On January 10, Colin Talks Crypto, one of EOS’s most prominent supporters on YouTube, announced that he had sold all his holdings following the earlier revelation that Dan Larimer had resigned from his position as Chief Technology Officer at Block.one, the company that developed the software operating the EOS blockchain.
In fact, Larimer had left since the end of the year.
According to CoinGecko, EOS is the sixteenth largest blockchain by market capitalization, trailing the privacy coin Monero and above the decentralized finance (DeFi) protocol Aave. Its market capitalization suffered significant losses after the news about Larimer, losing around one billion dollars in a single day.
EOS’s hopes often depend on the actions of Block.one, the company that successfully completed a year-long initial coin offering (ICO) that raised $4 billion, but these days, Block.one is clearly focusing more on increasing the value of its Bitcoin holdings, which amount to 140,000 Bitcoin (and still growing).
Conversely, Block.one is no longer promising to do more than provide the core software for EOS, which it continues to do.
Indeed, with the EOS situation becoming more complex in recent years, Block.one has introduced a new way for users to pay for transfers instantly (instead of the original method of staking EOS for a share of network resources), which closely resembles the method Ethereum uses with gas.
EOS Launch History
In fact, Block.one launched EOS in a unique way, perhaps the most hands-off approach to any significant blockchain since Bitcoin. The company wrote the software that powers EOS and then released it so that anyone who wanted to run it could do so.
As it provided a significant warning to supporters about this, there was already a global alliance in place holding calls lasting hours over Google Hangouts to plan the launch of the chain so that EOS would be considered the only and best chain.
After some delays, the global launch committee finally managed to launch the chain neutrally and then, after another delay, enough EOS token holders voted on the chain so that EOS started producing blocks on June 14, 2018.
All of this happened at a safe distance from Block.one itself. In fact, Block.one did not start participating in the governance of EOS until last year, despite being the largest single holder of EOS tokens.
Software and Governance Independence
This separation between the software creator and its governance may help explain why Block.one’s settlement with the U.S. Securities and Exchange Commission was light. Once this regulatory hurdle was cleared, Block.one was free to pursue its own ideas about the best use of the significant capital it possesses.
EOS supporters believed from the beginning that the funds entrusted to Block.one to manage would be used to drive value to the blockchain to make EOS tokens more valuable. However, this did not really happen, leading to frustration among long-time EOS supporters.
Many, like Colin Talks Crypto, moved on to other matters.
Colin Talks Crypto said in a January 10 video: “I sold 100% of my EOS tokens as a result of this news. For me, this was the last straw.”
Colin Talks Crypto is considered one of the prominent EOS advocates on social media. In addition to running several social media channels where he discusses cryptocurrencies, he also managed an EOS proxy where token holders could support his choices for the best block producers (more on that later). Colin Talks Crypto also shut down his proxy after Larimer’s departure.
Contributors
The Multitude
Before we go any further, here are some points of context, as the EOS system can become confusing.
Block One is the company that conducted the initial coin offering (ICO) that led to the launch of EOS. The offering was run on the Ethereum platform and then all tokens were transferred to the EOS platform. In mid-2019, Bloomberg reported that the company had over $2 billion in cash and 140,000 Bitcoin. Among its early investors is former Facebook investor and PayPal co-founder Peter Thiel.
Block One uses the funds from the initial offering for both direct investments and indirectly, through other funds it has invested in, including Galaxy Digital from Mike Novogratz. Novogratz sold Galaxy’s stake in Block One in 2019.
One of the most confusing points is perhaps this: Block One built EOSIO, the software that runs EOS. EOSIO is not EOS, and there are other public blockchains that also run on EOSIO, such as Telos and Worldwide Asset Exchange (WAX) and others.
Telos was launched as one of the earliest forks of EOS, and Sofie Renkinen, the CEO of the Telos Foundation, confirmed to CoinDesk that Block One did not invest in her organization.
“Telos is holding its ground regardless of what happens at Block One. While we are grateful for the EOSIO source code base, it is up to the community whether public blockchains will succeed or fail,” Renkinen wrote via Telegram.
Turning to Bitcoin
While Larimer was planning to step away from Block One, CEO Brendan Blumer was increasingly talking about Bitcoin alongside a pro-regulation vision for blockchain technology.
In October, Blumer conducted an interview with a contributor from Forbes magazine, where he stated, “Block One is an investment company, and sees that various businesses are emerging, but technology projects take a long time.”
In that interview, he mentioned that Block One has three components: building EOSIO as something that can be used by businesses, investing in other companies, and building its own business (like the social networking site Voice.com as an example).
What he did not include was what matters to EOS token holders: making investments that would drive value specifically to EOS, rather than EOSIO.
In October, at the end of the Ethereum rally that became known as DeFi summer, EOS holders asked Blumer on Twitter why the DeFi recovery hadn’t reached EOS.
Some believed that Block One could fund versions of successful use cases on Ethereum on EOS, where they could operate with lower transaction fees.
In his response, Blumer wrote, “We are very interested in investing in DeFi for EOS that can meet B1’s compliance requirements, and we are actively looking for it.”
The same complaint arose again in January.
In November, Blumer used the hashtag #ProFi in another tweet about the inaccessibility of DeFi for institutional investors.
He wrote, “Innovation in the DeFi space is revolutionary, but recent guidance from global legislators regarding lack of compliance controls makes it hard for major capital to access the opportunity.”
On the same day, he posted about how lawmakers had started to see benefits in Bitcoin, as a form of money that is easier to track, reminiscent of what former U.S. Treasury Secretary Larry Summers said in 2020, that money as we know it contains “a lot of privacy.”
The next day, Blumer went further in this regard, with a series of tweets describing the priority approach to compliance as a long-term game.
He wrote, “At B1, we strongly believe that the maturity of the regulatory environment for the ecosystem is advancing at an exponential rate, and that the seamless integration between the traditional and crypto environments, facilitated by compliance, will continue to open the way for mainstream adoption.”
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the end of November and December, his focus on Twitter increasingly shifted to Bitcoin, as happened with most people in this industry. He posted about Bitcoin’s replacement of gold and about the insufficient supply of Bitcoin for institutional demand.
Then one of Block.one investors, Christian Angermayer, commented, pointing out that Block.one’s holdings of Bitcoin are “the most strategic Bitcoin position in the world,” adding the hashtag #ProFi.
But what is the benefit of this talk about Bitcoin for EOS holders?
Blumer had an answer:
It’s hard to imagine that EOS will outperform Lightning, for example, from within the Bitcoin community as we know it now. EOS today operates on incentive rewards for governance participants and there’s no way to know how many current block producers are not a single entity or a few entities or a few entities in collusion.
This long-standing tension in the cryptocurrency world between pioneers who wish to build a separate economy and newcomers seeking to maximize profits by linking it to the traditional economy.
While Larimer, as we will see, leans towards the former, Blumer seems to be loyal to the latter. He may be looking forward to a future where current Bitcoin users do not rely on EOS as much as institutional adopters do, who seek a quick, cheap, and easily traceable solution.
Christina Pantin, spokesperson for Block.one, said: “As Brendan stated in his recent tweets, Block.one is working on developing products designed to leverage our position on Bitcoin, which are built using EOSIO software. We believe a network like EOS, built on EOSIO, has the ability and scalability to connect very valuable tokens like Bitcoin, which is slowly being transferred at high costs.”
Aron Cox, Block Producer candidate at Greymass, said: “The EOS community is likely to support more integration with Bitcoin. With so much tribalism in this space, I don’t think there’s much apparent hostility from within the EOSIO community towards other chains – even despite all the hate EOS/EOSIO receives. There’s nothing like EOS or any other EOSIO token (to my knowledge) trying to replace projects like Bitcoin – so it makes sense to find ways they can support each other.”
But one long-term member of the EOS community is not overly enthusiastic about Bitcoin’s prospects on EOS. An anonymous user named @blockchainkid posted on Telegram and Twitter: “Let’s call a spade a spade: the EOS token sale was just a massive transfer of wealth from ordinary cryptocurrency buyers to Block.one insiders and early investors.” A series of disappointments.
Not only Colin Talks Crypto and @blockchainkid have turned to social media to express their discontent.
Larimer also seems unhappy with how this project has evolved.
There’s a meme about Larimer that he always abandons projects, but he has been working on EOS for at least three years. It’s also important to note the significant contributions he has made to the industry, including laying the groundwork for DeFi, building software to operate a new compliance model, and formulating the concept of decentralized autonomous organizations (DAOs).
Larimer first announced he would leave Block.one on the Hive blogging platform on the blockchain, a modified version of the last protocol he built, Steem. He then confirmed the announcement on Voice, the social network backed by Block.one.
Larimer wrote: “I don’t know exactly what will happen next, but I tend to build more censorship-resistant technologies. I’ve come to believe that you can’t provide ‘freedom as a service’ and therefore I’ll focus my attention on creating tools that people can use to secure their own freedom.”
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Update later on Hive, Larimer wrote in frustration: “What can we do to make EOS ‘successful’? There is no single answer to this question because we have different definitions of ‘success’ and ‘success’ pathways can lead in opposite directions. The most common definition of ‘success’ that I see is a high price for the token. EOS would be ‘successful’ if everyone who buys it is making a profit. What if EOS achieves this ‘success’ by becoming a completely observed, focused, and restricted garden for known users?”
It seems that these comments come somewhat in response to those above from his partner in the company, emphasizing a friendly future for investors and regulators for the protocol created by Larimer. For him, Larimer was just frustrated by an era where every interaction with cryptocurrencies results in a taxable event.
Larimer also appeared dissatisfied with the failure of the EOS community to function as he expected it to as a DAO. After all, they didn’t need to rely on Block One to build on EOS. The blockchain was built to fund the development itself.
The design of EOS considered that token holders would support block producer candidates who put in their utmost effort to drive value to the blockchain by reinvesting the tokens they earn into funding EOS applications. EOS was also designed with a fund that EOS holders could use collectively to cover development costs.
After failing to establish a governance system for EOS, block producers burned the reserve accounts allocated for funding this development in May 2019, resulting in a short-term price spike and long-term doubts about the community’s commitment to a useful blockchain.
And the producers who built did not receive community support, generally. Instead, those who primarily used their profits to pay voters to support them are the ones who dominate leadership roles.
However, the CEO defended M
Source: https://www.coindesk.com/business/2021/01/19/dan-larimers-departure-brings-eos-disappointments-to-the-fore/
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