June EOS BP Meeting Recap

Introduction

The monthly EOS Block Producer (BP) meetings are intended to establish regular communications between the top 30 EOS BPs and the EOS Network Foundation (ENF), to foster an open dialogue between network operators and custodians in support of the mutual development of the EOS ecosystem.

Meeting Overview

The meeting began at 1:00 UTC on June 14th, 2023. Eighteen BPs attended the call, and a total of twenty-three people participated in the discussions, which ran for one hour. The Interprefy tool was used in the call for synchronous translation to facilitate the free flow of information across multiple languages in real-time. 

Beatrice Wang, Communications Manager for ENF, opened the meeting by welcoming the attendees and expressing gratitude for their presence. 

The Regulatory Environment and Our Position Within It

ENF Founder and CEO, Yves La Rose opened by discussing the current regulatory environment, particularly focusing on the recent actions taken by the SEC against Binance and Coinbase. He highlighted that while the SEC named multiple coins and projects as securities, EOS was not included in that list.

Noting that EOS was formed and launched by a decentralized community and is considered a utility token, the important role that centralized bodies like ENF and ENV play within the ecosystem was also emphasized. The ENF is continuously evaluating processes and structures to prevent encroachment into security territory. It was also emphasized that both the ENF and ENV operate with the guidance of legal counsel and conduct thorough research to ensure EOS stays clear of potential securities classification; this has been a priority since the inception of ENF. 

Yves assured the attendees that there has been no indication or reason to consider EOS a security, and while the ENF does collaborate with government entities in various jurisdictions to facilitate growth for the EOS ecosystem, no government regulatory agency has approached the ENF in this regard. Finally, the ENF is continuing to monitor the situation in the wake of the significant regulatory impact to the market over the past few weeks.

Navigating Market Trends and Ensuring Financial Resilience

Moving on to address the impact of recent market trends on the wider industry, including EOS, Yves noted that the market had experienced a significant downturn of approximately 35-40%, with an additional 5% drop observed in Asia the day of the meeting. While EOS itself was not directly affected by regulatory moves, the indirect impact that was being felt by EOS and the industry as a whole was also acknowledged.

The implications of market conditions on the ENF’s funding, which relies on the EOS token, was touched upon. As the value of the EOS token decreases, it limits the organization’s ability to execute initiatives. The ENF constantly reevaluates its budget and initiatives and has maintained a conservative fiscal approach. The EOS community has always operated with frugality due to the lack of previous funding opportunities and the value of the resilience that has been developed through this mindset.

Considering the not-for-profit nature of the ENF, it was explained that there are regulations and limitations on spending funds and holding a Treasury. These restrictions ultimately benefit token holders and support the organization’s positioning as a non-security entity.

While acknowledging the market’s impact on the ENF and network participants, Yves expressed gratitude to all attendees for their continued participation. He reassured them that he did not anticipate any foreseeable impact on external facing initiatives and community funding. These initiatives aim to allocate funds to projects within, and for, the community and the ENF is confident in their continuity despite market fluctuations.

ENF Token Sales, Strategic Partnerships, and Market Maker Dynamics

Addressing concerns raised about speculation around the ENF’s token sales and any resulting impact on the market, it was emphasized that the downtrend observed in the market is not exclusive to EOS and does not affect EOS differently. The ENF has not sold any tokens on the open market for a significant period of time, and it was explained that the strategic partnership with DWF required token accumulation to establish a balance sheet necessary for the partnership, while all token sales to DWF were conducted through an over-the-counter (OTC) arrangement, keeping those tokens off the open market.

Further clarifying the nature of the partnership with DWF, responding to inquiries regarding token sales to DWF and their ability to mitigate the downward market trend, it was confirmed that tokens were indeed sold to DWF through the OTC process. This approach offers advantages as DWF, being a market maker, utilizes the tokens for utility purposes by pairing them with stablecoins such as USDT/USDC and engaging in market-making services. This not only prevents downward pressure on the token price but also puts the tokens to work, fulfilling a specific role.

In addition to addressing downward pressure concerns, the importance of staying clear of actions that could potentially classify EOS as a security was underscored. Selling tokens on the open market could raise questions about the motives behind token purchases. To mitigate this risk, the ENF engages in OTC deals, subjecting the entities involved to rigorous Anti-Money Laundering (AML), Know Your Customer (KYC), and Know Your Business (KYB) procedures. 

Also addressing the misconception that DWF, as a market maker, should have been able to prevent the token price from declining, it was reiterated that the overall market decline of approximately 30% affected multiple coins that also have very well established market makers. While market makers can protect against some volatility, they cannot single-handedly control an entire market. Furthermore, DWF’s ability to influence the market is limited due to their possession of a relatively small number of tokens at the current time. As a market maker, efficiency increases with a larger token supply, but the ENF has not possessed a significant number of tokens to provide to DWF.

Summary of Fund Creation, Token Transfer, and ENV Investment Activities

Next addressing the recent transfer of approximately 22.7 million tokens that  signaled the creation of Fund I, it was explained that the tokens were transferred to an exchange account on Kraken which serves as the corporate exchange account for the ENV. Kraken was chosen as an exchange due to previous closures of Bitfinex and Binance accounts in Canada.

Acknowledging concerns raised about the large transfer of tokens in one go, it was stated that minimizing visible transactional movements aligns with the legal advice that has been received. The objective is to distance EOS from potential security classification. However, significant oversight remains in place, as the Cayman Islands jurisdiction was deliberately selected for the ENV to fulfill mandatory yearly audits, providing an additional layer of accountability.

Yves spoke to the importance of balancing transparency and protecting EOS from financial decision-making based on transaction information. Although specific transactions cannot be shared, the ENV is committed to reporting on investments made while oversight is also provided by the group of seven block producers (BPs) and a quarterly report will be provided to BPs on the basis of confidentiality.

The completion of entity incorporation and ongoing review of subscription documents was announced. The ENV has reached agreements with projects for investments in the primary market component of ecosystem development. While specific details will be shared in upcoming press releases, there was news of a significant investment that took several months of negotiation. The identity of the project was withheld to maintain confidentiality until marketing efforts can be initiated.

Furthermore, it was revealed that the ENV is actively pursuing strategic partnerships with other funds and venture capitalists (VCs). Two partnerships with different VCs have been established, and further information will be announced in the coming weeks. Despite the market’s current downturn, the ENV is poised to make its initial investments and continues to evaluate DEX platforms and projects through negotiation. Yves assured attendees of his commitment to negotiating diligently for the benefit of all token holders and expressed excitement about the agreed-upon terms with the four projects under consideration.

Financial Management and Strategic Positioning

The ENF practices conservative financial management and operates within strict guidelines that prevent it from taking on debt or loans. Despite market challenges, the ENF is well positioned and making prudent decisions.

The primary goal of the ENF and ENV is to position EOS for the next bull market, ensuring the network benefits from it. While EOS has thus far failed to capture the momentum of previous bull runs, resulting in a drop in rankings, over the past year and a half, EOS has maintained its relative rank stability.

Addressing concerns about expenditures, some context was provided by comparing the ENF’s spending with that of its competitors, speaking to the frugality with limited resources, despite its lower spending, EOS competes with entities that allocate 10 to 20 times more funds to maintain their rankings. ENF budget allocation involves creating and maintaining various initiatives as well as hiring, documentation, and the associated costs.

The ENF aims to distribute resources fairly based on value and feedback received from multiple sources. Continuous course correction and adjustment based on feedback play a vital role in stewarding EOS’s resources effectively, and a premium is placed on establishing a strong foundation to ensure that EOS can take full advantage of a rising market, in contrast to the challenges faced by competitors. The positive perception of EOS among various strategic partners, who regard it as undervalued and presenting significant opportunities was also mentioned.

Updated Travel Plans and Event Attendance

Yves previously scheduled trips to Hong Kong and Japan have been canceled, but he will be rescheduling the Hong Kong visit due to important business dealings and opportunities in the region. Yves has also applied for a special Hong Kong visa, requiring him to return in person. Yves also plans to attend the WebX Conference in Japan at the end of July.

The ENF’s sponsorship at Token2049 has been canceled in light of recent events and budgetary prudence. Instead, the ENF will focus on attending Korea Blockchain Week in Seoul. Yves also mentioned the possibility of heading to Hong Kong either before or after the event in Seoul.Regarding future trips, Yves announced his intention to attend an UpBit developer conference in November. Travel plans are still subject to change and updates will be provided in advance, considering the availability of attendees in different regions to potentially arrange meetings.

Block Producer Attendee List