There has been a debate on the how decentralized the EOS network actually is. This is despite the fact that the platform has been among the most successful in the cryptocurrency ecosystem.
Block.one, the company behind the EOS platform raised a massive $4.1 billion in a year-long ICO that is yet to be beaten debar the Telegram Open Network (TON) that has experienced a hiccup. It seemed that the EOS platform was designed for success because not just did the price of the token increase after it was launched, the community around it also grew.
However, that seems to be the biggest milestones the network has experienced until now, at least from the viewpoint of decentralization.
Popular dApp Platform
EOS is also popular among decentralized application (dApp) developers with 676 dApps built on the platform. According to data from Dapp.Review, just two other networks, Tron (693) and Ethereum (2,195) have more dApps.
Interestingly, dApps builton EOS are among the most popular judging from activity. The dApp.Review website recorded a 99 percent activity on all dApp smart contracts to originate from EOS. Yet the issue of decentralization has refused to go away.
This is mainly due to the platform’s architecture. Unlike Ethereum which is a dApp platform that uses the popular but energy intensive proof of work (PoW) consensus, EOS used delegated proof of stake (dPoS) which compromises decentralization in the quest to reduce energy consumption.
In analyzing the challenge of centralization of the EOS network, Binance Research wrote on its blog:
“While dPoS enables higher network throughput, it comes at the cost of decreased decentralisation, as it is based on the “institutional reputation” of a small set of actors.
The EOS infrastructure uses a set of 21 delegates, also referred to as supernodes, that may vote on new blocks in a round-robin model. These delegates are elected by EOS token owners out of a larger set of candidate block producers. Since block producers get rewarded per block validation, they have an incentive to get elected as a block producer, which puts them in direct competition for votes with each other. The block rewards are paid from annual token inflation.”
This has been an issue that investors and other stake holders would have to grapple with for the foreseeable future. Centralization comes with its challenges even though the EOS platform may raise argument to support its decentralization. We have seen companies such as Ripple enmeshed in lawsuits as a result of running centralized crypto platform.
Re-centralization of Blockchains
Nevertheless, Hacker and others in a 2019 study wrote that all blockchains are prone to centralization or what they called recentralization:
“They are informally dominated by coalitions of powerful players within the cryptocurrency ecosystem who may violate basic rules of the blockchain community without accountability or sanction”.
Investors would just have to hope that the EOS governance structure would not consitute a serious challenge down the line.