Of RAM and Insider Trading: the dramas for EOS continue
EOS has been hit with fresh allegations of possible insider trading by Block Producers concerning the availability and price of Random Access Memory in its network.
Based on current EOS RAM prices of 0.8 EOS/KB; 128 GB on would cost approx. 102 million EOS! (Feel free to work out fiat conversions of that)
Random Access Memory (RAM) is an extremely powerful and critical resource for all blockchains as it determines not only performance but also scalability.
In computing terms, it is the hardware in a computing device where the operating system (OS), application programs and data in use are kept so they can be quickly reached by the device’s processor. RAM is the main memory in a computer.
Hence, the supply, price and availability of RAM will eventually become one the most important and possibly contentious issues for EOS.
Currently, EOS uses a market-based allocation approach for RAM by utilising Bancor’s algorithm.
In doing so, they have essentially created a RAM Marketplace.
By creating this marketplace, in theory, EOS hopes to align RAM, it’s networks rarest asset, in accordance with the forces of supply and demand and thereby offsetting any future predicted shortages.
How this marketplace works is that each time a user buys or sells RAM; a 1% fee is applied (0.5% on the buyer’s side and 0.5% for the seller).
This process aims to create an economic incentive for users to sell their RAM whilst discouraging speculative marketing and inflation as the fees that are collected are immediately burnt.
To further reduce speculation, EOS’s super node centralisation enables Block Producers (BP’s) to determine the amount of RAM in circulation and by extension price.
Sounds simple in theory, doesn’t it?
The main concern with this model is that EOS is placing control of supply squarely at hands of the Block Producers. This model may enable BP’s to engage in pricing manipulation and collusion that could systematically hike the prices of RAM at the expense of genuine network users.
Simply put, BP’s have the ability to convene and add more RAM at any point in time; increasing supply when required sending prices crashing overnight.
More worrying is that there no text in EOS’s lengthy Constitution that deals with the specifics surrounding the creation and supply of RAM.
Present Situation
What we have seen happen of late, is that market forces have now taken hold of this finite yet-to-be required resource with RAM prices surging from $0.14 to $2.44 in little over 8 days.
The chart below shows RAM price progression since June 26, 2018.
This surge in price isn’t from all the distributed apps (DApps) running on the network nor is it the issuance of too many tokens; it is a direct result of investor hoarding.
EOS’s RAM economic model has, in fact, fuelled investor profit speculation and inflated expectation instead of its intended original use case.
To further exacerbate this, the ability to lease or rent RAM from other owners is not possible as it is with other EOS network resources such as CPU and bandwidth.
This situation will bring an immense burden for DApp developers looking to reserve rights for future resources that they may need for their project.
The Takeaway
It’s still early days for EOS and there are several forthright BP’s looking at ways to bring alignment and equilibrium to this issue; such as Evolution and Meet.One.
However, the volatility of the RAM market may mean that creating a dApp or token on EOS may not be as easy or accessible, as promised, but will ultimately be constrained by the complex rules of it’s governance model and economy.
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