EOS RATING REPORT 5

Token issuance is fair and reasonable, but there is a high risk in the use of funds

Before the mainnet launch of the project, EOS used ERC20 to issue a total of one billion Tokens for ICO, which starts on 26 July 2017 and ends on 1 July 2018. Of these, 200 million were issued in the first five days and 2 million every 23 hours thereafter. When it is officially released, EOS Token will add no more than 5% a year according to officials, EOS will spend an additional 1% a year on incentives for supernodes, with the remaining 4% temporarily in official custody and voted on how to use them.

Fig. 4 Changes in Market and ICO Prices for EOS

Source:Icocha

The ICO price for EOS is currently around $8, close to its market price, compared with an initial price of around $1. The Block.one team kept 100 million of the EOS Token. Although the tokens could not be traded or transferred before the project was officially released, it is still a risk for investors to consider as the startup team did not account for future usage plans.

Fig. 5 Distribution of EOS Token Holders’ Addresses

Source:Etherscan

In the token distribution sight, the sum of tokens held in the top 100 addresses accounted for 70% of the total of 1 billion, including the ICO address of the EOS (the first address in the right half of the figure above) and the 10% address reserved by the team (the second address in the right half of the figure above). Most of the top 3–10 addresses are those of digital currency exchanges, with the top 11–20 addresses holding tokens at less than 1.5% and other addresses holding less than 1%.

Fig. 6 Record of Token Withdrawals from EOS ICO Accounts

Source: Icocha

From the end of March to mid-April, ETH withdrawals from ICO addresses for EOS projects totaled 1.5 million, some of which went to the Bitfinex exchange, leaving the rest unaccounted for. While ICO for EOS projects met ERC-20 standards and relevant trading information for their addresses was publicly available, the specific purpose of the project funds was not visible.

It should be noted that Block.one, the company responsible for the EOS project, is registered in the Cayman Islands (companies registered there have no obligation to disclose financial information) and has so far not released details of the use of the funds, which further amplifies the risk of the use of funds for the EOS project.

The team is experienced in technology and operations, but the core member contains risk

EOS.IO was developed under the leadership of Block.one, whose CEO is Brendan Blumer, a co-founder of Okay.com, the Accounts Network, Gamecliff and the CEO and co-founder of ii5. The company’s CTO is Dan Larimer: a serial entrepreneur since 2014, a former CEO of Cryptonomex and Invictus Innovations, an engineer at Pheonix Integration, founder of BitShares, and co-founder and CTO of Steamit. On the resume, the core members of the EOS team are experienced in technology and operations.

EOS does not directly disclose information about investors and investment institutions, but based on information provided by third parties we can confirm that Li Xiaolai is an EOS investor holding about 5% of the EOS. On September 5, 2017, the EOS team posted on the official website distancing itself from Li, but the official term was “Mr. Li Xiaolai is not a co-founder, director, officer, fiduciary, employee, agent or team member of Block.one” and did not deny Li’s status as an investor.

In his previous project, Bitshares, Dan Larimer was forced to leave the founding team after he temporarily adjusted the issuance cap and changed transaction costs because of development funding problems. And now as the CTO of EOS, the uncertainties in his behavior will also pose a potential risk to the project.

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