CWC Newsletter #20 (March 30, 2020)
By Taylor Ryker, Analyst
EOS Worker Proposal System and the US Public Works Administration
During this time of world calamity in the form of the coronavirus impeding daily economic life and the huge declines in the value of cryptocurrencies, the EOS mainnet finds itself in a difficult situation. Although the EOS infrastructure is developing ahead of many competing blockchains such as Bitcoin and Ethereum, further funding of other EOS development projects is needed.
How to fund needed projects to maintain and build out the EOS mainnet is the current, major topic of discussion within the EOSIO community. This post will attempt to better understand the current EOS Worker Proposal System through the historical lessons of the US's Public Works Administration.
Public Works Administration
During the Great Depression of the 1930s, millions of Americans lost their jobs and were unable to find new ones. The US Federal Government created the Public Works Administration (PWA) to employ these Americans to work on large-scale public work constructions.
The PWA was instrumental in helping to build out the needed infrastructure for the US to prosper in the future. Such projects were deemed unprofitable from a private enterprise standpoint but immensely important for the public good and public commerce. In other words, private enterprises were unable to fund and profit from these projects by themselves; they needed a larger funding structure like the Federal government.
The PWA spent over $7 billion in contracts to private construction firms to build wastewater plants, tunnels, bridges, hydroelectric dams, airports, and public housing. Historically and contemporarily important structures from the PWA are the Overseas Highway, Lincoln Tunnel, Hoover Dam, Triborough Bridge, and the Detroit Sewage Disposal Project, to name a few.
EOS Worker Proposal System
The Worker Proposal System (WPS), proposed by prominent Block Producers EOS Nation and Attic Lab, is aimed to provide needed financial resources to the EOS ecosystem. Below are the major highlights of the WPS:
1. Raise the inflationary effect of EOS tokens by 0.03% annually, a very small number. It is an inflationary effect that comes from the fact that the WPS will access tokens that were previously out of circulation
2. Pull funding from a source that has 3.5million EOS tokens from the sale of premium name accounts and RAM purchases. The source is a fixed number of EOS tokens that has not been touched
3. Provide oversight of the WPS by all paid Block Producers (~65), which will make it more transparent and more decentralized in decision-making
4. Create a structure that needs approval by the top 21 Block Producers to continue funding the WPS every month
5. A maximum of 25,000 EOS will be awarded monthly to winning proposals to EOS developers, marketers, or entrepreneurs
Funding for Developers of EOS vs. Employing Unemployed US Citizens
Due to the increasing costs to host decentralized applications on the EOS mainnet, EOSIO developers have been forced to migrate to less-expensive EOSIO sisterchains, such as WAX and Telos (For a quick review of the differences between EOS and EOSIO, please read this).
Although cryptocurrency media outlets have raised unwarranted fear and uncertainty with these migrations, this was expected and needed for the EOSIO ecosystem to grow and expand. A good analogy would be that the EOS mainnet is like New York City and the other sisterchains (WAX, Telos, BOS, Ultra, etc.) are other cities such as Chicago, Cincinnati, and Tampa. Only the most profitable and robust companies can reside in New York City; whereas, other companies may choose to relocate to other cities.
However, the current costs to operate on the EOS mainnet has discouraged needed developers to support the building of its infrastructure. Popular EOSIO developers such as Steve Floyd, Rami James and others have voiced their concerns about needing more funds to continue EOS development.
Similar to the Public Works Administration, the EOS Worker Proposal System will be able to fund developers who nonetheless will help build out the infrastructure of the EOS mainnet.
Potential Pitfalls and Concerns
The CEO of Block.one Brendan Blumer voiced his concerns about the WPS. Although Blumer has indicated that he would support the WPS if launched, his main points of contention are (1) the riskiness of the operation and (2) would like token holders rather than Block Producers to decide how to allocate the funds.
The Public Work Administration also had criticisms, such as inefficiencies, wasted funds, and taking competition out of construction projects. However, I believe that the employment of millions of unemployed Americans, the building of vital public infrastructure, and the support of the Federal government for local economies outweigh these criticisms.
Perhaps, the EOS community needs to look more in-depth to past public work organizations not only in the US but around the world as well. But I feel confident that the EOS community will find solutions or will correct future flaws in order to maintain a vibrant funding mechanism that is sorely needed at this time.
Ultimately, I believe that the WPS is a needed component in the EOS ecosystem that will have huge returns even though it is a risky endeavor. Remember, there are conditions in place in the WPS that can easily scrap the project if deemed ineffective without any huge detriments. I say, nothing ventured, nothing gained.
Disclaimer: KJ Kingsley is not a financial advisor and holds the digital tokens or cryptocurrencies represented in the content above. This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this post constitutes a solicitation, recommendation, endorsement, or offer by myself to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. The opinions expressed in this publication are those of the author. They do not purport to reflect the opinions or views of any of the author’s employers.