The EOS network continues to be an excellent case study in the potential of Web3 networks. Since its inception, the EOS Network Foundation (ENF) has been given the necessary resources to safeguard the interests of the EOS network, promote the establishment of multiple public goods funding programs, and cultivate a strong team that can represent the new developments of the EOS network. Recently, the EOS network passed a new proposal that allows network funds to be programmatic and issued according to schedule, thereby more reliably supporting organizations like ENF who work hard for the benefit of the EOS ecosystem. In order to better understand the milestone proposal we just passed and what it means for the future development of the network, in this post we will briefly review the history of EOS governance and token economics to date. Wonderful content, don't miss it!
EOS Network Governance
The underlying consensus mechanism of EOS is Delegated Proof of Stake (DPoS), under which token holders have the right to choose entities, namely block producers (BPs), to produce blocks and determine the normative blockchain. Based on the total amount of tokens staked, the top 21 BP candidates become active block producers. The 21 active BPs effectively act as representatives of token holders, which enables them to effectively reach consensus through on-chain multi-signature approvals to make governance decisions, such as activating consensus upgrades to enhance blockchain protocols, or adding new features provided by smart contracts managed by the system.
Looking back at the pre-public product era of EOS
When EOS first launched, it had an annual inflation issuance rate of 5%. Block Producers (BPs) were rewarded with 1% of the inflation, and the remaining 4% of the inflation was accumulated in a savings account (eosio.saving) at that time. Before the network launched, there was an idea in the ecosystem to develop and establish a Worker Proposal System (WPS) that would use the 4% inflation issuance to fund the growth of EOS public goods and the ecosystem. However, despite multiple attempts to launch a WPS, such a system has never truly achieved its original expectations and vision.
Since there is no trusted tool to distribute the 4% inflation issuance funds that continue to accumulate in eosio.saving, the tokens held in the eosio.saving account were destroyed twice in 2019 and 2020, with approximately 34 million EOS destroyed each time. After the second destruction, the EOS network's issuance rate dropped to 1%, and block producers (BPs) remain the only entities that receive direct funding from the network itself. The EOS network has enough power to operate its infrastructure, but lacks a foundation, or the ability to meaningfully coordinate and self-direct ecological resources for public product development.
Hiring the Foundation’s DAO
On August 25, 2021, the EOS Network, as a Decentralized Autonomous Organization (DAO), operated and governed by active network BPs selected by EOS token holders themselves, expressed support for the formation of the EOS Network Foundation by approving a proposal by Yves La Rose, CEO of the EOS Network Foundation. The proposal called for the creation of an eosio.grants account, the reactivation of the eosio.saving account with a 2% inflation rate, and the approval of the transfer of approximately 3.4 million EOS from the eosio.ramfee and eosio.name accounts to the eosio.grants account; this particular 3.4 million EOS was the legacy fees generated by the network before the launch of the EOS network’s Resource Exchange (REX). Through this series of actions, the EOS Network Foundation was born.
Planting the seeds of trust: working together with the EOS network
When ENF first launches, the first 3.4 million EOS grant will serve as an initial funding round to demonstrate whether the foundation can have a positive impact on the network. If ENF successfully demonstrates its value and gains trust by using the initial legacy funds, the next step will be for ENF to appeal to the EOS network for additional funding by submitting a request to transfer funds from eosio.saving to eosio.grants via a multi-signature proposal.
In the 18 months since the ENF was founded, the positive impact of the network has been undeniably evident; a series of blue papers have been funded and written, which have triggered a number of key development initiatives; diverse public goods funding mechanisms have emerged, such as Pomelo and the Direct Funding Framework, and the multi-network collaborative Antelope Alliance has been established, key development milestones have been reached, and major technical innovations are being achieved. At the same time, the ENF continues to increase the frequency and quality of information provided to the EOS community through regular quarterly reports, project health report updates, fireside chats and other key initiatives, and is committed to openness and transparency.
While these initiatives have been ongoing, the ENF has applied for additional funding three times, each application was successfully approved by the EOS BPs, allowing the ENF to continue its work.
December 27, 2021: 6.5 million EOS
May 31, 2022: 9 million EOS
November 6, 2022: 9.2 million EOS
The foundation of accountability: checks and balances
The eosio.grants account is the ENF’s funding account, which is ultimately owned and controlled by the EOS network (eosio@active), and the active key of the account is managed by ENF. Under this permission structure, if ENF is deemed to have stopped fulfilling its mission to serve the EOS network, active EOS BPs can remove ENF’s active permissions on eosio.grants and stop providing funds to ENF.
There is also an additional safeguard: for any transfer from the eosio.grant account, more than two-thirds of the active key signers need to approve the transfer, and there is a 72-hour delay before all transactions are executed. During this 72-hour window, if any transaction is considered malicious, BPs can prevent it from being executed.
As has been demonstrated many times before, such as with the Recover+ initiative initiated by ENF, EOS BPs are able to act quickly when needed. For example, BPs took action to stop the Pando Rings vulnerability and were able to respond in less than 24 hours to prevent the theft of 2 million EOS.
The Rise of the New EOS
As ENF continues to achieve its stated goals and strengthen its ability to act in various fields, the new EOS is rising. Several key developments achieved in the second half of 2021 and 2022 ensure the autonomy of the network and stimulate its ability to continue investment and ecosystem development in the coming years.
On September 21, 2022, EOS community engineers, under the leadership of ENF, united to fork the stable EOSIO 2.0 codebase into a new codebase, and then improved on it, eventually creating Leap 3.1, the C++ implementation of the new Antelope protocol. With this move, the EOS network declared independence.
On November 12, 2022, the EOS network reached a consensus to use the 68 million EOS previously destroyed in 2019 and 2020 to fund the establishment of EOS Network Venture Capital (ENV). ENV's seed round investment is provided by the EOS network itself and controlled by EOS Fund Management (EFM), with the goal of making EFM a minority LP in the large ENV fund, with most of the capital coming from outside. The fund will focus exclusively on projects built on EOS, making strategic equity and token investments in technology startups across the Web3 space, with a focus on GameFi, the metaverse, e-sports, NFTs, fintech Web3 companies, and entrepreneurs built on the EOS public chain.
ENV will be an independent institution, on par with ENF, with a complementary but different mission. More importantly, the profits earned by EFM will be fed back into projects that benefit the EOS community. This may include initiatives such as buybacks and burns, or allocating profits to future investments.
Evolution towards autonomous ecosystems
After reviewing a series of epic developments over the past year and a half, let’s return to the critical MSIG in recent days. On February 7, EOS Network BP approved the MSIG proposed by EOS Asia, adding a smart contract to the eosio.saving account. The smart contract enables network issuance funds flowing into eosio.saving to be allocated to other accounts in a programmatic manner and receive continuous funds directly from the EOS network. In the short term, the default parameters of the smart contract allocate 100% of the funds to the eosio.grants account, which is managed by the EOS Network Foundation. However, with the introduction of a system contract that allows issuance to be allocated on a scheduled basis, this opens the door for organizations to receive continuous funding directly from the EOS network and creates a way for contributors to receive funds directly from the network instead of entirely through intermediaries such as ENF to develop a strong ecosystem.
Interested readers can find additional details of the smart contract and code here:
Smart Contract Operations and Forms
View the code on Github
With this new development, BPs still own eosio.grants, and the same safety timeframes still apply as before. The only difference is that inflation will flow in regularly, rather than in large amounts at irregular intervals. This will also further ensure that ENF can remain apolitical, without having to consider who is or is not in the top 21 at any given time.
In the long term, this new development opens up greater possibilities for EOS to continue to further develop into a self-governing, self-funding, and increasingly autonomous ecosystem, where other entities, smart contracts, and even DAOs can receive programmatic allocations of resources from the network, as long as these entities are approved by 15 of the top 21 active BPs in the network.
Previously, only BPs were able to receive programmatic funding from the network. Now, with the ability to directly fund an unlimited number of independent individuals working on behalf of the network, the possibilities for the future of EOS are endless.
Currently, ENF is using all funds for ecosystem initiatives as their feasibility and reliability are being battle-tested and proven. Over time, the EOS network community will be able to identify foundational programs and work to establish these as autonomous parts of the network, funded directly by the network itself.
Today, any entity can request direct, programmatic funding from eosio.saving by submitting a 15/21 MSIG proposal to a BP, without any barriers to doing so. However, making such a proposal successful will require great care, careful preparation, a good reputation, and likely support from existing network custodians and operators. But as we continue to move toward a more robust and autonomous EOS ecosystem, that day will come soon enough.
Conclusion
In less than 18 months, the EOS community has taken control of its own destiny, moving from an ecosystem without any funding other than BP rewards, to one that empowers the ENF entity to manage core development, grant management, and public product development. Soon, another independent entity in the form of ENV will come online to oversee the deployment of venture capital for innovative business models leveraging EOS. The network is in the best possible state to chart its own course and is unlocking the potential we have long hoped to achieve. Now, with the advancement of programmatic, planned funding, we have further established the ability of organizations such as ENF to continue to guide resource allocation on behalf of the network, while opening up a whole new world of greater network participation and autonomy. The potential of EOS as a DAO within a DAO is now beginning to become more apparent.
About the EOS Network
The EOS network is a model for the blockchain 3.0 era and is powered by EOS VM. EOS VM is a low-latency, high-performance and scalable WebAssembly engine that enables deterministic transaction execution with near-invisibility. The EOS network is designed for Web 3 and is committed to achieving the best Web 3 user and developer experience. EOS is the flagship blockchain and financial center of the Antelope protocol, and through the EOS Network Foundation (ENF) as a tool for multi-chain collaboration and the development of public basic products, it further improves the infrastructure and drives the rapid development of EOS.
EOS Network Foundation
The EOS Network Foundation (ENF) was created to create a prosperous, decentralized future for the EOS ecosystem. ENF is ushering in a new round of Web3 change by encouraging active participation of key stakeholders in the EOS ecosystem, supporting community projects, providing ecosystem funding, and supporting the construction of an open technology ecosystem. As the center of the EOS network and a leading open source platform, ENF was founded in 2021 and has a stable set of frameworks, tools, and blockchain deployment libraries. Together, we have achieved innovation in community building and are committed to creating a stronger future for all.
