Evolution’s Response to Vitalik
Vitalik Buterin, a co-founder of Ethereum recently wrote a blog post criticizing the governance structure and consensus model of EOS. Specifically, he argued that the current BlockOne model of DPOS with 21 Block Producers is flawed and would not be successful long term. Below, we will analyze his main criticisms of EOS and propose how Evolution, a new Blockchain using EOS open source software, will be able to solve his criticisms while still ensuring true decentralization.
For those of you who are new to our project, Evolution is a community driven adaptation of the EOS open source software launching a truly decentralized DPOS Blockchain.
Problem: Collusion Among Large Stakeholders
As Vitalik argues it’s not a question of if but when will large stakeholders position their votes towards profits over community interests. Venture firms affiliated with BlockOne now own or operate 8 of the 21 block producer candidates on EOS. INBlockchain, a lead investor in BlockOne, is developing its own BP candidacy and investing in 4 other BPs. These include EOS Mao Lao, OracleChain, EOS Gravity, and eosONO. Brendon Blumer the CEO of BlockOne is shown on the INBlockchain team webpage and shown as an advisor to INBlockchain. The collusion between BPs, Venture Funds, and BlockOne stakeholders continues to grow as we near June and will lead to the formation of centralized Cartels.
Cartels on DPOS
After analyzing BP candidates and investor relationships we’ve determined that a BP cartel formation between 12–15 BPs is very realistic during the first year after launch. Thus, making the entire ecosystem vulnerable to profiteering cartels seeking hyper inflationary actions to reap maximum payments and dilution of the community.
We agree with Vitalik in that the current structure of DPOS with 21 Block Producers it’s easily susceptible to manipulation among voters and large stakeholders. It needs to be noted that the issue of alliances and cartels is not just an issue with EOS’s current structure of DPOS. In most proof of work blockchains like Bitcoin and currently still Ethereum, alliances and cartels are rampant. In fact, the top three mining pools in Bitcoin and top 4 miners in Ethereum control more than 50% of the total hashrate. A recent study conducted by Cornell found that a Byzantine quorum system of 20 participants would provide better decentralization in real world than theoretically infinitely-decentralized BTC and ETH.
Solution: Introducing Verification and Identity
On Evolution, using our voting identity system (EIS) we propose that one Verified Evolution Account can only vote for one Verified Block Producer. This prevents large stakeholders from pooling tokens and distributing them to multiple BPs and thus quickly forming a cartel. No matter how many tokens an Evolution account owner stakes they’re only able to vote for one block producer and can’t divide up their votes as BlockOne has directed. Also, as voting grows in scale it will be vital for the community to verify large voting pools or voting accounts via (EIS arbitration) to ensure no collusion is taking place. All votes verified by EIS or unverified will be equally weighted, but it will be fully transparent how many verified and unverified votes a block producer receives.
While Evolution believes that privacy should be allowed to be built on top of Evolution, we maintain that those profiting from Evolution’s operation should be publicly identifiable and use identifiable accounts. The Evolution Identity System (EIS) will help ensure fair competition between BPs.
Community Equality vs. Wealth
Our token distribution model is designed to put the power back in the hands of the community and allow equal opportunity for all members. Instead of an ICO, we will be AirDropping tokens onto participants in the EOS crowd sale using two snapshots. Our Airdrop distribution will be equally distributed to EOS holders independent of ownership stake. Full specifics of our planned airdrop is outlined here.
This will prevent against large scale collusion seen by BlockOne’s early investors and Venture Funds.
Problem: Voting Collusion
Vitalik argues against Bribes or Dividends for Block Producer Voting. It is true that there has been a lot of discussion lately about the possibility of block producers paying dividends to the users that voted for them. Evolution will provide an arbitration framework for community initiates to ensure that paying for votes be prohibited and prevented in the Evolution Blockchain.
We can assume that if even one block producer starts paying dividends to their voters, others would surely follow, resulting in a competition between BPs for offering the highest possible dividends. While this may sound appealing, this has several negative implications. It opens the door for block producer dependency on third party sponsors. Other DPOS blockchain systems such as Lisk have shown that block producers will start offering dividends that approach or even reach 100% of the producer payout. At some point, it is conceivable to see BPs seeking other ways to generate profit and monetize their position.
Further, it reduces the system security: It creates an economic incentive to vote for the producer that offers the largest dividends. Yes, users are more likely to vote, but they are also more likely to vote based on dividend payments without considering any other factors that are important to the health of the network. This model will act as a disincentive for educated voting as users will simply vote based on which BP offers the highest dividends. (Credit to EOSGo Member tkaraivanov)
Solution: Preventing Vote Buying
We agree with Vitalik that simply outlawing block producers from buying votes or offering dividends in the constitution will not be enough to prevent the action from taking place. We believe providing complete transparency will be the best defense against vote buying.
Evolution will be introducing decentralized autonomous organization (DAOs) that act as banks for the block producers to receive their block rewards. All block producers will be verified through community mechanisms in the DAO which is required in order to participate as a block producer and receive block rewards. The community will have 100% transparency of the money that is received and sent from each block producer in the DAO. If a Block Producer violates the constitution and starts to pay large amounts of accounts that action will be visible for everyone to see as the lineage of funds will be traced though DAO accounts. We will be releasing BP governance documentation with full details on how this process will work soon.
Solving Over Compensation and Inflation
Evolution empowers DApps Developers by enabling all their resources to be used for BP votes. Since the end user of the EOS chain will mostly interact with DApps, we’ve constructed a governance model that realigns EOS with this in mind. This countermeasure ensures Block Producers compensate themselves fairly and keep rates competitive for DApps.
Building DPOS for Long Term Viability
After reviewing Vitalk’s criticisms of EOS we still concluded that the DPOS consensus model as a whole is the best model to simultaneously achieve scalability and decentralization. However, we have serious concerns about the way BlockOne has designed their DPOS structure for EOS. We aim to solve these issues to prevent centralization and maintain a healthy ecosystem.
We propose Evolution, a community driven adaptation of the EOS open source software. Evolution aims to structure votes and evenly distribute tokens to ensure true decentralization.
Welcome to the Evolution!