Block.one’s Settlement Offered a ‘Tiny Fraction’ of the $4.1 Billion Raised — EOS Network Foundation CEO
According to Yves La Rose, the founder and CEO of the EOS Network Foundation (ENF), the blockchain software company Block.one’s failure to financially back the EOS ecosystem after the 2018 initial coin offering (ICO) is one of the many reasons why the community felt compelled to take over.
Building Everything From Scratch
However, in written answers sent to Bitcoin.com News, La Rose revealed that the EOS community had to build everything from scratch since it didn’t “own any of the existing intellectual property.” In addition, La Rose said capital had to be injected” as quickly and effectively as possible” since the ecosystem had been starved of capital for years. This, however, had to be done before processes and frameworks that drive the decision-making were in place.
When asked about Block.one’s settlement proposal and why she urged the community to reject this, La Rose said the offer represented just “a tiny fraction of the $4.1 billion that Block.one raised from the community in its ICO sale.” She also argued that the proposed settlement fell well short of the $1 billion that the blockchain software company promised but failed to inject into the EOS Network and community.
As has been reported by Bitcoin.com News, in the years that followed the ICO, interest in EOS waned and this is evidenced by the drop in the crypto asset’s price from an all-time high of $22.89 seen in April 2018 to $0.57 on Sept. 21, 2023. However, despite this, La Rose suggested in her answers sent via Telegram that the crypto asset is on a path to recovery. She pointed to the Japanese Virtual and Crypto Asset Exchange Association’s recent decision to give the crypto asset whitelist approval.
Below are all of Yves La Rose‘s answers to questions sent.
Bitcoin.com News (BCN): Back in 2018, EOS had the biggest and most hyped Initial Coin Offering (ICO) ever at $4.1 billion. It had enough resources to build and scale the biggest blockchain network in the world. In your opinion, what went wrong and why did the community feel compelled to take over?
Yves La Rose (YR): The EOS community did not benefit much from the $4.1 billion raise because that capital went to the private entity that conducted the token sale (Block.one) rather than back into the EOS ecosystem. Only a small fraction of that capital ended up being deployed to the benefit of the EOS community.
Rather than re-investing capital into the EOS ecosystem and community, as promised during the ICO, Block.one instead invested the majority of the capital into Bitcoin, shareholder buybacks and private for-profit businesses unrelated to EOS.
Throughout the early years of EOS, the software development was very strong and was way ahead of its time. The community may have grown disappointed in the lack of ecosystem investment, but the technical contributions to the protocol were still meaningful for a while.
In the year or two leading up to the founding of the ENF [EOS Network Foundation], we had seen a significant decline in the rate of code production and the quality of the code that was being output for the open-source EOSIO software stack that powered EOS. What we saw was that a lot of the developers that were remaining in Block.one were repurposed to their centralized exchange, Bullish. So there were very few people still remaining on EOSIO core code development and those that were senior and still capable of doing a very high level of code, qualitatively, were repurposed for Bullish. At the same time, many engineers began exiting the company due to their discontent with the new direction and lack of focus on open-source blockchain development.
At a certain point, it was clear that the incentives were no longer aligned between EOS and Block.one. This was exacerbated after Block.one attempted to sell their unvested token stake, which is what led to the EOS node operators reaching a consensus to stop their token vesting and essentially fired Block.one for not fulfilling their commitments.
Shortly after that, the EOS community forked the codebase, hired all of the best engineering talent with deep EOSIO protocol experience, and then rebranded it to what we now call Antelope. The EOS Network officially hard-forked to our community-led Antelope codebase almost exactly one year ago on what we referred to as EOS Independence Day.
BCN: The EOS community members have come together under the umbrella of the EOS Network Foundation (ENF) to revive and nurture the ecosystem. Can you talk about the biggest obstacles to the community-led revival of a blockchain network which was apparently abandoned by the company that launched it?
YR: After founding the EOS Network Foundation two years ago, the project was already [an] established four years old project. The EOS community didn’t own any of the existing intellectual property: the website, Github, social media accounts, documentation, or even the name of the technology itself. All of this had to be built again from scratch and existing listing sites, data aggregators, and exchanges, all had to be contacted individually to be made aware of the leadership change and new digital properties. This was quite a difficult process and took a long time to overcome. We had to essentially build a brand new identity from scratch.
Another obstacle was that the ecosystem had been starved of capital for so long that we had to find ways to deploy capital as quickly and effectively as possible without necessarily having the time to develop processes and frameworks to drive the decision-making. What helped us get through this period was that many of the top ecosystem contributors had essentially been on a 4-year job interview at that point, so we had a pretty good idea of who and what to support. We formed multiple working groups, or think tanks, with the best and brightest in the ecosystem to help develop the roadmap and priorities for the network. We’ve been working diligently on executing the results of that work, and much more, ever since then.
BCN: The community and Block.one have been locked in a legal battle for a while now, and recently you urged the community to reject its $22 million settlement proposal. Why did you do this and what are the implications of of accepting such a settlement in the future?
YR: The proposed settlement amount of $22 million represents a tiny fraction of the $4.1 billion that Block.one raised from the community in its ICO sale and the $1 billion that Block.one promised to invest in the EOS Network and community but failed to do. On behalf of the EOS community, the ENF will continue to engage with stakeholders to ensure that Block.one is held to account for its promises to invest $1 billion in the EOS Network and community.
Block.one and its representatives made strong formal public commitments that led to stakeholders making investment and development decisions during and well beyond the year-long ICO. It has become apparent that there was no intention of following through on the commitments which has led to significant financial losses.
While EOS community members who joined the settlement may recover a small percentage of the losses that they suffered, the benefit to Block.one is much greater as community members who joined the settlement will be barred by the terms of the settlement from bringing any future claims against Block.one and its founders: $22 million is too small a price for Block.one to pay to avoid having to be held to account for their bad acts in the future.
YR: My journey in the EOS ecosystem began as the CEO and co-founder of the EOS Network block producer prior to the mainnet launch in 2018. We started out as a relatively unknown standby block producer, but over the years we gained credibility through leading many different ecosystem initiatives. We also led the coordination of several EOS system upgrades. We eventually became the #1 ranked block producer.
Over time it became more and more clear that EOS was in need of a focused entity that has, at its core, fulfilled a mission to enable developers, businesses, and individuals to build on EOS. A top-down appointed hierarchy responsible for the urgently needed allocation of funding and coordination of resources that is common in other ecosystems, but was lacking in EOS due to Block.one’s failure to take on this role, despite their $4.1b token sale.
It was obvious that this void needed to be filled, so in 2021, I stepped down as CEO of EOS Nation and began taking proactive steps towards gathering consensus from the network to support and fund a dedicated non-profit foundation to act as stewards for EOS. After several months of planning and coordinating the block producers, the EOS Network Foundation was born.
BCN: EOS recently received whitelist approval from the Japanese Virtual and Crypto Asset Exchange Association, allowing the native token to trade against the yen on regulated exchanges in the country. How important is the Japanese market, and the Asian market in general for EOS?
YR: EOS receiving regulatory approval in Japan was a huge accomplishment that only 78 out of the thousands of cryptocurrencies have been able to achieve.
Clearly defined regulatory frameworks are the holy grail of the crypto industry and Japan is one of the few countries that has one in place. I believe that there is still an incredible opportunity for more countries offering clarity and oversight to absorb market share. Hong Kong is another area that stands out in this regard with their recent initiatives.
Japan is important for EOS because it is a major growing market for web3 with an established regulatory framework and a supportive government. Their prime minister recently stated “Web3 is the new form of capitalism” in his keynote speech at the WebX Tokyo conference. Japan is also significant to the web3 space due to its established gaming industry and gaming intellectual property that are ripe for tokenization.
Asia has always been an important geographic area for EOS going back to its earliest days and it is where the vast majority of token holders and token weight resides. I strongly believe that the next wave of innovation in web3 will come in the form of blockchain-based gaming and Asia is clearly a leader in that space.
The Asian markets are also offering more welcoming rules to regulate crypto-related activities during a time when regulation is tightening in other parts of the world. In addition to the advantageous regulatory climate being offered, there is just a much larger population that is incomparable to other parts of the world so there are many more individuals who are able to participate as more retail markets continue to open up in places like Hong Kong.
BCN: In your opinion, what are the biggest problems with the crypto industry right now and how can they be solved?
YR: Generally speaking, blockchains and blockchain-based applications are still clunky and difficult to use for new users. They need to become easier to gain any kind of mass adoption.
Most people outside of crypto don’t want to use a blockchain or an NFT, they just want to use things that make their life better or more enjoyable. Mass adoption will come by using the technology to build things people want, but making the blockchain invisible to end users.
BCN: What’s the future direction of the EOS blockchain, especially considering there are a plethora of layer-ones vying to grab a piece of the pie?
YR: EOS is focused on delivering a user experience similar to what Web2 users expect and have become accustomed to. This means abstracting away most, if not all, of the cumbersome realities of Web3, including resource management. As more stakeholders start leveraging blockchain technology and we, as an industry, move towards mass adoption of various use cases and applications, high-frequency low-value transactions will become the norm and the EOS model will be there supplying the vast demand.
Users shouldn’t have to worry about managing their own resources or paying gas fees. EOS’s scalability offers developers low, predictable costs, allowing them to manage user resources on their behalf, offering a far better UX.
Mass adoption of blockchain won’t come from an app that’s simply built on top of a blockchain. It will come from apps that are made better by a blockchain but hide the clunky blockchain UX from its users.
BCN: EOS recently launched EOS EVM (Ethereum Virtual Machine) to bring EVM support in an attempt to revitalize the platform. Can you talk about the role of EVM compatibility in building a multi-chain future and why it’s important for different crypto market players to combine resources?
YR: What the EVM brings to EOS is essentially the ability to open the doors to an immense amount of developers that didn’t previously have the means to come into the EOS ecosystem and the EOS EVM opens that door for them.
The Ethereum Virtual Machine has undoubtedly become the standard for web3. This doesn’t mean that technologies outside of the standard cannot exist, but they must be interoperable with Ethereum to remain competitive. In our latest release of the EOS EVM, smart contracts on EOS native can read and call smart contracts to generate atomic transactions on EOS EVM and vice versa. The concept of interoperability between virtual machines is quite exciting.
EOS EVM allows EOS to leverage the largest developer community in web3 and developer tooling such as Hardhat and Openzeppelin. These developers are already familiar with EVM and have built a wealth of applications that can run on it. All of the tooling, protocol improvements, and open-source code from Ethereum is now at the fingertips of EOS developers. At the same time, our own engineers are also making their own innovative contributions to code such as the EOS EVM version of the Silkworm C++ Ethereum implementation, which is accessible to the rest of the Ethereum community since it is open source. Everyone benefits.
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