The EOS Network continues to serve as a remarkable case study on the potential for Web3 network evolution. Since the EOS Network Foundation (ENF) first emerged and was endowed with the resources necessary to champion the interests of the EOS Network, it has pressed forward to establish multiple programs for public goods funding while cultivating a strong team capable of pursuing renewed development on behalf of the EOS Network. In recent days, The EOS Network adopted a new proposal that enables the programmatic issuance of network funds to reliably sustain organizations such as the ENF that work for the benefit of the EOS ecosystem. To get a better understanding of the milestone that was just crossed and its significance for the future of the network, let’s take a brief look at the history of governance and tokenomics on EOS thus far.
EOS Network Governance
The underlying consensus mechanism on EOS, Delegated Proof Of Stake (DPoS), empowers tokenholder-selected entities known as Block Producers (BPs) to produce blocks and determine the canonical blockchain. The top 21 BP candidates ranked by aggregate delegated token stake are selected as the active block producers. The 21 active BPs effectively act as representatives of the token holders, which allows them to efficiently reach governance decisions through on-chain multisig approvals for issues such as activating consensus upgrades to enhance the blockchain protocol, or adding new features provided by system-managed smart contracts.
The Pre Public-Goods Era of EOS
When EOS first launched, it had an annual issuance rate of 5%. The Block Producers (BPs) received 1%, and at the time, the remaining 4% accumulated in a savings account (eosio.saving). Prior to the launch of the network, the existence of a Worker Proposal System (WPS) was intended to be developed, and it was thought that the WPS would leverage the 4% issuance to fund public goods and ecosystem growth. However, despite multiple attempts to launch a WPS, no system of the sort ever materialized.
Without a trustworthy vehicle for distributing the 4% issuance that continued to accumulate in eosio.saving, the tranche of tokens held there was burned on two separate occasions, ~34m EOS each time, in both 2019 and 2020. After the second such burn, the issuance rate on the EOS Network was reduced to 1%, and Block Producers (BPs) remained the only entities receiving direct funding from the network itself. The EOS Network had enough incentives to operate its infrastructure, but lacked a foundation, or any ability to meaningfully coordinate or self-direct resources towards the development of public goods.
The DAO That Hired A Foundation
On August 25th, 2021, the EOS Network, a Decentralized Autonomous Organization (DAO), operated and governed by the active network BPs who are themselves selected by EOS token holders, expressed support for the ENF by approving a proposal put forward by ENF CEO, Yves La Rose. This proposal called for the creation of an eosio.grants account, the re-activation of the eosio.saving account with 2% inflation, and approving the transfer of ~3.4M EOS to eosio.grants from the eosio.ramfee and eosio.name accounts; these particular 3.4M EOS were generated through legacy fees that the network had generated prior to the EOS Network’s Resource Exchange (REX) launching. With these actions, the EOS Network Foundation was born.
Sowing the Seeds of Trust: A Joint Effort with the EOS Network
When the ENF first launched, the first 3.4m EOS was to serve as an initial funding round that would showcase whether or not a foundation could make a positive impact on the network. If the ENF was successful in demonstrating value and gaining trust through its use of the initial legacy funds, then the next step would be for the ENF to appeal to the EOS Network for additional disbursements by submitting MSIGs that requested the transfer of funds from eosio.saving to eosio.grants.
In the eighteen months since the formation of the ENF, a positive network impact has undoubtedly been manifest; a series of Blue Papers have been funded, and authored, that gave rise to several key development initiatives, several public goods funding mechanisms such as Pomelo and the Direct Grant Framework have emerged, the multi-network Antelope Coalition was formed, crucial development milestones have been reached, along with major technological innovations being realized. At the same time, the ENF’s commitment to transparency through regular Quarterly Reports, Project Health Updates, fireside chats, and other key initiatives have continued to increase the frequency and quality of information being made available to the EOS community.
While these initiatives have been underway, the ENF has requested additional funding on three occasions, and each request was successfully granted by EOS BPs, allowing the ENF to continue its work.
A Foundation of Accountability—Checks and Balances
The eosio.grants account, which effectively functions as the ENF treasury, is ultimately owned and controlled by the EOS Network (eosio@active), while the active keys to this account are managed by the ENF. Under this permission structure, were it ever to be deemed that the ENF has ceased fulfilling its mission to serve the EOS Network, active EOS BPs could remove the ENF from its active permissions on eosio.grants, and in so doing, cease funding the ENF.
An additional safeguard in place for any transfers from the eosio.grants account is a requirement that ⅔ of the active key signers approve the transfer, and a 72 hour time delay before any transaction can be executed. During this 72 hour window, the BPs are able to stop any transactions from executing should they be seen as malicious.
As has been demonstrated on multiple occasions such as with the ENF initiated Recover+ program, EOS BPs are capable of acting swiftly when required. For example, BPs moved to stop the “Pando Rings” exploit and were able to react in less than 24 hours to save 2M EOS from being stolen.
The Rise of the New EOS
With the ENF consistently delivering on its stated goals and strengthening its capacity to act across a variety of domains, The New EOS is now emerging. A couple key developments in the latter parts of 2021 and 2022 ensured the network’s autonomy and galvanized its capacity for sustained investment and ecosystem development in years to come.
On September 21st, 2022, EOS community engineers, led by the ENF, rallied and forked the stable EOSIO 2.0 code repository into a new codebase which was then improved upon to eventually create 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 consensus to fund EOS Network Ventures (ENV) with the 68m EOS that had been previously burned in 2019 and 2020. With this seed investment from the EOS Network itself under control of the EOS Fund Management (EFM) the intention is that the EFM become a minority LP in the larger ENV fund, with most capital coming in externally. The fund will focus exclusively on projects building on EOS by making strategic equity and token-based investments into tech startups across the Web3 space, with a focus on GameFi, the metaverse, eSports, NFTs, fintech Web3 businesses, and entrepreneurs building on the EOS public blockchain.
The ENV will be an autonomous body in its own right, a peer to the ENF with a complimentary but distinct mission. Crucially, profits earned by the EFM will go back to programs that benefit the EOS community. This could include initiatives such as buy back and burn or profits being allocated to future investments.
The Evolution Towards an Autonomous Ecosystem
The epic string of developments over the last year and a half brings us back to the pivotal MSIG of recent days. On February 7th, EOS Network BPs approved an MSIG proposed by EOS Asia that adds a smart contract to the eosio.saving account. This smart contract now enables the network issuance that flows into eosio.saving to be programmatically distributed to other accounts and receive on-going funding directly from the EOS Network. In the near term, the default parameter for this smart contract directs 100% of the funding allocation to the eosio.grants account, which is managed by the EOS Network Foundation. However, the introduction of a system contract that allows issuance to be programmatically distributed creates a pathway towards the evolution of a robust ecosystem of contributors being funded directly by the network.
Additional details of this smart contract and code can be found here:
With this new development, the BPs still own eosio.grants and the same security timelocks still apply as previously. The only difference is that inflation will drip in on a regular basis instead of large infrequent top-ups. This will also further ensure that the ENF can remain apolitical, without consideration over who is or isn’t in the top 21 at any given time.
In the long term, this new development opens up a host of possibilities for EOS to continue further evolving as a self-governing, self funding, and increasingly autonomous ecosystem where other entities, smart contracts, or even DAOs may receive programmatic allocation of resources from the network, provided these entities receive approval by 15/21 of the active BPs of the network.
Previously, only BPs were able to receive programmatic funding from the network. Now the possibilities are endless with the capacity to directly fund an unlimited number of independent entities working on behalf of the network.
Right now the ENF is directing all funds to ecosystem initiatives as they’re being battle-tested and proven for their viability and reliability. Over time, the EOS Network community will be able to identify essential programs and work to establish them as autonomous parts of network operation with direct funding from the network itself.
Today, there is nothing standing in the way of an entity requesting direct, programmatic issuance from eosio.saving by presenting the BPs with a 15/21 MSIG proposal. However, for such a proposal to succeed it would need to be approached with great care, thorough preparation, solid reputation, and likely the support of existing network custodians and operators. Such a day will inevitably come, as we continue our evolution towards a more robust and autonomous EOS ecosystem.
In less than 18 months, the EOS community took control of its own destiny, and has gone from an ecosystem with no funding outside of BP rewards to empowering the ENF as an established entity for managing core development, grants, and public goods. Soon, another independent entity in the form of the ENV will come online to oversee venture capital deployment for innovative new business models leveraging EOS. The network has never been in a better position to chart its own course and achieve the potential we have long sought to realize. With our newfound ability for programmatic funding within the EOS ecosystem, we’ve secured the capacity for network custodians such as the ENF to continue directing resources on behalf of the network, while opening up a whole new world of possibilities for greater network participation and autonomy. The potential for EOS as a DAO of DAOs is now beginning to come into focus.
The EOS Network is a 3rd generation blockchain platform powered by the EOS VM, a low-latency, highly performant, and extensible WebAssembly engine for deterministic execution of near feeless transactions; purpose-built for enabling optimal Web3 user and developer experiences. EOS is the flagship blockchain and financial center of the Antelope framework, serving as the driving force behind multi-chain collaboration and public goods funding for tools and infrastructure through the EOS Network Foundation (ENF).
EOS Network Foundation
The EOS Network Foundation (ENF) was forged through a vision for a prosperous and decentralized future. Through our key stakeholder engagement, community programs, ecosystem funding, and support of an open technology ecosystem, the ENF is transforming Web3. Founded in 2021, the ENF is the hub for EOS Network, a leading open source platform with a suite of stable frameworks, tools, and libraries for blockchain deployments. Together, we are bringing innovations that our community builds and are committed to a stronger future for all.