The Rising Trend of Exchanges Participating as EOS BPs; EOS Becoming Even More Centralized
The rise of the staking economy has driven the business of PoS mining to the exchanges, and subsequently altering the power structure of EOS supernodes and the top block producers (BPs).
Since June of this year, the Super Node BPs that were stagnant during the bear market have all been replaced and flipped on its head.
Whale Exchange, Newdex, Hufu, Bigone, and several other exchanges and wallets, have been elected as the top 10 BPs. In the meanwhile, the original supernodes, EOS Newyork, EOS42, EOS Authority, and EOS Canada, all have dropped out the top 21 rankings. Huobi Pool continues to see its dominance.
Compared with a year ago, when various supernodes were so high profile and publicly announcing their campaigns, the supernodes that captured the market this time was quiet and silent, quickly creeping up the ranks.
The media publication from China, Odaily Planet Daily, has learned from people familiar with the matter that the aggregate PoS pool on EOS has captured nearly 100 million EOS, making up almost one-third of the total votes. And this number is still growing.
And to emphasize, behind this new supernodes are the PoS mine pools, and behind these pools are the exchanges.
As a result of such movements and dropoffs from the original block producers, we believe there a few large entities with a large number of EOS tokens controlling multiple supernodes.
At present, two of the top 5 ranked super nodes belong to one entity: EOSLaomao and Bigone exchanges both belong to the individual Laomao and team. The interests of the two are closely tied, and the strong essentially becomes stronger.
And now we are seeing a phenomenon where an overarching number of top BPs are coming from mainland China, and in other words, we are seeing EOS even more centralized than before.
Most of the top supernodes currently as of publishing date are either based in China or ran by a Chinese team.
New supernodes spawned by REX
On July 6th, Laomao, one of the large Bitcoin whales, with its exchange Bigone garnering 150 million votes, led to it ranking first place in the EOS supernode. And that only took 2 months of time.
Bigone began as a POS miner on May6th, and then climbed into top 21 ranking, and the finally became the first place ranked BP.
If it were a year ago, this speed is probably difficult for most participants to imagine.
This was primarily driven by the EOS resources exchange REX, which began in May.
The birth of REX originated from the vibrancy of DApp developments last year. At that time, the supply and demand of the EOS main network resources were not balanced. And in order to reduce development costs, BM proposed the idea of a resource leasing platform. On this platform, which became REX, the user needs to pledge EOS to rent EOS resource usage rights, in exchange they receive the same amount of resource token REX token, thereby obtaining REX token dividends, including dividend income, RAM transaction fee and namespace bidding fee.
After a few months of brewing, REX finally came on. However, due to the delay, and missed timing in the market, REX’s rental value is not high. Previously, demand only accounted for 2% of the Rex pool, which kept REX’s return rate also low, with an annualized rate of less than 1 %.
However, participation in receiving REX dividends requires minimum voting rights and gave the EOS pool an opportunity to get involved.
By opening the EOS mine pool and acting as the REX for the user, the super nodes increased its user’s annualized income to more than 3% with returns from “inflation reward + REX income”. It also obtained user’s votes and lent them itself to enter the race to become a supernode. These mine pools charge a certain management fee from the user’s income or benefit from another node.
So it turns out, these large exchanges and wallets that hold a large number of votes are taking away the power of the leading block producers by the virtue of its business nature.
The impact on the rankings is very significant. In addition to the centralized exchanges such as Bigone, there are many number of other exchanges and wallets rising.
The decentralized exchange Whale Exchange listed its EOS pool on May 1st, and on May 22nd, it had 112million EOS votes and was approaching supernode status.
On June 18th, the decentralized exchange Newdex also launched its staking pool Newpos. On June 30th, it was elected as the EOS super node with 133 million votes, ranking 14th.
Hoo.com or Hufu, which launched the REX financial services in May, was also elected as a supernode one month later. It also acquired an EOS decentralized exchange in the same month. Wang Ruixi, founder of Hoo.com, told the media Odaily Planet Daily that it is also planning to launch a PoS mining pool.
The number of mining pools is still increasing significantly. According to the latest news, DApp team Equilibrium and exchange Kucoin have recently announced to offer EOS staking services, and a leading Korean exchange Bithumb also announced that it will enter to compete for the EOS supernode.
It is no secret to the industry insiders, it gives them significant advantage when each staked EOS token can be used to vote for up to 30 different block producer candidates. It seems like for latecomers who want to enter, it will be even more difficult. many of the nodes express that: “The exchanges creating staking is an all-sided attack on us.”
So are the exchange pools good or bad?
With the exchanges coming attack, laments have come from the original EOS BPs. Many believe that newly arised exchanges, especially centralized ones, acting as supernodes will not contribute to the ecosystem. The nodes that were seen to show real care for the EOS ecosystem are being squeezed down and are losing their voice. The two nodes that have coordinated EOS’s main online line operations, EOS New York and EOS Canada, both have fallen off the ranks.
Many old nodes have expressed considerable pressure. The founder of HelloEOS laughs and says that “it is ready to be eliminated.” He stressed that HelloEOS work to be done is still being done, but “has put down the infatuation”.
In this regard, Wang Ruixi, the founder of Hoo.com, said that the reason for participating as a EOS SuperNode is to maintain the network’s security. As for EOS community building and basic tools, there will be other actions.
He believes that although the exchanges are aggressive, he feels that funds are a scarce resource compared to technology, operation, and publicity. The traffic, appeal, and credit behind exchanges can improve EOS. He also determined that if the mining pool wants to make money, it will actually have a set capacity limit according to the annualized rate. “It is currently assumed that a super node will have a revenue of more than 20,000 EOS per month. What if you give your users 6% per year? It means that your capacity is only 4 million EOS.”
Brian, the head of the EOS Amsterdam community, also believes that the exchange is considered to be the “leader in the ecosystem”. He is more worried, however, that the supernodes are almost occupied by mainland China nodes, leading to network security vulnerability, centralization and long-term negative PR. This would subsequently bring down the price of the token.
“EOS needs to have an active network, with safer and faster node distribution globally dispersed.” In his view, there should be at most nine supernodes in Asia, and the number of Europeans should be four to five, followed by South America, North America, and Australia.
In June of this year, Weiss Ratings said that EOS’s rating was lowered due to concerns about centralization. Brian believes that the centralization of EOS has become one of the sources of negative perception for EOS. Over time, the attitude of the cryptocurrency community for EOS will gradually turn more negative.
He said that as a result of the supernodes being based in Asia, it has indirectly prevented foreign capital investors from investing. “A lot of European investors have faced this problem, they don’t dare to invest, they are not optimistic about EOS, or they are a wait-and-see attitude.”
The multi-node size control is in fact doubled and multiplied by the inflation incentives, which represents the binding of the nodes to the deeper benefits of the EOS public chain, and also increases the centralization of the EOS public chain.