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Your city has just decided to introduce fiber optic Internet access. After deliberation and town halls and careful planning by the engineers, the municipality agrees to buy kilometers of cables for the installation.
Just as the mayor is about to sign the contract, members of the city council and the Chamber of Commerce buy up every inch of fiber – and sell it back to the public at a massive premium.
This is the situation EOS is facing, a decentralized community whose governance is somewhere between the Philadelphia Convention and a Lord of the Flies in the open market. Instead of focusing on creating new dApps and expanding the network, some developers have found a more profitable business model: trading network resources.
A speculative market has emerged for RAM, the gold of the EOS economy. RAM is critical to building and growing distributed applications. Unlike a token, however, there is no secondary trade – RAM is bought and sold over the network through an algorithm that mimics market prices.
As it is a scarce resource, RAM prices have skyrocketed over the past week, peaking at 900 EOS per megabyte. Dan Larimer (EOS CTO) suggested revising the pricing algorithm. Until then, an EOS rich list compiled from data visible on the EOS blockchain shows that users are hoarding hundreds of megabytes of RAM.
This bubble could hinder the growth of EOS. For one, a 4KB fee is required to open a new account, which is around $ 30 at peak prices.
Ram prices have risen sharply in the past few weeks. Source: eos.feexplorer.io
Ram for sale
Some developers have made significant profits from the sale of their memory. Everipedia, which aims to establish a blockchain-based, for-profit alternative to Wikipedia, started buying RAM in June to throw its EveripediaIQ token out of the air. But when prices went up, they decided to sell instead.
Everipedia, together with its partners Ikigai Asset Management and Dollar Vigilante LibertyBlock, is one of EOS’s best block producers.
“I bought 500MB of RAM on behalf of Everipedia,” says Kedar Iyer, Director of Software at Everipedia. “At some point we decided that the RAM market was overpriced and we’d better buy back later and then sell.”
“We thought it could go up by a maximum of 50% and wanted to buy while it was still cheap [around 20 EOS/MB]”Said Mr. Iyer over the telegram.” But by 700 we all decided it was going to be a joke and sold what we had left. “
An EOSFlare account identified by Mr. Iyer as his personal account shows that after spending 10,000 EOS to purchase the 500MB of RAM, the proceeds from the resale exceeded 81,000 EOS – Everipedia made approximately $ 600,000 that way.
Everipedia CEO Sam Kazemian defended the trades while also agreeing that the RAM market was out of control. “We strongly support increasing the RAM limit,” he said of Telegram. “As a developer, it’s important that it be used for both real-world purposes and for market speculation. Markets bring allocative efficiency, but too much with no real consumer / developer use, and this is detrimental to growth. “
Timothy Lewis is the founder of Ikigai Asset Management, one of Everipedia’s LibertyBlock partners. When asked if he was bothered by RAM speculation, he replied, “If you do it without a BP account, then no. If they are doing the BP direct rewards, yes. “There is no evidence that Everipedia used BP rewards on its trades.
Block producers face conflicting interests
Another block producer, EOS Nation, recently traded RAM at a high profit. Although EOS Nation tried to distribute its profits in a community fund, the trades led to severe criticism from the community.
In the EOS chain, block producers play a role analogous to miners and lawmakers, putting resources such as servers and RAM into the system. With only 21 seats available, the elections are very competitive and many producers plan in detail the community engagement and transparency.
Some block producers have expressly distanced themselves from the RAM market. “We believe that the resources available on the EOS platform should be used for their benefit, not for their ability to generate profits,” said EOS New York, another leading block producer, in a transparency statement.
“No fiduciary duty …”
Neither EOS Nation nor Everipedia are accused of doing anything wrong. They haven’t broken any laws or rules – at most, they may have violated an unspoken expectation that resources are dedicated to network development.
Even then, Dan Larimer was clear in a response to Crypto Briefing that there was “no fiduciary duty in [the] Constitution ”, which forces block producers to adhere to certain guidelines for trading RAM.
And in a network where ideals are explicitly modeled on free trade and laissez-faire principles, it’s hard to complain when they’re taking profits where they can.
However, it does raise questions about the relationship between public resources and private markets, especially if EOS builders are currently finding it more profitable to sell bricks than to lay foundations.
Andrew MacDonald contributed to this article.
None of the authors is currently invested in EOS, but owns other cryptocurrencies.
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