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The Trials And Tribulations Of A $4 Billion Blockchain

Broken

After a year of hard promotion, controversy and criticism, Block.one’s EOSIO platform finally went live on June 10th. Well, kind of. The project’s governance feature first required a vote to ‘elect’ the 21 entities that would be responsible for the blockchain’s operations. And then, when the deal was finally sealed and it’s mainnet launched, the network came to a screeching halt due to a bug in the system.

The freeze sparked a debate on Twitter with naysayers taking the stance of “I told you so,” and supporters scrambling to justify the stumble. But this misstep is only one of many in the EOS saga.

From Block.one’s omnipotent-yet-passive involvement in the fundraising campaign to ex-Mighty Duck Brock Pierce’s abrupt exit from the project, the story has been a page turner from the beginning.

With $4 billion now under its belt, and a real-life product finally available to the public, it’s worth looking back through EOS’ and Block.one’s wild year.  

In June 2017, the initial steps were made by Block.one to begin the process of the EOSIO platform’s initial coin offering. The company, co-founded by Brock Pierce, with the support of Dan Larimer of Steemit and BitShares as CTO and Brendan Blumer as CEO, aimed to create "end-to-end solutions to bring businesses onto the blockchain from strategic planning to product deployment.”

The project was immediately met with both excitement and apprehension, with a war of words between Larimer and Ethereum brainchild Vitalik Buterin erupting as a result of a Reddit post just months after the launch of EOS’ ICO. In this debate, Buterin highlighted a number of issues, from the platform’s lack of transparency to potential vulnerabilities. Buterin also mentioned that, because voters would have such little impact alone, users may be incentivized to pool resources, perhaps even on exchanges which could carry greater weight in the voting process.

Related: Net Neutrality Supporters Face Off Against The FCC

In Larimer’s response, he notes: “Once again critiques of DPOS, EOS, and STEEM are based upon flawed economic assumptions, misinformation, and ignorance/denial of vulnerabilities in their proposed solutions. I fully recognize that voting is not ideal, but it is currently the best approach when factoring in all risks, attack vectors, and recovery options”

In spite of the criticism, as EOS’ bank account grew, as did Block.one’s enthusiasm.

In October, then-advisor and co-founder of the project, Brock Pierce proclaimed that 1000 separate dApps would launch on the platform simultaneously, with Brendan Blumer taking this optimism to the next level, pledging $1 billion to dApp developers building projects on EOSIO.

The team’s enthusiasm was quelled briefly in March, however, when several news pieces targeting Brock Pierce, including a scathing bit from John Oliver, hit the shelves. The stories opened old wounds, ultimately resulting in Pierce’s exit from the project. While Block.one’s announcement highlighted Pierce’s numerous contributions, there was much speculation that the company parted ways with Pierce due to his unsavory past.

In the face of adversity, and without a live product, the EOS token continued its upward momentum, fueled by a few high-profile partnerships and a slew of proposed airdrops. But in late May, just days before EOSIO’s planned launch date, the project was hit with another wave of bad luck.

With anticipation reaching a peak, EOS holders and crypto enthusiasts were hit with a phishing scam resulting in millions of dollars in lost coins. The scam promised free, unsold coins from a URL cleverly designed using Livonian, a dead language once spoken in Latvia, to make the it look like a legitimate email from e?s.com wherein users were asked for their private EOS key.

Adding fuel to the fire, Block.one released a statement announcing that their Zendesk support system had been breached, allowing the malicious actors to lead victims to a separate key-capturing site.

Following the breach, Block.one initiated a bounty program where one white hat hacker netted a reported $120,000 in his quest to uncover bugs within the system. And though it was said that the bugs were resolved, other reports have also been released outlining severe vulnerabilities in the system, with Cornell professor Emin Gün Sirer even suggesting that one vulnerability could even bring down entire exchanges, stating: “I’m calling it: there will be a massive exchange hack within the next year, taking advantage of an EOS vulnerability. That exchange will lose its hot wallet.”

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Despite this, Block.one pushed the network live.  

For the blockchain to actually be considered valid, however, 15 percent of the held tokens would be required to vote for the operators of the chain, or Block Producers. This led to a 5-day delay and a hold on all users’ coins as the blockchain struggled to reach the amount of votes needed to move forward. Then, after a single entity’s vote, the blockchain’s BPs were chosen. And though the project was finally open to the world, the 5 percent jump understandably raised some eyebrows, with Jackson Palmer, creator of Dogecoin, even suggesting that large exchanges voted on behalf of their users, potentially fulfilling Vitalik Buterin’s previously mentioned prediction.

EOS token distribution has long been a point of controversy within the crypto realm as many reports have noted that less than 1000 people control nearly 85 percent of the total tokens on the market, with only 10 wallets controlling nearly 50 percent. And while many have refuted that some of these wallets may be held by exchanges, the centralization risk becomes abundantly clear in this voting scenario.

One Reddit user researched the votes and found that four EOS holders accounted for 50 percent of Bitfinex’s total votes, with one of the whales contributing 27 percent alone. It’s also worth noting that the same whale contributed an equal amount of tokens to a number of other BPs located around the world.

Though users on both Twitter and Reddit have disputed or justified these claims, Bitfinex’s position as a Block Producer represents are clear and present conflict of interest in the quest for true decentralization – an issue that Block.one has gone above and beyond to try and establish was non-existent.

Things become even more murky when Brock Pierce is brought back into the picture. As the creator of Tether, a U.S. dollar tied currency used and (potentially) abused by Bitfinex, and co-founder of EOSIO, the potential for foul play becomes even more great.

Tether has already been a point of scandal in the past, with accusations crypto price manipulation and “printing” coins out of thin air, and with this new connection to the EOS ecosystem, one can’t help but wonder if Pierce ever actually left the project.

Despite the project’s trials and tribulations, however, EOSIO offers an interesting take on a very difficult problem to solve.

By Michael Kern via Crypto Insider

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