Recall that most ICOs have discrete, non-overlapping, contribution periods followed by withdrawal periods. So why is that the industry standard? Because of the contribution recycling problem.
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Good work from @AlethioEthstats. As they point out, the fact that EOS had massive outflows from the crowdsale contract DURING THE SALE is hugely problematic. Why did they depart from the established best practice and do this?https://media.consensys.net/a-retrospective-of-the-eos-token-sale-172d3437932b …
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Imagine I'm running an ICO, selling tokens for 1 ETH. I receive 10 ETH and distribute 10 xyzcoins. I withdraw 10 during the sale, and resubmit them as bids for my own ICO. I still have that 10 ETH AND I now own 10 xyzcoin too. Honest buyers have been massively, covertly diluted.
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Now imagine that voting weight is proportional to future tokens, as is the case with EOS. Would you be able to resist the allure of giving yourself permanent, covert control of the system – for free?
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Now it doesn't actually matter whether this occurred or not. All that matters is that there was the appearance of impropriety. And... there is. About 91% of all ETH submitted to the EOS crowdsale contract were withdrawn PRIOR to the end of the crowdsale.
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The problem with running a loose or no-KYC crowdsale is that you can't exactly prove who contributed what. So you are left trying to prove a negative ("we didn't engage in self dealing, promise!"). But definitively proving that is impossible.
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There are other, more benign reasons for engaging in recycling or having insiders participate in the sale. Hasu realized the same thing here (in the context of the ETH ICO):https://medium.com/hasufl/ethereum-presale-dynamics-revisited-c1b70ac38448 …
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But Block One, by disbursing the treasury funds during the sale, did itself no favors. There is now a permanent cloud hanging over the sale, and allocators will need to see extremely compelling evidence to the contrary to have those suspicions allayed.
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And this is the central point: for novel, unregulated capital raises, the transparency requirement should be far onerous than regulated, conventional raises. However burdensome disclosure for an IPO is, it should be multiples more stringent for an ICO.
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Block one did mention that an audit was coming, to prove that no wash trading, self dealing, or recycling occurred in the sale. I seriously doubt that a big 4 firm would put their reputation on the line for that. https://medium.com/eosio/an-update-from-block-one-ceo-brendan-blumer-eb54c2652322 …pic.twitter.com/NtJnXosPim
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I am happy to be surprised! From the tone of Block one's comments, it looks like we will actually get something to look at. But the exculpatory evidence consists of a tangled mess of OTC data, private exchange data, and on chain wizardry. I doubt we'll get anything definitive.
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I don't own any EOS or anything that could realistically be interpreted as a close competitor. I am just fascinated by the ongoing suspension of disbelief in this industry. These are private monies issued in pseudo IPOs – shouldn't you have a right to look at the cap table?
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I know lots of really smart people that are EOS fans – maybe I'm missing something here, but I've never heard a good justification for the structure of the sale. On balance, going for the continual outflow model was a huge reputational risk that few things would have justified.
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Maybe because the crowdsale lasted a year.
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right... but why did they go for that model instead of the tezos/eth model. that's the question. knowing that the recycling problem (or conspiracy) would cast doubt on the legitimacy of the sale.
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I still don't see the difference between developers getting back their ether during ICO or after. In both cases it's free for tezos/eth/eos orgs to buy from their own sale. In fact buying might even be simpler in classic model since it doesn't move token price as much.
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Would “during” enable them to make the ICO look a lot bigger, by buying and selling at the same time (increase volume w/o increasing exposure)? Note I know zero about this ICO, other than what I just read in this thread.
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Hard to decide if that's worth it. Technically both ways increases the perceived amount contributed. I'm speculating, but higher evaluations could make the ICO appear too expensive with too little room to move up and reduce new funding coming in which they'd still want.
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Least we not forget the arbitrage between the EOS crowdsale contract and exchanges since the token was actively trading during ICO: https://github.com/bartleyg/eos-crowdsale-arbitrage … https://coindecode.io/how-swim-made-thousands-gaming-the-eos-crowdsale/ …https://twitter.com/panekkkk/status/1007476334199758848?s=21 …
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Wow, this piece was very, very well written and detailed. Very straightforward about their use of the data in this piece. EOS had a key-binding for their mainnet swap, no? I wonder how many EOS stayed in Bitfinex wallet during the swap. Analysis #2?
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