Abrupt EOS block producer demotion sparks concerns over centralization

On June 7, one of the EOS network’s most consummately professional block producers—the companies that run nodes to validate the network—was unceremoniously voted out after nearly a year of stellar service. Though EOS New York was swiftly voted back in, some observers are pinning the events on a group of Chinese whales who colluded to rig the results. Is this fair, and indeed, is it bad?

EOS’s brand of democracy is super quick, with votes on who gets a place in its 21-member strong cabal of network operators taking place every 60 seconds. Block producers operating at any one time are charged with hashing together transactions on the network, which they do every half a second.

EOS New York, an independent and self-funded producer that was voted in 375.4 days prior to  June 7, wasn’t strictly voted out, but instead saw its ranking—visible here—slide below 21, with other producers taking its place. There is a dearth of raw data, making it difficult to ascertain exactly who cast which votes, and who ended up with a commanding share of the vote. But a cursory glance of the voting registry shows that nine of the twenty one current reigning champions are based in China. 

In the EOS community on Reddit, observers said the EOS New York ouster was the final straw—a sign a powerful vested interest had taken control. "We need to stop the Chinese from colliding [sic]," wrote one observer. "And eossingapore [another popular block producer] is not run by Singaporeans...it's run by China."

Nevertheless, in comments to Decrypt, EOS New York spokesman Kevin Rose was sporting about the loss. “We are independent and self-funded,” he wrote. “We are confident in the value we bring to the community and will work our way back. We reinvest back into EOS through open-source software, community leadership, governance.”

But he also acknowledged that there were problems with the voting system—which gives deeper-pocketed voters more clout, and in some cases results in block producers paying voters to turn up to the polls—and said that a “whale” might have swayed the results. “Large token-holders, colloquially known as whales, exist,” he said. “These whales vote, and in DPOS voting matters. Because voting participation is low relative to the total tokens in circulation when some of them vote it can be felt.”

Sam Cassett, the CSO of Ethereum incubator ConsenSys—a competitor to EOS and the financier of Decrypt—described the network’s vulnerability to whales as a “point of centralization.”

“Small numbers of entities that hold large amounts of tokens can corrupt this voting process, as in what just happened,” he said. “The governance mechanism has failed to work as planned, and instead there is capture of the process by a small number.”

To Rose, this is nonsense. “Us moving out of the top 21 and back in again is like taking the cherry off the top of an ice cream mountain and then putting it back,” he said. “The fact that the voting is so close among most of the top 21 is good. Block Producers should be able to be moved. Would incumbency not be worse?” 

But the problem, added Cassett, wasn’t just the possibility of a conspiracy. “My point is that the entire system of governance is poorly designed,” he said. “It has just punished a good actor that has devoted considerable supply-side resources to the network. Ideally, any good actor that wants to help should be able to.”

Put it this way: There are one hundred block producers in waiting, according to EOS Authority. Only 21 of these can validate blocks at any one time, meaning 79 full-fledged companies just sit around doing...nothing? But as Rose said, the block producers do contribute other things to the network. "We run world-class infrastructure, we lead issues of governance, we develop open-source tooling, user tools, and are working on an EOS specific hardware key," he said, to name a few.

Still, jury's out.