Seven years later, the largest financing project in history of US$4.2 billion announced failure

Author: Jaleel Gali, BlockBeats

Today, EOS has been renamed Vaulta.

The ancient public chain, which had been thriving for a whole year for 7 years ago and was regarded as the earliest "Ethereum killer", finally gave up the dream of building a million TPS and announced its turn to Web3 banking business. The once thrill of $4.2 billion in financing, the hustle and bustle of 21 supernodes, and the utopian declaration of millions of TPS - these fragments are pieced together, which is the most expensive idealistic experiment in blockchain history.

Seven years later, no one mentioned this "old age public chain" with a market value ranking of 97th. In the days to come, EOS is no longer a high-performance public chain, but a makeover attempt to move to Web3 banking - it has given up its former dream and even given up its name.

We still use this article to record the craziest product of the ICO era, burning so much money, leaving behind a sighing story.

A tower of Babel piled up with code and dollars

In 2017, the blockchain industry was in its craziest rise. Bitcoin broke through $1,000 at the beginning of the year and soared directly to $20,000 at the end of the year. Ethereum's smart contracts completely changed the crypto world. ICO (initial token issuance) became the hottest financing method, with hundreds of projects pouring into the market, scrambling to build a "decentralized future."

And in this capital frenzy, EOS emerged with the banner of "Blockchain 3.0" and held high the banner of "replacing Ethereum". Its white paper depicts an ideal country: million TPS (transaction volume per second), which completely solves the scalability problems of Bitcoin and Ethereum; zero handling fees, ordinary users do not need to pay expensive Gas fees, and on-chain transactions are smooth like cloud applications; it produces blocks very quickly, and 21 super nodes are responsible for packaging transactions, and are no longer dragged down by miner competition. ; Blockchain supercomputers make decentralized applications (DApps) truly a reality.

Founder BM (Dan Larimer) is EOS's biggest signature. For the technical school, he is a genius - the year after Bitcoin was born, he suggested to Satoshi Nakamoto to change the consensus mechanism, believing that PoW (Proof of Work) is not efficient. Later, he founded BitShares and Steemit, and once became one of the most well-known engineers in the cryptocurrency industry. But BM is not just a tech geek, he also has utopian idealism. He believes that blockchain can change everything, and EOS will be the ultimate solution to the structure of human society.

A genius CTO, coupled with a first-class marketing team, the ambitions of this story are already on the table. On June 26, 2017, EOS started crowdfunding, with plans lasting for one year (in comparison, the financing cycle of most ICOs is only a few weeks to a few months).

Investors from around the world flocked to raise $185 million in 24 hours. In the end, EOS successfully raised US$4.2 billion, becoming the largest financing in the history of the currency circle, far exceeding all projects in the same period, including Ethereum's US$18.5 million.

Top 10 ICO projects in 2018

With US$4.2 billion, EOS has become the super capital of the currency circle.

In April 2018, the price of EOS rose from USD 5 to USD 23, a monthly increase of 360%, and its market value ranked among the top five in the world, second only to Bitcoin, Ethereum, Ripple and Bitcoin Cash. The media has been crazily raising momentum, with headlines such as "EOS will become the first trillion-dollar cryptocurrency" and "BM is the next Satoshi Nakamoto". Ethereum developers have also begun to worry that the rise of EOS will lead Ethereum to decline.

This year, before EOS was launched on the main network, it had become the hottest star in the currency circle. Driven by FOMO (Fear of Missing) emotions, EOS is considered the "next generation Ethereum", and some even predict it will reach $1,000.

Super node campaigns have become global hot spots, with "godfather" figures such as Li Xiaolai and Laomao entering the market with high profile, and exchanges, mining pools, Wenzhou capital and even traditional funds flocking to it - this campaign is called "blockchain's Wall Street IPO." China, the United States and South Korea launched a "country war in the currency circle", and the Korean community shouted "Not investing, is not a Korean." Li Xiaolai's coin capital held 4 node tickets, and Wenzhou Gang brought 8-digit EOS to the market to buy goods.

4.2 billion US dollars in fundraising, star projects, dark horse public chain, and a lot of attention. BM went to Hong Kong and was picked up by the project party at the airport in a luxury car. Everything looks so beautiful, but under the feast, everything is built on the Tower of Babel, piled up by codes and dollars.

EOS only starts at the peak

Under the craze, the problem has quietly emerged:

The voting system of EOS is questioned and easily controlled by large players, and the degree of decentralization of super nodes is questioned; after the main network is launched, multiple technical problems arise, and developers begin to question the stability of EOS; the in-depth intervention of exchanges and capital giants makes the election of super nodes no longer fair, and the community begins to have different voices; after the main network is online, BM began to frequently change the governance mechanism, causing chaos in the community.

But the market was still immersed in carnival at that time, and all doubts were overshadowed by the slogan "EOS is about to change the world." In that golden age, everyone believed that EOS would become the overlord of the future, and even the ultimate form of the blockchain industry. However, reality is often more cruel than dreams. No one expected that this project, which was once highly anticipated, would fall from the altar in just a few years.

Technology Disillusionment: From "Million TPS" to "Distributed Database"

The biggest problem with blockchain at that time was scalability, how to make more transactions in one second. The Bitcoin network can perform 5 or 6 transactions at the same time in one second, and Ethereum is better, with about 20 transactions per second. But these are far from meeting the requirements of blockchain use.

In this case, EOS's million-dollar TPS made everyone crazy. You should know that at the 00:00 on Tmall Double 11, the maximum transaction volume per second is more than 100,000.

However, 4 months after the EOS main chain was launched, the highest TPS was only 3996, which is far from the millions advertised at the time.

EOS is far lower than expected, but on the other hand, Ethereum is gradually improving its performance through the Layer 2 expansion solution. Competitors such as BNB Chain and Solana are also rising rapidly, and EOS's "performance advantages" have been completely eliminated.

People discovered that the so-called "million TPS" was actually a carefully designed text magic - BM quietly added a prerequisite to this number: it must rely on an infinitely expanded side chain ecosystem. According to his vision, if a chain can handle 4,000 transactions, 100 side chains can achieve 400,000 TPS in parallel. But the reality is that until 2023, only 3 side chains of the EOS ecosystem were launched, and two of them became "ghost chains" due to the evacuation of developers. BM's response to this was to turn around and announce on Twitter that "the anti-inflation algorithm is being studied", and at this time EOS's market value has fallen out of the top 20.

Difficulty is the most core issue of EOS.

At the beginning, EOS hit users' pain points with free transfers. Users soon discovered that although EOS transfers do not require a handling fee, they must be used tokens to exchange for CPU resources. When the network is congested, transferring 10 EOS requires a stake of CPU worth 5 EOS - this is essentially a disguised freeze on user funds. In a peak DApp traffic in 2020, 2,000 EOSs can only be redeemed for 1.3 seconds of CPU time, and ordinary users need to repeat operations more than ten times before completing a transfer.

In addition, BM also set a RAM supply upper limit, and the market hyped RAM, causing the RAM price to soar by 100 times, and developers had to spend high costs to purchase storage resources. In 2018, some speculators began to hoard RAM. In just a few months, the price of RAM soared from 0.01 EOS/KB to 0.9 EOS/KB, seriously affecting DApp development, and many new projects directly gave up EOS.

Ultimately, this resource management model makes the user experience of EOS worse than Ethereum: on Ethereum, users can directly pay Gas fees to complete transactions; but on EOS, users must first learn the complex resource staking mechanism, and even spend a lot of money to purchase CPU and RAM, which has led to serious hindering of the development of the DApp ecosystem.

From today's perspective, it is actually difficult for us to understand. With such a poor user experience, EOS at the end of 2018 and early 2019 had an explosion period: dapps mainly based on spinach on chain are very popular on EOS.

Data on December 24, 2018 showed that in the past week, a comprehensive comparison of the DApp ecology of the three major public chains, ETH, EOS, and TRON, found that: Total user count (people): EOS(75,346) > TRON(45,777) > ETH(33,495); Total transaction count (transaction): EOS(23,878,369) > TRON(13,803,322) > ETH (413,019); Total transaction volume (USD): EOS(345,489,773) > TRON(135,201,171) > ETH(44,272,856);

This shows that at that time, EOS was really high hopes by the community, and its ecological prosperity surpassed ETH and TRON. Perhaps it is precisely because of this "Nan Ke Yi Meng" that today's old players in the currency circle always sigh when they recall EOS.

Governance collapse: election bribery, centralization and community

division

Of course, when we talk about governance now, we only seem to be able to laugh, but at that time, the governance of EOS was highly expected. BM is very confident that under his careful design, 21 nodes will make this network far surpass Ethereum.

He believes that there will be 2/3 of the good people on this network. Everyone will do good and do evil to the nodes and users will vote for it. This is a perfect utopia. It turns out he was too naive.

The EOS main network has been online for 3 months, and bribery between nodes has become an unspoken rule. In order to get the block reward of EOS, no one can stop the big players and nodes from investing each other. This is not the most exaggerated thing. It is absurd that nodes do evil on their own.

The mechanism of EOS is that 21 super nodes take turns to release blocks. At that time, a user's money was stolen by a hacker. The solution was that 21 nodes set the hacker's address to a blacklist, making it impossible for the hacker to transfer money. This was a normal and simple operation, but there was a node that was not set at the time. So the hacker transferred the money away during the time when the block was released at this node. Just think nothing happened.

BM tried to bind these behaviors through the EOS Constitution, but soon found that the constitution was unbinding: because the supernode itself was the beneficiary of election bribery, they had no motivation to enforce the rules stipulated by the constitution. The arbitration mechanism is completely useless and has no actual binding force.

In 2019, BM completely abandoned constitutional governance and announced that the EOS community should evolve freely and no longer interfere with the election methods of supernodes. By 2020, the super nodes of EOS have become a game field for exchanges, mining pools, and capital consortiums, and the votes of ordinary coin-holding users are meaningless. DPoS should be a model of decentralized governance, but it turned out to be a powerful political version in the currency circle.

On the issue of governance, EOS has also encountered a big problem: before the EOS main network was launched, BM proposed an innovative "EOS Constitution", hoping to use code + rules to restrict behavior on the Internet, but in just a few months, the constitution has undergone many revisions, and the community has become increasingly dissatisfied. In June 2018, EOS's original constitution allowed supernodes to arbitrate transactions, but due to abuse of power, BM decided a few weeks later to amend the constitution to prohibit nodes from interfering in transactions. In 2019, BM suddenly proposed to abolish the constitution and switch to "user contract governance". The community fell into chaos and did not know how the governance rules of EOS would evolve. This ever-changing governance model has completely lost the trust of developers and investors in EOS.

In this crisis, BM and Block.one (EOS's parent company) gradually shifted their attention from the EOS main chain to the EOSIO software: BM believed that "the future of blockchain is in enterprise-level applications", so it began to promote EOSIO, allowing enterprises to build their own private chains instead of focusing on the optimization of EOS public chains. The core updates of the EOS main chain have almost stagnated, and many key upgrades (such as cross-chain and storage expansion) have not been promoted for a long time.

As a result, the developer ecosystem of EOS has shrunk sharply: the Ethereum community is highly active, applications such as DeFi and NFT have exploded, while the number of DApp developers of EOS has gradually decreased. By 2022, EOS developers will lose nearly 100 people every month, and some EOS browser and wallet projects will be directly closed.

External strangulation: Mining disaster, bear market and the silence of

Block.one

At the end of 2019, the EOS price fell below USD 5, and fell to USD 1.8 the following year, plunging more than 90% from its all-time high of USD 23. When supernodes face survival crisis, developer loss, and market liquidity exhaustion, what the EOS ecosystem needs most is the rescue of its parent company Block.one.

What we all know is that early Block.one raised $4.2 billion, becoming the largest financing event in cryptocurrency history. Logically speaking, this fund can support the long-term development of EOS, support developers, promote technological innovation, and allow the ecosystem to continue to grow. When EOS eco-developers begged for funding, Block.one threw out a $50,000 check — not enough to pay Silicon Valley programmers two months’ salary.

"Where did the 4.2 billion US dollars go?" the community asked.

Part of the answer was disclosed in an email from BM to Block.one shareholders on March 19, 2019: As of February 2019, Block.one's assets (including cash and invested funds) totaled US$3 billion.

For these 3 billion miles, about $2.2 billion was invested in U.S. government bonds, and in the email, this part of the assets are also called "liquid fiat assets".

For some investments, you can find some in public information: game company Forte, NFT platform Immutable, and resort hotels in Puerto Rico. In short, the companies you invest in have one common feature: they have nothing to do with EOS.

When Bullish had not yet become the core business, Block.one also had a trump card in his hand, Voice, a social product deployed based on EOSIO smart contracts, which is also the only product with business relationship with EOS. To create Voice, Block.one invested $150 million, and the biggest expense was to buy a domain name for $30 million. The seller was MicroStrategy, a listed company with the most Bitcoin mentioned above.

But it seems to be a curse of fate. Voice's first press conference lasted for half an hour, with content lower than expected, and there were many disappointments, which caused the price of EOS to fall. More than half a year later, various faults and Bdangsugs occurred on the day the Voice IOS version was launched in the Apple Store. The Voice official website page showed "Error 1020", and said that the website "using security services to protect itself from online attacks." EOS holders were completely disappointed, and Voice finally announced in September 2023 that it would be gradually shut down.

Projects launched by Block.one

The thunder and raindrops are loud and the rain seems to be the usual style of Block.one's investment projects. After that, Block.one did not have a large investment move and began to completely lay down. Today, Block.one has 1.64,000 Bitcoins lying on its account, which means its net worth has increased from 3 billion in 2019 to 16 billion US dollars now, five times more, and it can be called a master of liquidity management.

There is no actual DeFi, NFT, and DApp ecosystem support program. In contrast, the Ethereum Foundation and the Solana Foundation continue to subsidize developers and promote technological innovation, while Block.one does almost nothing.

An early EOS investor asked angrily on Reddit: "We invested in EOS because we promised to subvert the blockchain, rather than letting Block.one use this money to speculate on Bitcoin!"

Although Block.one is currently the second largest number of Bitcoins to MicroStrategies, with a total of 160,000 BTC worth US$16 billion. But EOS, which received no support from these huge sums of funds raised, continued to go downhill.

Block.one's governance chaos is even more shocking. Block.one is becoming more and more like a "family business" with CEO BB as the core, and BM is not in this family.

Sister is CMO: CEO Brendan Blumer's sister Abby airborne chief marketing officer. Her only visible "political achievement" is to change the EOS brand color from tech blue to "softer Morandi gray".

Mother management venture capital: Blumer's mother Nancy is in charge of the EOSVC venture capital fund. The social application Voice led by it has less than 10,000 users per year, but it costs US$150 million.

BM's puppet show: Founder BM revealed on Twitter that he had no right to make decisions and could only watch the team pour resources into the enterprise-level toolkit EOSIO - a project customized for giants such as Walmart, which has nothing to do with the EOS mainnet.

In 2021, the community launched a "fork uprising" in an attempt to cut off the control of Block.one. The EOS Foundation came forward as a community representative to start negotiations with Block.one. But over a month, the two sides discussed various plans, but no agreement was reached. Finally, the EOS Foundation joined forces with 17 nodes to revoke Block.one's power and kicked it out of the EOS management. Without the parent company's EOS, it is becoming more and more like a DAO.

After EOS split from Block.one, the EOS community held several years of lawsuits against the funds for the initial ownership of the funds, but so far Block.one still has ownership and use of the funds.

What’s even more ridiculous is that since 2024, BM’s Twitter content has almost no longer involved blockchain, and the only technical discussion is just a sporadic mention of database optimization. By contrast, his focus has turned completely to theological sermons, with high focus on biblical interpretations, the end of the world prophecy of geopolitical conflict, and criticism of mainstream Christianity…

BM 's Twitter content

Looking back at this seven-year crypto epic, the collapse of EOS has long been full of warnings: No matter how high the TPS is and how exquisite the resource model is, if the user experience is so complicated that it discourages ordinary people, everything is meaningless. The former "Ethereum killer" eventually died in the quagmire of its own economic model, governance chaos, and technological stagnation.

Seven years ago, EOS crowdfunding attracted US$4.2 billion, which was once considered the most brilliant financing miracle in blockchain history; 7 years later, its story became the biggest "joke" in the currency circle.

In the end, EOS did not kill Ethereum, it killed itself first.