EOS Community Is Challenged After Node Announces Financial Rewards for Votes

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This week, the EOS blockchain protocol angered decentralization
proponents yet another time. Specifically, Starteos, one of EOS’
officially sanctioned Block Producers (BPs), appeared to publically
offer its token holders financial rewards in return for their votes.
Starteos’ vote-buying tendencies seem to fall in line with previous
scandals centring around EOS: This year, the blockchain protocol
reversed previously confirmed transactions and started an internal
investigation after Huobi, its other BP, was accused of running a
corruption scheme , among other things.

Brief introduction to EOS and its key features
EOS.io is a blockchain-powered smart contracts protocol for the
development, hosting and execution of decentralized applications
(DApps ). It was launched in June 2018 as open-source software,
while the first testnets and the original white paper emerged earlier
in 2017. The platform was developed by block.one, a startup
registered in the Cayman Islands and lead by Daniel Larimer and
Brendan Blumer.

EOS has raised the most funds during its Initial Coin Offering
(ICO ): The startup managed to gather around $4.1 billion worth of
investments , after fundraising for nearly a year. That number
remains unmatched to date.

The protocol is supported by the native cryptocurrency, EOS —
currently the sixth largest crypto by total market cap. Those
tokens can be staked for using network resources either for
personal use or leased out for developer-use — basically, EOS.io
attempts to represent a decentralized alternative to cloud hosting
services.

EOS employs a consensus model called delegated proof-of-stake
(DPoS). Essentially, that means that its investors are rewarded
with voting power and decide who gets to mine the EOS
blockchain.

Hence, the EOS ecosystem rests upon at least two major entities:
the EOS Core Arbitration Forum (ECAF) — effectively its ‘judicial
branch’ — and BPs, who produce blocks on the EOS blockchain —
just like miners do within the Bitcoin (BTC) blockchain.
BPs earn EOS tokens produced by inflation — according to some
estimations, top EOS BPs obtain around 1,000 tokens per day.
They are elected through the constant voting process, and their
number is capped at 21 — consequently, the top is fluid by design,
and BP candidates who earn enough votes can replace the BPs in
power at any minute.

Starteos: Major BP’s explicit vote buying
Starteos is a startup based in Chengdu, China. According to its
website , the company “entered blockchain industry [sic]” in 2013.
This year, Starteos has reportedly issued at least two products:
the self-titled digital wallet and ‘Memory Box,’ a “one-tap access”
cold-storage wallet. Currently, Starteos is the fourth-largest BP,
as per eosnetworkmonitor data, meaning that it gets a large
portion of the BP revenue.

On Nov. 27, Starteos published a Medium post titled “We Gonna
Share BP Proceeds With You — This Is the Way We Warm You Up
in This ‘Winter’!” In it, the startup team claimed that “after
delegating Starteos.io as proxy, you could get continuous and
stable EOS revenue.”

“The ‘winter’ of cryptocurrencies has come. How much faith do
you left to have [sic]?” the post reads, continuing:
“Now, Starteos is still gonna stay with YOU, our most important
and best friends! And we [are] gonna share the proceeds with you
and make [it] through the difficulties together.”
Further, the Chinese startup outlines an instruction on how to
claim the benefits: After selecting Starteos as a proxy, users can
pick “stable income,” “mining” revenue mode or the “random
revenue” mode, where they play “Lucky Fruit Slots Machine” with
game tokens to get “EOS revenue.”

Explicit vote buying seems to contradict decentralized and
democratic blockchain policies advocated by the EOS
administration and the project’s original white paper . Its co-
founder and  chief technology officer, Daniel Larimer, wrote soon
after EOS mainnet went live:

“EOS is fundamentally different from other governments
and blockchain communities in that its community wishes
to operate at the highest possible ethical standard of
voluntary consent and non-violence.”

More specifically, Starteos’ winter promotional campaign seems to
violate Article IV of the current EOS constitution titled “No Vote
Buying,” which states the following:

“No Member shall offer nor accept anything of value in
exchange for a vote of any type, nor shall any Member
unduly influence the vote of another.”

Community reaction: Calls for unvoting, constitutional reform

Expectedly, the crypto community, which traditionally values
decentralization, was not happy about an EOS BP openly buying
votes.

On Nov. 8, weeks before Starteos published a Medium post
explicitly describing how users can claim some of the revenue,
EOS investor Maple Leaf Capital pointed out that Starteos was
launching a slot machine DApp, where users allegedly could set
Starteos as a voting proxy to obtain in-game tokens. According to
the original article describing the DApp, the rewards to the gamers
would come directly from games.eos’s BP reward, which, in turn,
is owned by Starteos .

“It may not be bad-intentioned, but it looks awfully close to
transferring block-producing reward value to its voters,
with a thin veil of gamification & probability attached to it.
This could set a bad precedence and deserves some
debate.”

Later, on Nov. 29, the investor announced it would discontinue
voting for Starteos, arguing that “swapping block reward for votes
in gaming form is detrimental to the long-term economic value for
the EOS.”

Steemit user the awakenment stresses that games.eos is holding a
paid position, being ranked at the 66th position (game.eos has
since moved up to the 50th place). He wrote an open letter after
failing to receive a response from the Starteos administration:
“If other BPs copy what Starteos is doing and launch a
second or third BP themselves, we will soon end up with
the large BPs being owned and run by the same handful of
owners.”

After the letter was published, a Starteos representative reportedly
did message him:

“[They] admitted to creating the games.eos account and admitted
to ‘collaborating’ with games.eos, but they told me they had
different owners, which does not match up with what they have
stated on their website.”

Australia-based crypto persona Crypto Tim, who covers mostly
EOS-related news, published a video titled “EOS BP Starteos Are
Vote Buying,” which gathered some commentary from the
community on Reddit and YouTube. On Twitter, he called for
Starteos “to be removed as a Block Producer.”

Some of the BPs have expressed their views on vote buying as
well, albeit without directly mentioning Starteos. On Nov. 27, EOS
New York, which is currently the eighth largest BP, wrote that “the
EOS constitution is simply not good enough and we deserve a
clear document that outlines our basic system of governance,” and
then shared their proposal . After being asked in the comment
section whether the document features any restrictions on vote
buying, EOS New York stated , “There are not. We have it now and
we have BPs violating it. No point.”

Moreover, Starteos has reportedly been unvoted by at least one
BP, Bulgaria-based EOS Titan. Nevertheless, Starteos continues to
hold the third/fourth positions in the BP ranking, which suggests
that it is still largely supported by other BPs. The list of Starteos
supporters can be monitored via a resource powered by EOS Titan
— according to their data, Starteos’ largest ally is Huobi, which
has been previously accused of running a mutual voting rig.

Source : https://cointelegraph.com/news