EOS.IO is a cryptocurrency token and blockchain that claims to operate as a smart contract platform for the deployment of decentralised applications and a decentralised autonomous corporation.
EOS aims to become a decentralised operating system supporting industrial scale applications, with claims to eliminate transaction fees and also conduct millions of instantaneous transactions per second. Dubbed the Ethereum killer, it’s unclear what the acronym EOS actually stands for, although Reddit users have speculated it may be Ethereum on Steroids, Economy of Space, Endless Online Scaling, or perhaps a tribute to Eos, the greek goddess of dawn.
Although EOS promises to be a revolutionary new technology in the world of crypto, the controversy behind the platform is a result of its unconventional approach towards governance. EOS employs a governing body of 21 block producers who oversee and regulate the network using a constitution which lays out its rules.
There are some questionable issues within the constitution and also on the EOS website which must be brought to light. For example, the constitution states that:
After 3 years of inactivity an account may be put up for auction and the proceeds distributed to all Members by removing EXAMPLE from circulation.
This implies inactive wallets can be frozen and the funds held within them confiscated. This puts into question the whole concept of property rights and the ability for a token holder to truly possess the ownership and title to their tokens.
Furthermore the FAQ page of the EOS website states:
The EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities or features on the EOS Platform.
Perhaps this statement is an admission the EOS token is completely useless and the creators are covering their tracks in the event of future litigation.
The website continues:
Proceeds from the EOS Token distribution will be the revenue of block.one.
Block.one is a private company registered in the Cayman Islands, and is the company responsible for building the EOS software. The company has sole discretion on how to spend the proceeds, and as a private company, it is not subject to any scrutiny on how the money raised will be used.
The launch of EOS was also a questionable event. EOS undertook an unconventional year long ICO process, from which it raised USD4 Billion. After initially launching as an ERC20 token on the Ethereum platform, in June the token launched on the EOS Mainnet. However, the launch was short lived after a major bug within the software code caused EOS transactions to come to a standstill. In order to apply the fix to get rid of the bug, EOS developers had to shut off the EOS Mainnet a mere 48 hours after launching.
Although halting the network may seem like the prudent course of action to take, this event raises some critical questions. If a small handful of developers are able to shut off the network, what’s stopping them from shutting off the network indefinitely and holding the token holders at ransom? Or more likely, what’s to stop the authorities such as the U.S. Securities and Exchange Commission from classifying EOS as an unlicensed, unregistered security and shutting down the network?
In further evidence of complete network centralisation, back in June, seven EOS accounts which were the victims of a phishing attack had their transactions reversed. Then just recently, in a separate incident, 27 accounts were frozen indefinitely by the block producers after they arbitrarily decided that these accounts had deliberately spammed the network.
EOS appears to be an experiment at incorporating the decentralised technologies of cryptocurrency while blatantly existing as a centralised entity. Cryptocurrencies such as Bitcoin were created to resist censorship, to uphold property rights and to store of value with no counter party risk. In its short history, EOS has already censored transactions, stated their intention to confiscate inactive tokens, and presented counter party risk by shutting off the entire network. Perhaps a governing body of 21 producers are able to unanimously keep the network somewhat decentralised while still maintaining the rules of the platform, but the short track record of EOS has shown otherwise.