funds tend to maintain a greater deal of involvement in these networks than individual users, and they are always looking to protect their investments by helping to guide the network’s evolution. Running EOS proxies allows them to act as activist investors in a more powerful way, leveraging large amounts of voting power to side with their interests.
- Exchange Proxies
Many users in the EOS ecosystem hold their tokens on exchanges like Bitfinex and Huobi. These exchanges often store EOS tokens in large chunks in offline wallets and use their internal systems to credit users’ individual balances. In order to allow users to vote for block producers, some of these exchanges have set up multiple proxies that count users’ balances internally, and then vote for block producers proportionally using the proxy accounts.
All users must remember that tokens kept on exchanges are merely IOUs from those exchanges. If you do not control your keys, you do not control your funds or your votes. For this reason, we highly recommend that users do not keep their tokens on exchanges for extended periods of time.
Proxy Voting Mechanics
For a user to proxy her vote, all that is required is a simple on-chain transaction. Most major EOS wallets have the ability to set a proxy built into the UX in a simple and easy-to-use way.
For a in-depth explanation of how to vote on EOS, including multiple options for setting a proxy, see our voting guide. A detailed list of the top EOS proxies, along with information on each, can be found at this link.
Any user of EOS can become a proxy. Again, all that’s required is that the account registers on-chain as a proxy. Some wallets like eos-voter by Greymass and EOSToolkit offer easy interfaces for registering a proxy.
To further improve the transparency and information flow of the proxy ecosystem, a number of block producers, led by Aloha EOS, created the EOS Proxy Info contract. This is a contract that allows proxy accounts to publish information about themselves on-chain. Any user can find this information using any block explorer or an interface like this one by Aloha EOS.
One very important aspect of proxy voting is the existence of voter decay. Voter decay is a feature built into the EOSIO software that slowly decreases the power of the votes cast by users until they recast their vote. This is a way to prevent “set it and forget it” voting. Users who do not actively participate in voting on an ongoing basis will see their voting power slowly decrease over time. This is a good initiative that ensures more active governance, but it also means that users must at least confirm their proxy on an regular basis.
Voter decay takes place at a rate of about 1% per week. This means that, over the course of one year, an account’s voting power decreases by about half if it does not renew its vote. This applies not only to voting directly for block producers, but also to votes that are proxied. So, if you decide to delegate your voting power to a proxy account, make sure to renew your vote often. The good news is that re-voting for a proxy is just a simple transaction.
We encourage any user who has not yet participated in voting to delegate their voting power to a proxy account to vote on their behalf!
Aurora EOS Proxy
Aurora EOS runs a proxy account called auroraeosprx
We vote for block producers who share our vision for the future of EOS and actively work to bring value to the ecosystem. We’ll be publishing a blog post in the near future outlining the specific criteria we use to evaluate block producers and cast votes.
Aurora EOS is the leading block producer for the informed voter. If you find our work helpful, please vote for our node: auroraeoscom
If you prefer to proxy your vote, our proxy account is auroraeosprx
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