From the Missing Piece to Proxy-as-a-Service, a new proposal for EOS vote-security
I just read the two proposals from EOS New York “The Missing Piece to the EOS Incentive Model” and EOS Nation “Proxy-as-a-Service”. They both raise one of the most important issues of dPoS blockchains: vote-security; explained by two apparently distant points of view.
The goal of EOS New York proposal is to overcome vote-buying by increasing the voter participation. As a matter of fact, the greater the voter-participation, the less effective will be the vote-buying or swapping. For this reason, it will be much more difficult for a Block Producer to buy votes and become an active BP, therefore increasing the security of the chain.
EOS Nation has instead proposed a direct vote-buying mechanism in which they share part of their BP rewards to token holders who stake in EOS Nation’s interNATIONal proxy. Through this system, EOS Nation will be directly accountable to the token holders if they started voting in ways that seemed nefarious or malicious.
I found in both proposals some interesting ideas seen separately, but that together can solve each other’s issues.
To increase vote-participation, EOS New York intends to use part of the EOS inflation and distribute it to voters. However, inflation is never well seen throughout the community, and solving problems through inflation always seems to be the easiest way. A distribution of inflation to voters does not result in a reward, but in a tax for non-voters. The token holders who do not vote, for whatever reason, will see the value of their token deteriorate over time. Inflation is indeed a great tool when used to increase the value of the network, but if distributed to a large slice of the token holder, it could easily increase the selling pressure of the token. This would not make very pleased investors, who are always fundamental in the ecosystem of any cryptocurrency. The strength of this proposal, consists in the fact that said inflation is distributed to all voters, regardless of which Block Producers they have voted for. This is therefore a non-biased vote.
In the proposal of EOS Nation, it’s the same Block Producer that distribute part of its rewards to the token holders who voted for its specific proxy. This is therefore a biased vote. Through this mechanism, EOS Nation would control the vote of its voters, being able to distribute, exchange or sell them with 29 other BPs. As proxy can vote for a maximum of 30 BPs, if this proposal were to be carried out successfully, EOS Nation would receive a value 30 times higher than the rewards it distributed to its voters. However, the strength of this proposal lies in the fact that the vote-rewards are not generated by new inflation, but by rewards that the BPs distribute voluntarily.
After evaluating both proposals, I realized that:
- We need an incentive for voters to increase the vote participation and consequently the security of the chain.
- This incentive must be non-biased, in order not to increase the strength of the BPs.
- If carried out through inflation, it could deplete the value of the token, as it is distributed to a large slice of the token holders.
In this post, I propose to you a system where:
- Each Block Producer can spontaneously and voluntarily distribute in a common fund part of its own BP Reward.
- Their maximum contribution must have a limit, so as not to run into a “race to the bottom”.
- The fund must be distributed to all voters, regardless of which BPs they voted for. It must be a non-biased vote.
With regard to the first point, I do not want this mechanism to be forced, but rather a voluntary act on the part of Block Producers. The distribution of rewards in the fund must be transparent, anyone can see which BP have deposited and how much.
The second point is a must to avoid falling into the “race to the bottom”, where each Block Producer goes to distribute the totality of its rewards because “obliged” by the system. The limit I want to propose to you consists in the value of the vote of 1 EOS with respect to its economic value.
Currently with 1 EOS we are able to vote up to 30 BPs, this means that the value of the vote of 1 EOS is 1/30 its economic value. BPs receive 1% of the total EOS supply, i.e. about 10,000,000 EOS. If each BP would donate 1/30 of its reward to the common fund, around 333,333 EOS would be obtained per year.
The 1/30 donation threshold corresponds to about 3% of BPs rewards. For an active BP that receives 700 EOS per day, this is about 23 EOS per day. As there are already BP who are willing to give up part of their rewards, it should not be an excessive cost.
According to the EOS Authority website, to date the vote participation is around 30%, i.e. 300,000,000 EOS voting. If these funds were used as a reward it would be 0.111% per year for the voters.
The reward from the Block producers will be constant and not dynamic. So, mathematically, as the vote participation increases, the vote-reward rate will decrease and the token holders will have less and less incentive to vote until we reach a new equilibrium. Hopefully, this new equilibrium will be greater than the current one, with a vote-participation of 30%.
Finally, with regard to the third point, as already explained, it is necessary that the vote-reward is non-biased, in order not to concentrate the power of the Block Producers.
I’m waiting for feedback, you can contact me on telegram: @edcrypto1
If I get enough answers I will create a new public group to discuss them, or I will move the conversation to some existing group.