Crypto Newsletter 12/12: The Latest Squabble with EOS
The past week led to yet another wave of controversy with blockchain consensus protocols. EOS, which has faced criticism since it launched in June this year, has come under fire yet again. The blockchain, built by the company block.one that famously raised over $4B in the largest ever ICO, uses a consensus mechanism called Delegated Proof of Stake (DPoS), in which EOS holders elect 21 miners that validate transactions on the EOS blockchain.
These 21 nodes are democratically elected, but the system does raise the question of whether the nodes can be manipulated to the detriment of the entire network. This question is now being put to the test by one of the 21 miners, Starteos, which has offered to buy votes to secure its place as one of EOS’ officially sanctioned miners. The ramifications of Starteos’ plan are unclear as it is still remains one of the top 5 miners despite a public outcry over their willingness to buy control in the network. There is no doubt that this development adds yet another question mark as to how best integrate decentralization and centralization to make a more scalable blockchain solution.
Meanwhile, Ethereum approaches its hard fork Constantinople in January, but its Casper proposal (which would be implemented after Constantinople) has received some negative feedback, as Muneeb Ali, the co-founder of Blockstack, wrote a critical peer review of Ethereum Research’s paper on Casper’s consensus protocol.
On the centralized front, BitGo and ErisX both made big hires this week. While EOS is mired in controversy for merging decentralization with centralization and Casper is struggling with its own issues, other centralized businesses continue growing without giving decentralization a second glance.
What’s Happening In the News
In a report from MIT, two researchers analyzed data from pump and dumps on crypto exchanges. They discovered that these scams account for $7M of monthly trading volume and that if you didn’t invest within the first 18 seconds of the pump, there was little chance you could profit from the scam.
In a speech last Thursday, SEC Chairman Jay Clayton said, “a number of concerns have been raised regarding the digital assets and ICO markets, including that, as they are currently operating, there is substantially less investor protection than in the traditional equities and fixed income markets, with correspondingly greater opportunities for fraud and manipulation. I believe that ICOs can be effective ways for entrepreneurs and others to raise capital. However, the novel technological nature of an ICO does not change the fundamental point that, when a security is being offered, our securities laws must be followed.”
In a blog post on Friday, Coinbase announced that it is looking into adding 31 tokens to its trading platform, though each must meet Coinbase’s compliance standards before being added.
Articles We Read (And You Should Too)
In a guest post for CryptoSlate, Howard writes about the issues with decentralization, and why it made conflict with regulators inevitable. Luckily, there is a path forward for blockchain within market regulations, one that leads to both greater investor protection and efficiency, as well as newfound liquidity.
Consultant Jill Carlson walks readers through the difference between products, platforms and protocols in this helpful overview.
Last week, we included a thought piece from Joe Lubin, a co-founder of Ethereum and founder of ConsenSys, and this week Forbes published an insightful piece on Lubin in the wake of ConsenSys firing 13% of its staff last week. The article covers Lubin’s rise to riches, the unusual inner workings of ConsenSys, and questions how long Lubin can personally finance ConsenSys’ burn rate before Ethereum reaches mainstream adoption or Lubin bankruptcy.