EOS Reward Structure Could Leave Blockchain in Tatters

EOS Reward Structure Could Leave Blockchain in Tatters

EOS coin could be heading for a period of decline following news that many of the blockchain’s producers are losing money. Due to the current level of interest from those wanting to buy EOS, the price is at a point where those contributing to the blockchain aren’t able to make any money.

News of what’s seen as a fundamental flaw in the EOS reward system came via an altShiftdev survey by the creator of My EOS Wallet. Of the 26 block-producers surveyed, all commented that they are currently losing money by processing blocks of EOS transactions. The reason for the drop in earnings is down to the project’s flat compensation fee. Unlike blockchains such as Bitcoin (BTC) that adjust payments based on the current price of the coin and the difficulty of processing a block, EOS has a flat 1% reward.

EOS Not Producing for Producers

Initially, limiting payments was to ensure producers didn’t earn too much. In essence, this was to disincentivize mass blockchain mining outfits from dominating the network and, in turn, having some level of control over it. However, as the price of EOS has fallen from $24 in May to around $2, the flat structure has resulted in financial losses for producers. As per the survey, around $4.50 is the breakeven point. Therefore, at the current level, EOS block producers are having to spend their own funds just to stay afloat. In light of the recent news, members of the community have called for a dynamic compensation structure.

“A full 73% of BP surveyed want Dynamic Inflation, knowing full well it would limit their profits in bull markets and almost 35% of them were too worried about losing their current votes to do anything about it, even while on the verge of bankruptcy,” reads the recent survey.

EOS survey

EOS survey could be bad news for blockchain.

Without making changes, the number of block producers will gradually decline meaning the blockchain would eventually come to a standstill. At this point, EOS transactions wouldn’t be processed and the network would, essentially, be dead. However, the EOS team have showed they’re not afraid to innovate. In September, a vote was taken to reduce the cost of creating an EOS account for developers. After 15 block producers agreed to the move, the cost of creating and running decentralized apps (dApps) on the network was reduced by around 25%.

EOS Has the Power to Innovate

As well as innovating, EOS has also shown its resilience this year. A security breach on October led to counterfeit EOS coins entering the market. Despite taking an initial hit, the price-per-token didn’t completely crumble under the weight of the bad news. With that being the case, there is hope for those that currently own EOS. What’s more, with the issue now out in the open, the likelihood of change has increased dramatically. Although a solution may take a while to materialize, the evidence suggests that those with a direct influence on the EOS blockchain want things to change. If that happens, there’s no reason this coin couldn’t rally in the first half of 2019.

*Information in this article should not be taken as investment advice. 

 

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