EOS uses a delegated proof of Stake (DPoS) consensus algorithm. In this system, the token holders vote 21 representatives known as block producers (BP) who maintain the history of the blockchain and receive rewards.
This system has proven to be faster than the Proof of Work (PoW) or the Proof of Stake (PoS) systems since there are fewer decision makers and only compete at the voting stage. This, however, retains a fear of partial decentralization.
This fear appears to be playing out as it was revealed last week that nodes had mutual vote exchange, sharing and outright vote buying.
A Twitter post by Mapple Leaf Capital brought to light an ongoing debate about unconfirmed reports that Huobi crypto exchange had received EOS in exchange for BP votes. The debate post contained presumably leaked spreadsheets from Huobi which showed that it accepted money to support certain BPs.
The allegations are that Huobi voted for 20 other BPs while receiving votes from 16 BPs. Also, the exchange allegedly voted for some BPs in exchange for varying percentages of the returns in EOS.
EOS Response to Vote Buying Claims
Reacting to the brewing scandal, Block.one, the creators of EOS acknowledged news of the scandal stating that it wouldn’t stand idly by if there was indeed a problem in the process. Its statement released on Tuesday reads:
“We are aware of some unverified claims regarding irregular block producer voting, and the subsequent denials of those claims. We believe it is important to ensure a free and democratic election process within EOS and may, as we deem appropriate, vote with other holders to reinforce the integrity of this process.”
The problem with EOS Governance
The level of decentralization on the EOS platform has been questioned on several occasion, some observers saying that it tends more to a centralized rather than a fully decentralized blockchain government.
Ethereum founder Vitalik Buterin has strongly spoken against the DPoS model giving reasons why blockchain networks are better served by fully decentralized consensus protocols used by Ethereum and Bitcoin. In a preemptive post in March, Buterin against a brewing scandal which he calls “another frontier of US-China geopolitical economic warfare.” He argued that since the rewards available for BPs on the fifth largest blockchain is high, it would be very competitive and this will increase the risk of vote buying and mutual voting.
Vote buying is banned by the EOS constitution but the constitution has not yet been ratified by EOS users.