Hey Steemit,
Here is your Black Swan, so
As we stated in our previous article we are drafting the report for EOS in order to provide you with a consistent and comprehensive document to understand this very hyped project. The report will take into account, obviously, the latest “political developments” occurred with respect to the community and the behaviour of block producers, but we would like to focus on a different matter in this article.
Assumption II: The legitimacy of the votes casted by Bitfinex on the first block producers election.
Prior to any further consideration it shall be noted that, as at the voting date (14 June 2018), Bitfinex held 10.67% of the total number of EOS tokens in circulation and asked its EOS customers whether their tokens should have been used by Bitfinex, “on their behalf” (we will talk again of this topic), to cast the so called “EOS Network Activation Vote”. Furthermore Bitfinex was the 8th block producer for number of votes (currently is the 1st), so it had a material interest in procuring that at least 15% of all the EOS tokens holders would have voted in order to start working as a block producer within the EOS network.
The EOS Network Activation Vote worked as follows:
(i) Bitfinex would have used the EOS tokens of its customers to vote for block producers to the extent that at least 15% of the EOS tokens on Bitfinex would have voted yes to the EOS Network Activation Vote proposal;
(ii) in case of the 15% threshold being reached Bitfinex would have used EOS tokens to vote equally for the first 30 most voted block producers (including itself);
(iii) in case of 15% of the EOS tokens on Bitfinex being used to vote no to the EOS Network Activation Vote, Bitfinex would have closed the voting poll and not used the EOS tokens to vote on the EOS mainnet.
It is hard to understand the rationale underlying the voting mechanism chosen by Bitfinex.
In particular it is hard to understand on which basis when 15% of the tokens on Bitfinex expressed their vote to adhere to the EOS Network Activation Vote the remaining 85% of token holders shall be forced by this strange “tyranny of the minority”.
On which legal, economical and/or sociological basis were 85% of the tokens used just because the remaining minority of 15% of the tokens represented they wanted to participate to the EOS Network Activation Vote? Why did the poll not remain open for a given amount of time but instead was programmed to be closed as soon as the threshold would have been reached?
The answer is simple and straightforward: because Bitfinex had a material interest in the launch of EOS mainnet. And this is clearly legitimate. The major problem is that, behaving as a “tyrannical representative” that uses biased voting system it may have increased the turmoil around the launch of the EOS mainnet.
The voting rules followed by Bitfinex were not defined through a solid majority. It also seems that Bitfinex did not respect nor follow any kind of politics/methodology characteristic of real life elections (which, even if flawed, may reach a sort of consensus in their utilization nontheless).
So, as far as our short analysis goes, EOS DPoS consensus is a representative system in which other very prominent representatives (i.e. exchanges) may vote on behalf of token holders without such token holders even knowing it (it is hard to expect all of the voters of Bitfinex to have known that the EOS Network Activation Vote was ongoing and that their tokens would have been used without their consent).
Furthermore such custodians (exchanges) / self declared representatives may chose themselves the rules to be applied between them and their customers, and the votes casting is, per se, centralised and by definition not transparent as almost all exchanges are centralised exchanges.
Only time will let us know if the issues we raised in these two articles are really issues or if we are seeing a new form of representative/semi-decentralised system taking its shape, but one thing is sure: the starting of EOS mainnet has been somewhat dramatic and shady, a very good thriller movie.
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Best,
Black Swan team
