Having seen a lot of reddit threads and comments on EOS-related stories along with a video on youtube from 'Ivan on Tech' which has like 45k views, I am putting in my 2 cents on some of the theories surrounding EOS, and the company Block.one which is distributing the ECR20 EOS token.
The cryptocurrency space is dominated by misinformation, rumour, speculation and sadly, dishonesty. I'm a big believer in being sceptical of anything and everything, especially when the stakes are large - I have followed EOS since inception closely. These are my observations and opinions. If I am incorrect in any way, please let me know!
The EOS ICO - a quick recap
Block.one has undertaken an unusual distribution methodology for EOS.
- There are 1 billion EOS tokens.
- From the 26th of June to 1st of August, 200mn (or 20%) of the tokens were sold. This sale was uncapped. The 'final' price of EOS after this first 5 day period was calculated simply as the total amount donated (in ETH) divided by 200mn. Approximately US$185mn of ETH was raised, so the EOS price was a little under US$1.
- Thereafter, a new ICO occurs every 23 hours with 2mn tokens sold for ETH. Again, this is uncapped. The daily ICO price is again calculated as total amount donated (in ETH) divided by 2mn.
- Block.one will end up distributing 90% (or 900mn) tokens by the 1st of June 2018, retaining 10% of tokens for the company.
CONSPIRACY THEORY #1 - Block.One is buying EOS tokens in its own ICO
This is the biggest and most serious allegation/speculation I've come across. Some people are claiming that Block.one is using the ETH it has taken in, and turning around and recycling it back into its own ICO.
This would of course artificially keep the price of EOS high, and increase the amount of money brought in through the daily ICO's.
To clarify this, let's say the price of EOS is US$1 in the secondary market on the exchanges. In order for there not be a substantial mis-pricing between the daily ICO price and the price of EOS on the exchanges, the 2mn of EOS sold in a given daily ICO window should bring in roughly US$2mn of ETH.
Hypothetically when Block.one takes in US$2mn, can they then put that $2mn of ETH (or any previous raise) into the next days ICO, propping up the EOS ICO price safe in the knowledge that the $2mn comes back to them anyway, and that the higher price shows fake 'demand' therefore bringing in more money from other investors to the daily ICO's?
There are three main reasons why I believe this is not happening (in no particular order).
Firstly, both the Block.one CEO Brendan Blumer and more importantly CTO Dan Larimer have both categorically stated that Block.one is not recycling ETH. What's more, the CEO has stated that the company is engaging with an auditor to demonstrate this.
Secondly, the roster of Block.one investors includes Brock Pierce (the Chairman of the Bitcoin Foundation), Blockchain Capital, Bo Shen GP at Fenbushi Capital (another GP there is Vitalik Buterin), exchanges Bitfinex and Yunbi, and who knows who else.
For Block.one to be lying to their community and their investors (or that such investors would sanction this) is implausible. It would be a career-ender for everyone involved, and for very little upside. Block.one ALREADY took in over US$180mn in its initial ICO period (where it couldn't possibly recycle any funds). And according to website eosscan.io they have taken in over US$300mn so far already.
Thirdly, if block.one were to recycle ETH into its own ICO, it would end up with a huge amount of EOS which is completely contrary to the end goal of having as widely distributed a token as possible (which was the entire reasoning as I understand it for distributing over the course of a year). And they'd ultimately get found out anyway.
All in all, this conspiracy theory is a non-starter.
CONSPIRACY THEORY #2 - Block.One is amassing a huge ETH stake to either profit when ETH switches to POS, OR to ultimately drive down the price of ETH
I think this is again unlikely for a couple reasons: firstly because the CEO has stated that block.one has already sold the majority of ETH that has been brought in.
Secondly, it implies that instead of looking to provide a functional, scalable competitor to ethereum, Dan Larimer and the team are instead closet believers in ethereum and want to hold it to profit when (or IF) it switches to POS. If anyone has seen Dan state anything optimistic about ethereum then please let me know! I saw a clip of him quizzing Vitalik years ago and predicting all the scalability problems that ethereum is now facing - and now Dan is building something else with the aim of accumulating ETH? Again, it doesn't fit.
Thirdly, the theory that Block.one is accumulating ETH just to dump it and drive down the price makes no sense because a) any ETH dump would only effect the price temporarily (even a billion dollars of ETH would eventually be digested by the market), and b) why would you shoot yourself in the foot by driving down the price of an asset you are fire selling and thereby costing yourself and your investors money? Makes no sense.
CONSPIRACY THEORY #3 - Block.One is incorporated in the Cayman Islands... therefore it's dodgy
That is apparently a 'red flag' that's been thrown about by a lot of folks. Why? It's the gold standard offshore jurisdiction. If you want tax efficiency, then you incorporate offshore. Pretty much every hedge fund in the world uses Cayman or BVI, most multinationals have Cayman entities - it's standard.
I think this red flag only crops up amongst people in the community who are simply inexperienced when it comes to global financial and corporate structuring.
Summary
Again - I believe we should question everything. It's what rational investors with money at stake should do. And for us in this community it's made all the more difficult by the complete lack of objective crypto media so we often get a lot of subjective opinion and commentary which clouds things.
However, I think it's also worth recognising that there are a lot of powerful vested interests who want to see EOS fail... Ethereum for example is a US$25 billion dollar competitor and many of their foot soldiers appear more than happy to spread the FUD.
Dan Larimer has built, deployed and created some landmark innovations in the crypto space - and now he has a $300mn (and growing) war chest behind him - he and EOS are a threat.
Free thinkers welcome.
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STOP@cryptokarma, excellent. I believe the same way. This post should be seen by far more people by now, it's important to mitigate these 'EOS red flags' misconceptions that are infesting the crypto minds.
I understand the fear and concern of those who think otherwise but these thoughts are built on the beliefs that the block.one company's sole existance is to harm the cryptoworld, which simply doesn't make any sense. People say Dan Larimer is a quitter, but with every project he left a new one much more interesting and relevant came by. The block.one blockchain isn't the exception, its technology is very attractive providing a potentially disruptive solution to much of the economic issues of today's world.
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