New research has shed more light on the crypto industry’s largest-ever token sale, alleging that foul play may have been afoot during EOS’s initial coin offering (ICO) four years ago.
Researchers from the University of Texas have raised fresh concerns regarding Block.one’s record $4.362 billion ICO for the EOS blockchain in 2017 and 2018. The highly-anticipated project was backed by industry heavyweights including PayPal co-founder Peter Thiel alongside billionaire hedge fund managers Alan Howard and Louis Bacon. The research does not accuse Block.one itself of any wrongdoing and the company has cited a report stating there was no evidence it was involved.
On Aug. 31, Professor John Griffin of the Austin McCombs School of Business and financial analysis firm Integra FEC published their findings in a paper titled “Were ETH and EOS Repeatedly Recycled during the EOS Initial Coin Offering?” — alleging that wash-trading played a key role in EOS’s price discovery. Bloomerbe
According to the paper and outlined in an investigation by Bloomberg, EOS was allegedly wash-traded on the Binance and Bitfinex cryptocurrency exchanges in an effort to artificially inflate the prices. Wash-trading describes the process where an entity simultaneously acts as the buyer and seller at the same asset to artificially bolster volume or manipulate prices.
Griffin wrote that artificial demand from suspect accounts created the illusion of demand for the token and pushed prices up:
“First, it directly manipulated EOS’s offering price upward through the extra buying and inflated the market value of the token. Second, it created the false impression of value of the token which enticed others to want to purchase the ICO token.”
The research allegedly identified 21 accounts that recycled EOS tokens during the ICO. Funds identified as suspect amounted to 1.2 million ETH worth around $815 million at the time. Ether was the sole cryptocurrency used to buy EOS during the year-long ICO.
The analysis claims that Ethereum accounts were created in order to repeatedly purchase EOS over time. It claims that a “significant portion” of the Ether raised during the token sale appears to have been “recycled by transferring the ICO contributions through a series of obfuscating intermediary accounts and finally arriving at Bitfinex.”
“2.895 million Ether ($1.721 billion USD), or 39% of the Ether raised in the crowdsale, are also traced from the ICO crowdsale wallet back to Bitfinex.”
Griffin did not identify the owners of the accounts or point the finger toward Block.one regarding the alleged wash-trading, but noted: “These suspicious accounts accounted for almost a quarter of EOS purchases by the end of the crowdsale.”
Professor of law at Cornell Law School, Robert C. Hockett, said that he worked for more than one month on the story alongside media outlet Bloomberg — which published its findings on Sept. 2.
Worked with the Bloomberg buddies for a month on this one. Rather remarkable story. Vulgar pre-’33 securities scandals are apparently being crudely recapitulated across the crypto space now. https://t.co/Ogu5nSf6oF
— Robert Hockett (@rch371) September 2, 2021
According to Bloomberg, Block.one responded to the paper by referencing a July document authored by law firm Clifford Chance LLP that asserted there was “no evidence that Block.one purchased tokens on the primary market.”
Related:Startup Darling EOS Cashes In Millions Of ETH As ICO Scorn Continues
The same John Griffin published a paper in October 2019 titled “Is Bitcoin Really Un-Tethered?” that claimed the leading stablecoin Tether (USDT) was wash traded to influence Bitcoin prices during the 2017 bull market. Speaking to Cointelegraph in Feb. 2020, the firm behind Tether, iFinex, labeled the claims “reckless and false.”
Manipulation or otherwise, EOS has largely fallen out of favor with crypto traders and investors. Since ranking among the top five crypto assets by market cap in mid-2018, EOS has since tumbled to rank 35th by capitalization.
The token currently trades for $5, down 77% from its April 2018 all-time high of $22.70.
EOS rallied in May after Block.one, a blockchain software firm, announced a $10 billion funding round to build an EOS-based crypto exchange platform called Bullish. The EOSIO development company revealed that it had raised capital from Peter Thiel and Mike Novogratz, as well as hedge fund managers Alan Howard and Louis Bacon.
In light of the ‘bullish’ news, the recent $6 local top stands 60% below the $15 high reached on May 12, and this leaves investors with little reason to celebrate. At the moment, retail traders are not comfortable using leverage for bullish positions and professional traders have been neutral-to-optimistic since mid-July.
EOS price in USD at Kraken. Source:TradingView
Analysts also pointed to a May 2 report commissioned by Block.one that suggested an increase in the inflation rate from 1% to somewhere between 1.2% and 3.8%. The new issuance rate would be necessary to increase financial incentives for voters and block producers.
However, the lack of deliveries and partnerships caused EOS to quickly lose steam, and the price fell to a low at $3.04 on June 22. The bearish trend ended on June 23, as the little-known ‘Bullish’ exchange said it would be going public on the New York Stock Exchange via a special-purpose acquisition company, or SPAC.
A positive and lasting trend initiated as the ‘Bullish’ exchange released its private alpha version on July 27 and promised a full launch later in 2021. The project also mentioned that it would have spot trading, margin trading, and liquidity pools.
Finally, on Aug. 19, EOS announced free access to live pricing data using real-time market information provided by AlgoTrader. The Swiss-based startup oracle includes multiple assets from various exchanges and can create synthetic instruments, derivatives, and stablecoins.
Retail traders were momentarily bullish
To understand whether traders are leaning bullish as EOS price holds the $5 support, one should analyze the perpetual contracts futures data. This is the retail traders’ preferred leverage instrument because its price usually perfectly tracks the regular spot markets. There is also no need to manually roll over contracts nearing expiry, as required on quarterly futures.
In any futures contract, trade longs (buyers) and shorts (sellers) are matched at all times, but their leverage varies. Consequently, exchanges will charge whichever side is using more leverage at a funding rate to balance their risk, and this fee is paid to the opposing side.
Neutral markets tend to display a 0% to 0.03% positive funding rate, equivalent to 0.6% per week, indicating that longs are the ones paying it.
EOS perpetual futures 8-hour funding rate. Source: Bybt.com
Data reveals a modest excitement building up from Aug. 8, which lasted less than 10 days. The positive funding rate shows that longs (buyers) were the ones paying the fees, but the movement seems reactive to the price increase and faded as EOS failed to breach the $6 resistance.
Data shows pro traders have a bullish bias
It is also useful to analyze the premium quarterly futures contracts, as whales and arbitrage desks trade such instruments more frequently. In the fixed-month contracts, eventual demand imbalances are reflected by a price difference versus regular spot markets.
Healthy markets should display a 0.5% to 1% premium, which is equivalent to 3% to 6% annualized. If the futures contract’s premium is nonexistent, it is a bearish indicator because investors are not comfortable creating long positions using leverage.
Related:Bitcoin’s race to $50K heats up as solid institutional backing continues
EOS Sept. futures contracts premium at FTX. Source:TradingView
There has been no change in the 6% annualized premium this time despite EOS’s price movement. However, data shows that professional traders have been slightly bullish since mid-July, while retail traders were primarily flat apart from a brief 10-day period.
Although it remains unclear how the ‘Bullish’ exchange launch might impact the price of EOS, derivatives indicate that whales and arbitrage desks positively reacted to the news and have kept the bullish stance ever since.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
One might assume that a firm with a name like “Bullish” would garner a lot of attention in announcing its intention to go public, especially given that the exchange is backed by blockchain software company Block.one. Until today however, it seems to have gone mostly unnoticed by participants in the crypto space.
In a Friday announcement, Bullish said it would be going public on the New York Stock Exchange via a special-purpose acquisition company, or SPAC. The tech firm, which described itself as “focused on developing financial services for the digital assets sector,” will merge with Far Peak Acquisition, whose CEO is Tom Farley, former president of the New York Stock Exchange. Farley will become the new Bullish CEO and Block.one CEO Brendan Blumer will be chairman of the crypto exchange. The deal isexpected to close sometime this year.
The announced SPAC plans come less than two months after the launch of Bullish capitalizing with roughly $10 billion. Block.one provided 164,000 Bitcoin (BTC) — roughly $9.7 billion at the time — $100 million in cash, and 20 million EOS tokens, while an additional funding round raised $300 million.
However, it is unclear what exactly Bullish is offering in terms of products or services prior to going public, other than seemingly having billions of dollars to move around. The firm’s investor website includes a 19-minute video along with two notices of the initial capitalization and public offering, while the main website offers no information other than “go boldly, go Bullish.” The video includes Bullish claiming that it controls a “hybrid style order book” that combines liquidity pool capability from the DeFi space with a central limit order book.
Some crypto holders responded to the public offering on social media, with user Crypto Krillin likening the SPAC announcement to a “news scam pump.” Others have similarly accused Block.One of doing a cash grab.
This is the most absurd crypto arc rn.
“Bullish Global” going public at a $9b valuation.
Blockone injecting their 164k BTC holdings.
Ex NYSE president will be CEO.$EOShttps://t.co/qx5v93J0pD pic.twitter.com/YqRhnJWSHf
— Hsaka (@HsakaTrades) July 9, 2021
Bullish’s $9 billion valuation is around one quarter of crypto exchange Coinbase’s $45 billion valuation since its April public offering. The proceeds will reportedly include $300 million of committed private investment in public equity from EFM Asset Management, BlackRock, Cryptology Asset Group and Galaxy Digital, with $600 million net cash in trust.
Related:Crypto exchange Kraken says it is ‘too big’ to go public through a SPAC
U.S.-based exchange Kraken has also hinted at going public soon, but has made no firm announcement at time of publication. However, stablecoin-focused crypto company Circle said yesterday that it plans to go public in a $4.5 billion deal.
Bullish Global, the cryptocurrency company operating under the hat of the blockchain software firm Block.one, has revealed plans to go public on the New York Stock Exchange (NYSE).
Bullish made the announcement via a press release on Friday (July 9th, 2021). According to the publication, the firm plans to go public via a merger with a special purpose acquisition company (SPAC) called Far Peak Acquisition Corporation.
The alliance between Bullish and Far Peak indicates a pro forma equity value of about $9 billion, subject to adjustment based on the value of crypto assets at the close of the transaction.
There were discussions about a SPAC merger back in June, with speculations that the alliance could see Bullish valued at $12 billion.
While the Boards of Directors of Bullish and Far Peak unanimously agreed to the deal, the transaction which is expected to be completed before the end of 2021 would need approval from the latter’s stakeholders.
Far Peak is led by Thomas Farley, who previously served as the President of the NYSE between 2014 and 2018. Following the closure of the deal, Farley would serve as the CEO of Bullish, while Brendan Blumer, the CEO Block.one, would become the Chairman.
In addition to going public, Bullish is planning to release a cryptocurrency exchange. Meanwhile, it will conduct a private pilot program before the planned public launch.
“We are excited to be partnering with Far Peak to bring Bullish into the public markets to offer our customers the opportunity to own a part of our business.” – commented Blumer.
Meanwhile, EOS responded positively to the news, with the token’s price gaining 10%.
The Bullish news comes shortly after fintech firm Circle, announced plans to go public on the NYSE through a merger with SPAC Concord Acquisition. Coinbase became the first U.S. cryptocurrency exchange to go public through a direct listing on Nasdaq.
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EOSIO developer Block.one says it is focusing on its crypto business mandate after recently settling a class action lawsuit.
In a blog post published on Friday, the blockchain software firm announced a settlement agreement with a group of investors led by the Crypto Assets Opportunity Fund related to the 2018 EOS initial coin offering.
If approved by the court, Block.one will settle for $27.5 million, a figure similar to the fine remitted by the company to the United States Securities and Exchange Commission back in October 2019.
The EOS ICO that raked in over $4 billion has been the subject of some controversy with allegations that tokens were sold to U.S. investors. Some participants have also alleged that Block.one deceived investors with false and misleading statements.
Commenting on the settlement, Block.one stated:
“Block.one believes this lawsuit was without merit and filled with numerous inaccuracies. However, accepting this settlement allows us to focus more time and energy on running our business and delivering new products.”
Indeed, the company recently announced plans to launch Bullish Global — a tech subsidiary that aims to bridge the traditional and digital asset spaces. As previously reported by Cointelegraph, Block.one has raised $10 billion to establish the tech subsidiary with plans to launch a hybrid cryptocurrency exchange platform.
Related: Block.one secures funding for $10B EOS-based crypto exchange platform
Block.one’s latest venture has attracted support from major players like Galaxy Digital’s Mike Novogratz and serial investor Peter Thiel. Hedge fund managers like Louis Bacon and Alan Howard also participated in raising $300 million for Bullish Global.
Such is the extent of Block.one’s pivot to this new venture that the company reportedly sunk its Bitcoin (BTC) holdings — about 164,000 BTC valued at $9 billion at the time — into the new company. The EOSIO developer also coughed up another $100 million cash injection as well as 20 million EOS tokens.
Block.one, EOSIO’s open-source parent company, announced the establishment of a new subsidiary, Bullish Global.
The company launched Bullish, a cryptocurrency trading platform based on the EOS blockchain.
The platform will combine centralized and decentralized crypto exchange infrastructure to provide traders with lending, and portfolio management tools to promote deeper digital asset liquidity through a new Automated Market-Making (AMM) mechanism.
The CEO of Block.one Brendan Blumer commented on cryptocurrency exchanges that will be available to the masses later this year. He said:
“The Bullish exchange will leverage blockchain technology and a new market architecture to revolutionize the high-performance trading landscape by transparently automating expensive third-party functions and turning them into yield-generating portfolio management tools to offer institutions and individuals better and safer access to the latest cryptocurrency investment strategies.”
According to the official announcement, EOSIO developers revealed that Bullish Global has raised more than $10 billion in funds, including Block.one’s initial investment funds of $100 million, 164,000 BTC, and 20 million EOS and a total value worth 300 million strategic investment led by the co-founder of Palantir Peter Thiel,the co-founder of Brevan Howard Asset-Alan Howard, and other celebrities.
Stimulated by the good news, EOS rose by 55.50% in 24 hours. In the past 7 days, it has recorded a total increase of 93.48%.
At the time of writing, EOS is trading at $13.95.The current price of EOS is still a long way from its all-time high of $23.08, which was set in 2018 on Huobi global exchange.
There has been some selling pressure encountered by the token in mid-to-late January and early June 2018, near the $14 to $15.50 level. However, based on the trading volume, the previous volume is relatively small. Although EOS may experience some selling pressure ahead, both the upward sloping moving average and the MACD index indicate that the bulls are currently dominating the market.
Stochastic RSI is reaching the overbought zone, accompanied by a bullish crossover over the 80 mark. This suggests that the RSI may continue to reach extreme highs and this could be a bullish signal for the EOS altcoin.
If the bulls can push the decisive closing price above $15.50, then the bullish momentum may prompt EOS to retest its all-time high of $23.08.
Blockchain software firm Block.one has announced plans to launch a cryptocurrency exchange subsidiary.
According to a release published on Tuesday, the platform dubbed “Bullish Global” will run on the EOS blockchain.
As part of the announcement, the EOSIO developer revealed that it had raised capital to the tune of $10 billion for the crypto exchange. This sum includes $300 million in investor funding from the likes of Peter Thiel and Mike Novogratz, as well as hedge fund managers Alan Howard and Louis Bacon.
The remaining capital sum reportedly came from Block.one’s crypto holdings including 164,000 Bitcoin (BTC) — worth about $9 billion at the current market value — and 20 million EOS. The EOSIO developer also reportedly came up with another $100 million cash injection for Bullish Global.
Back in January, Cointelegraph reported that Block.one’s Bitcoin holdings stood at about 140,000 BTC. Commenting on the planned crypto exchange, Block.one CEO Brendan Blumer said:
“The Bullish exchange will leverage blockchain technology and a new market architecture to revolutionize the high-performance trading landscape by transparently automating expensive third-party functions and turning them into yield-generating portfolio management tools to offer institutions and individuals better and safer access to the latest cryptocurrency investment strategies.”
The company revealed that Bullish Global will combine features of centralized and decentralized crypto exchange architecture and operations. Block.one also stated that the planned exchange will function as an independent entity.
Apart from offering automated market-making services, the Bullish exchange will also provide lending markets as well as portfolio management tools for users.
Also commenting on the announcement, Galaxy Digital’s Mike Novogratz predicted that Bullish Capital will hit the ground running based on its sheer size and scale.
EOS, a platform that is designed to allow developers to build decentralized apps with its native token “EOS”, has seen its token rise for three consecutive days by 110%. Yesterday, EOS broke the psychological barrier of $10 yesterday.
This rise may be related to the new project EOS’ parent company Block.one is currently exploring. According to sources familiar with the talks, Block.one may have purchased the domain name Bullish.com for $1.08 million.
According to previous media reports, Bullish is expected to conduct an initial public offering (IPO) through a special-purpose acquisition company (SPAC) in the middle of 2021.
At the same time, the power-up model of EOS also provides a more favourable way for EOS holders to make money.
This protocol allows traders to pay a fee to power up their account for 24 hours in order to conduct transactions on the network without having to pay transaction fees for each transaction.
According to Coinmarketcap, EOS, the nineteenth-largest cryptocurrency with a market cap of $ $20,285,290,163 has risen by 92.56%% in the past 7 days.
Judging from the daily candlestick chart, in tandem with EOS’ explosive growth, its transaction volume has also been surging. The daily trading volume for EOS on the Binance crypto exchange is as high as $244.233 million, which is the highest EOS trades has climbed since the token’s listing on Binance. This also means that the bulls are buying in bulk.
But today, the enthusiasm of the bulls seems to have weakened. Although EOS touched $13.25, it has still yet to retest its all-time high of $15.68, which was attained on June 2, 2018. Today’s long upper shadow line of the candlestick indicates that the bears are triggering a number of sales.
Due to the declining linkage of the mainstream cryptocurrency Bitcoin, EOS bulls seem to be hesitant to enter at such a high price.
Bitcoin bulls are actively defending the $56,000 support position.
The transaction price of EOS/USDT is much higher than the Exponential Moving Average ribbon. Both the upward sloping moving average and the bullish MACD index indicate that the bulls are currently dominating the market.
Stochastic RSI is reaching the overbought zone, exceeding the 80 mark. A reading above 80 suggests that the RSI may be reaching extreme highs and this could signal a pullback from EOS altcoin.
In the short term, EOS/USDT is likely to experience a horizontal movement around $11.00 before it tests its record-high of $15.68.
Daniel Larimer, former chief technology officer of Block.one and a co-founder of Block.one and Steemit, has revealed his next project, called Clarion.
The project is meant to become a mobile-first decentralized social media platform, supporting all types of social features like personal messaging via text and video, publishing content to followers or having Discord-like voice chat rooms.
According to Larimer, Clarion “learns lessons from other projects,” including the initial idea for Steemit and Voice, two social media projects he launched or backed.
According to him, the two previous attempts at decentralized social media were “logically centralized” and required “all full nodes to process all transactions.”
Larimer’s idea of a better network draws more from RetroShare and Zeronet, two platforms based on peer-to-peer messaging, with the latter based on BitTorrent. He also cited file sharing protocols like IPFS as good examples of decentralized networks. These present usability challenges though, especially on mobile devices.
Clarion would be developed as a “progressive web application” based on WebAssembly, a framework that allows building high-performance apps on the web programmed languages like C++ and Rust. This is mostly necessary to avoid the reliance on native applications distributed through app stores, with Larimer noting that “recent actions by Google, Amazon, and Apple have demonstrated that we cannot rely on app stores and hosting providers to distribute our applications and content.” The WebAssembly architecture also helps when designing desktop full nodes, as it requires minimal changes to the code.
Clarion’s blockchain-related aspects are somewhat less clear, as Larimer described it as not needing to reach consensus on the order of user actions, thus making it a “layer 0” platform. WebAssembly plugins will still allow building applications on top of the “Clarion OS.” Larimer clarified that there will be no tokens associated with the project’s base functionality.
The announcement was met with some skepticism in the community due to Larimer’s perceived history of abandoning projects. Larimer was the co-founder of Steemit, a blockchain-based social media platform popular during 2017, which he left in favor of Block.one, the company behind EOSIO, a blockchain framework underpinning both EOS and Voice, another social media platform.
After Larimer left his post at Block.one in January, many interpreted it as a sign that he was going to build something else, which appears to have been the correct intuition. It is interesting to note that the projects Larimer left did not fare too well afterwards, with Steemit being acquired by Tron in a rocky and controversial deal, while EOS is currently struggling against its newer competitors in terms of adoption.
Larimer still seems to be particularly interested in decentralized social media, a space that is also seeing a growing list of competitors. While his past experience would make Larimer an excellent candidate for building a viable “Big Tech killer,” it also raises the question of why Clarion’s basic ideas could not be implemented earlier, while he was still heading those projects.
On Jan. 10, leading pro-EOS YouTuber Colin Talks Crypto announced he had sold all his holdings following the revelation earlier that day that Dan Larimer had resigned his position as CTO of Block.one, the company that made the software powering the EOS blockchain.
In fact, Larimer has been gone since the end of the year.
EOS, as of this writing, is the 16th-largest blockchain by market capitalization, according to CoinGecko, right after the privacy coin Monero and right above decentralized finance (DeFi) protocol Aave. Its market capitalization took a major hit following the Larimer news, losing about a billion dollars in a day.
Hopes for EOS have in many ways hinged on the actions of Block.one, the company that successfully completed a yearlong initial coin offering (ICO) that raised a record-setting $4 billion. These days, however, Block.one is more explicitly about driving value to its stash of 140,000 BTC (and counting) than its considerable EOS position.
To be fair, Block.one never really promised to do more than provide the underlying software for EOS, and it has continued to do so.
In fact, as EOS has become clogged in recent years, Block.one has released a new way for users to pay for transactions as they go (rather than the original approach of staking EOS for a percentage of network resources), which sounds a lot like Ethereum’s approach with gas.
Winding back the clock, Block.one launched EOS in a unique way, probably the most hands-off approach of any significant blockchain since Bitcoin. It wrote the code for the software that runs EOS and then it just published it, so that anyone who wanted to kick it off could do so.
As it had given supporters considerable warning around doing this, though, by the time the code was released there was already a global coalition in place running hours-long calls over Google Hangouts to plot the launch of the chain so that one and only one would be viewed as the EOS blockchain.
After fits and starts, the global launch committee finally got the chain running in neutral and then, after another delay, a sufficient number of EOS bagholders cast on-chain votes so that EOS actually started producing blocks on June 14, 2018.
All of this happened at arm’s length from Block.one itself. In fact, Block.one did not start participating in EOS governance until last year, despite being the largest single holder of EOS tokens.
This separation between the software’s originator and its administration may help explain why Block.one got off with a light settlement from the U.S. Securities and Exchange Commission. Once through that regulatory gauntlet, Block.one has been free to pursue its own ideas about the best use of its considerable capital.
Early EOS backers have always believed that ICO funds entrusted to Block.one would be used to drive value back to the blockchain in order to make EOS tokens more valuable. That has never really happened, however, which has driven frustration by longtime EOS backers.
Many, like Colin Talks Crypto, have moved on.
“I just sold 100% of my EOS tokens as a result of this news. For me it was the last straw,” Colin Talks Crypto said in the Jan. 10 video.
The YouTuber is one of the better-known EOS proponents on social media. Besides running multiple social media channels where he discussed cryptocurrency, he also ran an EOS proxy where holders could back his picks for the best block producers (more on these below). Colin Talks Crypto also shut down his proxy following Larimer’s departure.
Many stakeholders
Before we go any further, here are a few points of context, because the EOS ecosystem can get confusing.
Block.one is the company that ran the ICO that led to the launch of EOS. The ICO ran on Ethereum and then all of the tokens on Ethereum were ported over to EOS. In mid-2019, Bloomberg reported the company had more than $2 billion in cash and 140,000 BTC. Its backers include early Facebook investor and PayPal co-founder Peter Thiel.
Block.one uses its ICO funds by making investments directly and also indirectly, through other funds it has invested in, including Mike Novogratz’s Galaxy Digital. Novogratz sold off shares that Galaxy held in Block.one in 2019.
The most confusing point is probably this one: Block.one built EOSIO, the software that runs EOS. EOSIO is not EOS, and other public blockchains also run on EOSIO, such as Telos, Woldwide Asset Exchange (WAX) and others.
Telos was launched as one of the earliest forks of EOS, and Suvi Rinkinen, CEO of the Telos Foundation, confirmed to CoinDesk that Block.one has never invested in her organization.
“Telos is standing strong, no matter what happens at Block.one. Although we are grateful for the EOSIO codebase, it is the community that makes or breaks public blockchains,” she wrote over Telegram.
EOS was the first and best-known public blockchain launched using EOSIO software and the one that has by far the largest market capitalization. Block.one often speaks of advancing EOSIO but seldom of EOS. This distinction is not lost on EOS holders but it likely is lost on casual observers.
EOS is run using the delegated proof-of-stake consensus mechanism devised by Larimer and first used on STEEM, such that EOS token holders continuously participate in an election of the 21 entities that lead the chain – the parties that can resolve disputes, verify transactions and make upgrades to the network.
Those 21 entities are called “block producers,” and they earn new EOS as it is minted with each block for verifying transactions. They serve basically the same role as miners on the proof-of-work Bitcoin and Ethereum networks.
EOS holders often contend that theirs is the most active blockchain, but subsequent research has cast significant doubt on such claims.
BTC pivot
While Larimer has been plotting his move away from Block.one, its CEO, Brendan Blumer, has been talking more and more about bitcoin alongside a pro-regulatory vision for blockchain technology.
In October, Blumer gave an interview to a Forbes contributor, in which he said, “Block.one is a holding company, and see different business emerging but technology projects take a long time.”
In that interview, he said Block.one has three components: building out EOSIO as something that can be used by businesses, investing in other companies and building its own businesses (giving the social network Voice.com as his example).
What he didn’t include seems more salient to EOS token holders: making investments that will drive value to EOS in particular, rather than EOSIO.
In October, at the end of the boom on Ethereum that came to be known as DeFi Summer, EOS holders questioned Blumer on Twitter about why the DeFi boom hadn’t reached EOS.
Block.one, some felt, could have funded versions of Ethereum’s successful use cases on EOS, where presumably they could run with lower transaction fees.
In his response, Blumer wrote, “We are very interested in investing in #EOS DeFi that can meet the compliance requirements of B1, and are actively on the lookout.”
The same complaint resurfaced again in January.
In November, Blumer would use the #ProFi hashtag in another tweet about the inaccessibility of DeFi for institutional investors.
“The innovation in the #DeFi space is revolutionary, but the recent guidance of global regulators regarding its lack of compliance controls makes it difficult for mainstream capital to access the opportunity,” he wrote.
The same day he posted about how regulators are starting to see advantages in BTC, as a form of money that’s easy to supervise, seemingly echoing a point made by former U.S. Treasury Secretary Larry Summers in 2020, that money as we know it has “too much privacy.”
The next day Blumer would take this further, with a Twitter thread in which he describes a compliance-first approach as playing the long game.
He wrote, “At B1, we’re firm believers that the regulatory maturity of the ecosystem is advancing at an exponential rate, and the harmonious integration of both traditional and crypto ecosystems that is facilitated by compliance will continue to pave the path of mainstream adoption.”
In late November and December, his attention on Twitter would turn more and more to Bitcoin, as it did for most people in this industry. He would post about BTC replacing gold and an inadequate supply of BTC for institutional demand.
And then one of Block.one’s investors, Christian Angermayer, would weigh in, calling Block.one’s BTC holdings “the most strategic #Bitcoin position in the world,” adding the hashtag #ProFi.
What good would any of this Bitcoin talk do for EOS holders, though?
Blumer had an answer:
Its hard to imagine EOS superseding, for example, Lightning, from within the Bitcoin community as we now know it. EOS today runs on the basis of payoffs to governance participants and there’s no way to know how many of the existing block producers aren’t one or just a few entities or a few entities in collusion.
This is a longstanding tension in crypto, between the pioneers of the space who wanted to build a separate economy and the newcomers looking to maximize profits by plugging it into the traditional economy.
Larimer, as we’ll see, leans toward the former, but Blumer’s allegiance seems to be the latter. He may look forward to a future in which it is not Bitcoin’s existing users relying on EOS so much as institutional adopters that want a solution that’s fast, cheap and easy to track.
“As Brendan has said in recent tweets, Block.one is working on products designed to leverage our Bitcoin position, built with the EOSIO software,” Christina Pantin, a spokesperson for Block.one, told CoinDesk in an email. “We believe that a network like EOS, built on EOSIO, has the capacity and scalability to bridge a highly valuable token like BTC, which is unfortunately slow and expensive to transfer.”
Aaron Cox, of the block producer candidate Greymass, told CoinDesk over Telegram that the EOS community would likely support more BTC integrations.
“With as much tribalism as exists in this space, I don’t think there’s a lot of outward aggression from within the EOSIO community towards other chains – even despite all the hatred EOS/EOSIO gets,” he wrote. “It’s not like EOS or any other EOSIO token (that I’m aware of) is out to replace projects like BTC – so it only makes sense to find ways they can support each other.”
One longtime member of the EOS community is less excited about the prospects for BTC on EOS. A pseudonymous user going by @blockchainkid on Telegram and Twitter posted:
“Let’s call a spade a spade: the $EOS token sale was just a massive wealth transfer from retail crypto buyers to @block_one_ founders and early investors.”
A series of disappointments
Colin Talks Crypto and @blockchainkid aren’t the only ones who took to social media to express disappointment.
Larimer also does not seem happy with how this endeavor has turned out.
There’s a meme around Larimer that he always abandons projects, but he’s been working on EOS for at least three years now. And it’s important to also note the major contributions he has made in the industry. They include laying the foundation for DeFi, building software to run a new consensus model and articulating the concept of decentralized autonomous organizations (DAOs).
Larimer first announced he was leaving Block.one on the blockchain blogging site Hive, which is a hard fork of the last protocol he built, Steem. Then he substantiated the announcement on Voice, the Block.one-backed social network.
Larimer wrote:
“I do not know exactly what is next, but I am leaning toward building more censorship resistant technologies. I have come to believe that you cannot provide ‘liberty as a service’ and therefore I will focus my attention on creating tools that people can use to secure their own freedom.”
In a subsequent update that followed on Hive, Larimer wrote, with seeming frustration:
“What can we do to make EOS ‘successful’? There is no single answer to that question because we all have different definitions of ‘success’ and the paths to ‘success’ can head in opposite directions. The most common definition of ‘success’ that I see is a high token price. EOS is ‘successful’ if everyone who buys it makes money. What if EOS achieved this ‘success’ by becoming a completely regulated, centralized, walled garden of KYC’d users?”
These comments seem to come somewhat in response to those above from his co-founder, emphasizing an investor- and regulator-friendly future for the protocol Larimer created. For his part, Larimer only had frustration for an era in which every interaction with cryptocurrency incurs a taxable event.
Larimer also seemed disappointed in the EOS community’s failure to function as the sort of DAO he had envisioned. After all, it wasn’t essential for them to rely on Block.one to build on EOS. The blockchain was built to fund development itself.
The EOS design assumed that token holders would support block producer candidates who did the most to drive value to the blockchain by reinvesting the tokens they earned in funding EOS applications. EOS was also designed with a fund in place that EOS holders could use collectively to pay for development as a collective.
After failing to create a governance system for EOS, the block producers burned the “savings account” meant to fund such development in May 2019, causing a short-term bump in price but long-term doubts about the community’s commitment to a useful blockchain.
And block producers that built didn’t earn community backing, by and large. Instead, the ones that primarily used their earnings to pay voters to back them came to dominate the leadership roles.
However, the CEO has defended the practice of buying votes on Twitter. “When BP’s offer token holders revenue for their vote, it lowers the cost of network operation by passing value back to holders,” Blumer wrote.
For his part, though, Larimer seemed to share the concerns about bribery that CoinDesk had reported on. He wrote in his Jan. 10 Hive post, “In theory, token holders are supposed to vote in producers that provide the most value to the network. In practice, token holders vote in people who pay them kickbacks. It would be like Apple shareholders electing a board that issued new shares and distributed them as kickbacks to a subset of the shareholders.”
After burning the savings account and devoting the block rewards to payoffs, it’s no wonder the community expected Block.one to build for it. Who else could afford to?
But Block.one has shown little tangible evidence of interest in doing so. After all, the returns on Bitcoin have been so much better.
Departures
When Colin Talks Crypto described Larimer’s departure as the “last straw,” he went on to produce another 18 minutes of frustration.
First, the fact that Voice is not running on EOS. When first announced in June 2019, Block.one had said every Voice user would get an EOS account automatically. By January 2020, it had walked that back, indicating that it wouldn’t launch on EOS but that Block.one would “like” it to leverage the EOS public blockchain and “potentially others.”
Last January, CEO Brendan Blumer took to Twitter to describe CoinDesk’s reporting as misleading, but even then he didn’t reiterate the commitment from June, instead writing only that “publishing to public chains will diversify moderation and strengthen censorship resistance.”
Similarly, on Jan. 8, Voice.com CEO Salah Zalatimo wrote in a blog comment that can be seen republished here that the team remains committed to “linking up with the EOS mainnet,” language that falls short of the originally promised plan to run Voice on EOS.
In fact, CoinDesk has been only able to identify one project backed by Block.one that’s running on EOS, and that’s Everipedia. Another company backed by Block.one, Mythical Games, has announced its intention to run on EOS, but CoinDesk has not been able to verify that it has done so. In December, a lead developer tweeted that the game intended to “connect” with the mainnet. A request for comment to the company has not been returned by press time.
When asked to confirm whether or not these were the company’s only investments that run atop EOS, Block.one responded but didn’t answer the question.
“Block.one and its partner funds have made more than 70+ investments into companies already using EOSIO, intending to move to EOSIO, or looking to use EOSIO,” Pantin wrote.
As previously noted, EOSIO is not EOS.
Many EOS holders also found encouragement in the October announcement that Google Cloud would deploy a block producer candidate. There have been no updates on this initiative three months later.
Google confirmed the original report to CoinDesk, but, upon follow-up, Google spokesperson Jane Khodos told CoinDesk in an email, “Unfortunately we can’t comment about our customers.”
One longtime EOS backer emailed CoinDesk last week to say that it might soon be time to write a post-mortem for the blockchain. Of course, the death of EOS is unlikely. Blockchains hardly ever truly die.
But, for many early proponents, including – in particular – the man who created it, it seems the hopes that brought them to EOS have already been laid to rest.
