The Fundamentals Team at CryptoEQ recently reevaluated EOS and have determined that over the past several months, the risks involved with holding and transacting in EOS are no longer tenable or justifiable and thus has been downgraded to our lowest ranking of Deficient.
Read Report: EOS Investor Report ->
Analysis Methods
CryptoEQ reviews hundreds of different factors/metrics/parameters across ten Core Categories for evaluating value, potential, and risk for crypto-assets by a human-led team. While simply using data scraping to aggregate on-chain/Github/node count/social media data is quick and helpful, it is but only a small fraction of the total picture. This algorithmic-approach (the popular approach by many of the leading crypto “research firms”) is inadequate, lacking the necessary depth, context, and nuance needed to appropriately evaluate a crypto project. Most things in life are rarely so black and white and the wild, new world of crypto assets is no exception.
For examples of why the data-scraping approach is insufficient, take a look at the examples below and answer for yourself.
- Project X has 25 developers and Project Y has 50. Which one has the “better” overall team?
- Project X has 200 Github commits in the last month while Project Y only has 20? Is Project Y stagnating? Is X gaming the system? Or does Project X having to do 10x the work because their original code was buggy?
- Project X has a staking reward of 10% and Project Y 5%. But what about inflation? Or pay-out times/lock ups? Our underlying currency risk? Is one losing value compared to the other? Which project offers the best risk-adjusted returns?
- Project X has 100 nodes and Project Y has 1000. But are there master nodes? A permissioned system? Same consensus mechanism? What’s the node geographic distribution? The concentration of mining pools?
These are just but a few examples of the problems one must solve to adequately evaluate a crypto asset project. Our goal from day one has been to provide unbiased, high-quality, comprehensive research in order to deliver high signal-to-noise, practical, and impactful information you can immediately use to your advantage. CryptoEQ is a research platform and suite of products that bring a multi-factor, comprehensive framework to the complicated world of crypto but presents it all in an intuitive, user-friendly platform making crypto accessible to all.
We are dedicated to providing accurate cryptocurrency ratings based on risk and quality in order to help investors and institutions reduce liabilities and make more intelligent financial decisions.
This approach means having to constantly reevaluate blockchains over time as they build, grow, evolve, fork, fizzle out, etc. as new data becomes available. With this mindset and against the backdrop of our original CORE Categories, we are happy to announce a new CORE Rating for EOS!
Justification for EOS downgrade from Neutral to Deficient
- Despite raising $4.1 billion during its ICO, EOS has not been able to challenge Ethereum in nearly any significant metric: users, dApps, developers, adoption, price, etc. Price and interest in EOS are near all-time lows compared to the leading smart contract blockchain, Ethereum.
- EOS consensus and block validation remains extremely centralized around 21 Block Producers which have participated in cartel-like behavior and vote-buying
- Beyond the cartel/oligarchy-type nature of the Delegated Proof of Stake (DPoS) consensus system, it was revealed that 6 of the 21 (~30%) Block Producers were controlled by one entity, further increasing centralization
- The blockchain has proven it is not censorship-resistant
- Cost of running a node (being a Block Producer) are extremely high, creating barriers to entry for community members and precludes all but the most well-funded entities from participating in the network
- Governance system is convoluted, incomplete, and susceptible to collusion and the formation of cartels
- Because EOS developers must front the cost of onboarding users onto their dApp, building on EOS is prohibitively expensive for most developers possibly contributing to developers leaving the project at an alarming rate
- dApp usage numbers are suspect as a report in June 2019 found that 51% of EOS dApp accounts and up to 75% of dApp transactions were not from actual users but from bots all while dApp development has stalled considerably
- Development activity on the GitHub has declined substantially since 2018 and trending towards zero
Dan Larimer must have seen all this, too, because last month he walked away from the project (his third project to abandon). At this point, EOS is less a decentralized dApp blockchain and more a BTC/ETH treasury.
