Corrupt Governance? What We Know About Recent EOS Scandal

Those tokens could be staked for using network resources either for personal use or leased out for developers use - as per the project's whitepaper, dApp developers can build their product on the top of the EOS.io protocol and make use of the servers, bandwidth and computational power of EOS itself, as those resources are distributed equally among EOS cryptocurrency holders.

The total inflation of EOS tokens is reportedly 5 percent, only 1 percent of which goes to BPs. Whilst BPs have the option to keep the tokens, they are also encouraged to reinvest them "To create better infrastructure growth, better community and financial support, along with better education on the EOS network and EOS dApps", as blockchain analyst and tool builder Ben Sigman explains in a Medium post.

The voting process with EOS is constant - that means that the top 21 is fluid and BP candidates who earn enough votes can replace the BPs in power any minute.

The supposedly democratic voting system soon showed its flaws: for instance, cryptocurrency exchange Bitfinex secured its position as a block producer allegedly due to the votes of just few EOS holders, one of which accounted for 27 percent of all votes for Bitfinex, as community members pointed out on Reddit.

'Mutual voting', in turn, would imply a process when block producers are voting for each other in order to remain in power and keep their passive income - according to some estimations, top three EOS BPs earn around 1000 EOS per day.

The EOS voting system seems to be designed for casual users who vote with their private wallets, whilst investors who have their EOS tokens on exchanges' wallets appear to be stripped off of their voting rights - instead, they are passed over to the exchanges who hold their tokens.

According to the explanation of Twitter user and EOS investor Maple Leaf Capital, who summarized the document's findings in English, Huobi voted for 20 other BPs, and 16 of them voted back for Huobi.

The Twitter user linked the alleged mutual voting with the recent promotion of Huobi Pool Token which shared tokens with users in exchange for locking their EOS on Huobi.

One's CEO Brendan Blumer published a statement addressing EOS public blockchain governance problem.

"Dan Larimer's Delegated Proof of Stake was designed with the requirement that 15 of 21 independent votes are required to operate the network securely. If, as some alleged recently, some current Block Producers are coordinating together, this might call into question the transactional reliability of the EOS blockchain data for all users and the attractiveness of EOS as a platform for dApps."