Weiss Ratings Downgrades Crypto Project EOS amidst Collusion Concerns

Weiss Ratings has downgraded their rating for EOS, citing concerns about centralization and the project’s lack of capability to fix these systemic issues, June 7, 2019. 

Cracking Down on EOS

EOS has been the subject of intense debates within the crypto community. While they have a devoted user base, there has been a lot of flak around the project since their year-long ICO to raise four billion USD.

The Whiteblock paper on EOS was also a critical talking point for the project’s vulnerabilities. Though the hardware used by Whiteblock employed low-end specs which possibly limited the scalability, their caution over centralization was legitimate and still stands today.

EOS DOWNGRADE: #EOS has serious problems with centralization, and their event last week did anything to alleviate that, so we’ve severely downgraded its technology score. It’s now up to #ADA to launch a truly decentralized #PoS #blockchain. No pressure.#crypto #Cardano #BTC

— Weiss Crypto (@WeissCrypto) June 7, 2019

EOS has only 21 block producers, voted in by token holders who stake their voting power for a block producer. Initially, this was dispersed across the world and there were minimal concerns about block producers colluding.

However, over the last year, most of the block producers have been concentrated within China – 14 out of 21 of them.

According to CryptoSlate, the top five EOS mining pools had a vote correlation with each other above 60 percent on a constant basis, making the circumstances all the more suspicious.

EOS has not done much to remedy these issues in their platform, and Dan Larimer, the co-creator of the platform, has gone on to say crypto projects need a certain level of centralization to function properly.

This is a huge negative for those who believed in delegated proof of stake’s (dPoS) viability as a consensus mechanism. But dPoS cannot be completely struck off yet, the main issue for its lack of efficacy in EOS is due to the limited number of block producers. As Polkadot launches something similar with nominated proof of stake (nPoS), many people believe their lack of constraints on network parameters like block producers could help them implement this successfully.

While Weiss and other rating agencies are providing a seemingly valuable service to retail investors and institutions who do not want to go through with their own research, it is questionable to rely on them for unbiased information.