A Node Operator’s Confession of EOS DPoS Corruption [1/3]

Hahn Ryu

Published in

NodeONE

9 min readDec 6, 2023

There Is Nowhere to Hide Behind the Code

About this Series

“There is Nowhere to Hide behind the Code — A Node Operator’s Confession of EOS DPoS Corruption” is a three-part series of articles that deeply explores the corruption and governance issues within the EOS DPoS (Delegated Proof of Stake) system. It depicts how the ‘code is law’ approach can be used to betray the ‘intent’ of the token holders via centralized exchanges’ staking practice. This series, through the perspective of a whistleblower, exposes the reality of vote trading and selling in the EOS blockchain, critically addressing the corruption process in blockchain governance. The series is structured as follows:

Part 1/3 — I Believe that the Truth Heals

Preface: Why This Series Deserves Your Attention
Confession: I Believe that the Truth Heals
Primer: Brief History of the Deterioration of EOS Governance Integrity

Part 2/3 — How to form a Cartel on DPoS Blockchains

How Vote-selling Works: Introducing the Vote Broker
How Cartel Stabilizes on DPoS: How Vote-Swapping Works
The Role of Centralized Exchanges: Staking Is Actually Voting

Part 3/3 — Master in Master’s Place, Servant in Servant’s Place

Where legitimacy Comes From: You Can’t Hide Behind the Code
Conclusion: Master in Master’s Place, Servant in Servant’s Place

Objective of the series

The goal of this article is to shed light on the internal governance corruption within the EOS chain, caused by exchange’s staking practices designed without adequate consideration for on-chain governance. It aims to raise awareness among exchanges about the negative ripple effects of their staking service practices, encouraging them to operate staking services with greater responsibility.

More specifically, the primary target is to halt the collaborative alliance, particularly the vote-selling arrangement, between exchanges and anonymous vote-brokers. These partnerships have played a pivotal role in undermining the internal governance of EOS.

Why Readers Should Pay Attention

For EOS Holders: This article comprehensively covers the processes and principles of governance issues and corruption within the EOS network, based on data. Token owners can make informed decisions about their investments and network participation by understanding the role and extent of vote manipulation by vote brokers.

For Crypto Investors: General cryptocurrency investors can gain an in-depth understanding of how centralized control and corruption in blockchain governance can impact the internal economy of a chain. The case of EOS offers insights into how blockchain governance systems can go wrong, especially in projects claiming decentralization.

For Web3 builders: The essence of Web 3 revolves around community ownership of the internet, as opposed to the corporate-dominated landscape and closed systems of Web 2. This series serves as a cautionary example, showing how a Web 3 project can inadvertently adopt the same pitfalls as Web 2 if it doesn’t pay sufficient attention to the delicate aspects of governance and transparent decision-making of its users.

For Exchange Representatives: Exchanges providing staking services wield significant influence in decision-making processes in POS and DPoS systems like EOS. This article emphasizes the crucial responsibility exchanges hold in token governance, offering insights on how to avoid mistakes and uphold responsibility while providing staking services.

For ENF(EOS Network Foundation): ENF has become the single most important entity in the EOS ecosystem and it has achieved so many things. Actually its own establishment is such a monumental success of the community in the absence of centralized authority. This article points out how all its achievements can be undermined if they were built upon an illegitimate foundation.

The following is my confession why it has taken so long for me to share this story and my intention of sharing what I experienced and witnessed in my six years’ journey in EOS.

Confession: I Believe that the Truth Heals

My name is Hahn Ryu and I founded the NodeONE team in 2018 and worked as a BP for the EOS mainnet until July 2023. I want to share my experience of how despite EOS’ brilliant beginnings it ended up where it is currently, now ranked in the low-60’s on CoinMarketCap.

It is my understanding of how over the past six years the transparency and legitimacy that are the life and essence of a public blockchain were damaged and corrupted through vote trading, vote sales, and behind-the-scenes collusion. To my knowledge this is the first time information of this depth is being shared with the public. I sat in the front row and watched from the genesis block to where EOS is today.

Rather than saying that I watched, it might be more accurate to say that I participated in and contributed to the corruption, to a greater or lesser extent. My engagement is an example of how a blockchain community can gradually die and lose its vitality.

Over the past six years, I have seen my lowest self while traveling around various countries, including China, begging vote brokers and exchanges to sell me votes. Even though I knew that this was against the public interest, I comforted myself by saying, ‘Everyone else is doing it too.’ I also saw myself feeling comfortable and at ease through vote sales regardless of my performance as a BP.

I have to admit that I have felt very hypocritical at times, because I was participating in vote sales myself while at the same time preaching that we needed to end vote sales for years.

Before writing this confession, I had to fight against many conflicts not only within myself, but also the people who have been with me in this process of corruption. They are very ordinary people, people who smile and say hello and build relationships anyway. I was afraid that the truth I would reveal would be viewed by them as an attack. I was afraid that I would end up with blood on my hands.

Above all, since the nature of this article was that of a whistleblower, I was not confident that I could handle the repercussions of exposing the truth about a large exchange or others who wouldn’t like this. More than anything, I was afraid of the criticism and glares that would follow if this became controversial. I feared if I would suffer the same fate as those who ended up suffering after telling the truth.

However, in front of the obvious corruption, I have managed to discern that the public interest is more important than my greed or personal interest of not wanting to get blood on my hands, or maintaining a seemingly peaceful relationship with those who are in the midst of corruption.

I believe that the truth heals, however painful. I know that this information will cause a lot of controversy, but I am writing this any way as if I were taking a bungee jump. With the determination that I have nothing more to lose, I want to let go of everything and reveal everything. What happens next will be decided according to the will of the community. I surrender.

To continue, I’ll briefly overview the history of the deterioration of the integrity of EOS governance, for holders and builders in and out of the EOS community. It will give you a framework for how to see things that I’ll cover in the following stories in the broader context of the chain’s history.

Brief History of the Deterioration of EOS

EOS is a blockchain with a very unique market position with respect to its origin philosophy and a history full of twists and turns. Conceived by Block One (B1) and launched by the community, EOS’s Initial Coin Offering (ICO) was strategically designed to circumvent classification as a security by the SEC, raising a historic $4.1B, the largest in crypto history.

The core vision of EOS was to establish a ‘governed blockchain’, rooted in the principle that ‘the intent of code is law’. This ethos was visually represented by its logo, the chestahedron, symbolizing the human heart.

https://frankchester.com/project/chestahedron/

EOS implemented Delegated Proof of Stake (DPoS) as its consensus algorithm, where token holders elect up to 30 Block Producers, ultimately choosing 21 BPs (1 Token 30 Votes) to notarize public consensus and make pivotal technical, economic, and political decisions as per the collective opinion of the public via referendums. This system was intended to embody the collective will of the EOS community.

Crucially, the original constitution of EOS included a no-vote-buy rule, a clause aimed at ensuring fair and equitable governance by preventing the purchase of votes. This rule was foundational in maintaining the integrity and decentralization of the EOS network.

However, the governance framework of EOS underwent a dramatic shift with the introduction of the EOS User Agreement (EUA) in 2019, led by Kevin Rose of EOS New York and Yves La Rose of the EOS Nation (and also the CEO of the ENF now). The EUA, forcefully ratified by the top 21 Block Producers(BP), effectively nullified the interim constitution, including the no-vote-buy rule.

It centralized decision-making power within the top 21 BPs, eliminating the need for referendums or public votes, effectively turning the chain into a ‘code is law’ chain, rather than ‘the intent of code is law’.

This paradigm shift had far-reaching implications for the EOS community. It dismantled the psychological barrier against vote-buying, leading to a governance landscape where BPs prioritized special relationships with exchanges to purchase votes instead of building products or public goods for the EOS community.

It became common for BPs to allocate 80–120% of their earnings to secure these votes, which were then redistributed as yield back to both on-chain, and exchange-custodied stakers. The entrance of major exchanges like Huobi and ZB, followed by OKex, exacerbated this ‘race to the bottom’.

As a result, the top 21 BPs became largely unknown to actual EOS token holders, despite holding the ultimate keys to all political and economic decision-making power. The chain effectively came under the control of a few brokers and centralized exchanges.

The history of deterioration of EOS governance serves as a critical lesson for the broader crypto community. The shift from the original vision (‘the intent of code ls law’) to the EUA-led governance (‘code is law’) highlights the criticality of stakeholder representation and the dangers of vote-buying practices.

This history serves as a reminder to the broader crypto community that public decision-making power inherent in ‘staking’ should not be neglected. It’s a core ethos of decentralization, vital for any blockchain claiming to uphold these principles.

The EOS story demonstrates the need for vigilance and a commitment to ensuring that consensus is not compromised by financial incentives and truly reflects the sovereign intent of the community.

To gain a more in-depth understanding of the history of EOS from a broader perspective, I strongly recommend you to read my previous article: “It’s time to go back home, EOS.”

Let’s go back home, EOS.

We want EOS to work together with B1 to realize what it was originally trying to achieve with Profi (defi + KYC)…

hahnryu.medium.com

Title of the upcoming piece of the series is “How to form a Cartel on DPoS blockchains”. It will delve deeper into the process the way how cartel, or shadow government of EOS chain, is formed, by exposing on-chain data and my private conversations with vote brokers and centralized exchanges.

Stay tuned.

If you want to discuss about this article and governance in EOS, please join the conversation on the EOSproject Telegram group.