Today, we’d like to voice our support for the tokenauction referendum proposal by EOS New York. Should this issue be put to a 15/21 BP approval vote, we plan to vote in favor of the approval. As part of our commitment to active participation in EOS governance, we’ve signaled our support of the proposal on-chain (see transaction here ), and will also offer an explanation of our stance below.
This proposal is important for two primary reasons: it provides added security for token projects built on EOS, and it creates a source of revenue for the blockchain itself that can be allocated using the same decision-making process that governs other network upgrades.
EOS Token Contracts
Currently, many of the projects that have issued tokens on top of EOS have done so in a way that doesn’t offer users the same level of trust as the EOS system token. Many of these contracts are controlled by a single key pair, leaving them open to potential attacks. Even if developers of these contracts distribute control of keys among different team members, collusion-based attacks are still possible. In many cases, users and holders of the tokens don’t have strong guarantees about how those contracts are controlled and must place full trust in the developers themselves.
In order to deliver the benefits of a blockchain-based system and to offer true self-sovereign ownership of digital assets to their users, developers must take additional steps to distribute control of their contracts. eosDAC has described one such system in this article , and we encourage all developers to familiarize themselves with this system. One drawback of the eosDAC system, however, is that it still places the burden on potential users to evaluate a given token contract’s key setup on a project-by-project basis.
The EOS New York proposal takes this one step further by utilizing an existing contract ( eosio.token ) that, by its very nature, is as secure as the EOS blockchain itself. One of the major benefits of EOS New York’s suggested approach is that it allows any token project to use an existing, already secured smart contract which the EOS token uses today. This proposal takes an existing contract and turns it into a "token factory" for the mainnet, which enables standardization and increases user assurances. Users simply have to verify that the token uses this system, and they can have strong guarantees about the security of the token contract and the nature of their digital assets. Because this contract is controlled by the same parties that control the eosio system contract (the elected block producers), users are simply placing trust in the same system that operates the blockchain itself. Any existing user of EOS has already opted into this system, so there is no additional level of trust required.
The second part of this proposal is equally important. The proposal would create a bidding system (similar to the existing premium name bidding system ) for token projects to purchase three letter token ticker names within this system contract. In doing so, this system would create a new revenue stream for the blockchain itself.
The EOS mainnet currently generates non-inflationary revenue in two primary ways— premium name auctions and RAM sale fees. These funds are pooled into the eosio.names and eosio.ramfee contracts, respectively. Currently, there is strong support to have these funds added to the books of the REX and paid out to REX holders on a per-block basis. We support this initiative and recognize that it adds important incentives for REX users that will be beneficial to the network as a whole. But we also recognize that revenue generated by the blockchain could also be reinvested into developments that advance and improve EOS.
Funding for the operation of the EOS mainnet, on the other hand, currently happens through inflation that is paid to the block producers and to the eosio.saving fund. Block producers can use their earnings to individually fund developments and improvements to EOS, and they can even collaborate to do so. Still, those funds flow directly to the individual block producers and don’t create any sort of shared fund that can also be used for improvements to the chain.
While the eosio.saving fund does act as a sort of shared fund in this way, it is further complicated for a number of reasons. eosio.saving is a smart contract that is funded through inflation and could be used to fund future worker proposal systems. The problem with this approach is twofold. First, it is inflationary funding, meaning that every EOS token holder “pays” for this fund pro-rata. Second, there is no clear plan in place for how to allocate these funds. This has been a controversial issue, and the EOS community is currently debating how to move forward with this system. Several proposals have been made to reduce or even eliminate the flow of funds into this contract, to burn the savings entirely, or to develop a worker proposal system using those funds.
While we look forward to seeing the eosio.saving debate progress, we recognize that the nature of the issue results in a lot of uncertainty and could take significant time before a plan is in place to move forward. This proposal from EOS New York offers a near-term plan for funding future development that does not require further inflation and can be enacted immediately. All EOS token holders stand to benefit from network improvements that are funded through this system, but they do not all have to pay for them through inflation. These improvements will be funded by those that want to purchase premium property on the network itself.
This proposal also sets an explicit precedent for these funds to be controlled by elected BPs, providing more clarity than the current status of the eosio.saving fund. EOS is a representative (or delegative) system, with the elected set of BPs providing shared management of the chain at any given time. If one views EOS as a DAC, then BPs are like a board of directors that collectively manage the DAC after being voted in by token holders. Creating a shared fund from network revenue that is managed by BPs simply gives these BPs another tool at their disposal that can be used to improve the chain in ways that aren’t currently feasible without a shared fund.
We support this proposal because we believe it will bring value to EOS in two primary ways. First, it offers improved security that benefits end users of token projects. Second, it puts in place a concrete plan to fund and improve the EOS mainnet that does not require additional inflation.