Tesla may provide a real world antithesis to the autonomous company that Larimer is trying to achieve with PDoS-driven autonomous companies.
EOS launched its blockchain over the weekend marking a new chapter for the Delegated Proof of Stake (DPoS) protocol that also powers social media site Steemit and the Bitshares exchange.
Created by Dan Larimer in 2014 to address what he saw as the inefficiencies in PoW and PoS through a core function, shareholder voting, that implements “a layer of technological democracy to offset the negative effects of centralization”.
What is delegated proof of stake?
Very simply, every token holder has a proportional voting right to choose who the block producers are (or witnesses in DPoS vernacular). The productivity and behaviour of witnesses is held to account by the shareholders (token holders), so if they don’t meet block targets or act in a way that harms the network they are voted out of the job, which can happen several times in a single day.
Of course, there is a monetary incentive for the witnesses to perform dutifully in the form of a salary, which voters set, and through the networking effect of EOS – the more people who use the coin the more their salary is worth. Also each witness – block producer – is accorded the same power and responsibility regardless of their size.
The witness voting process on BitShares exchange.
In addition to exponentially increased transaction speeds from Bitcoin’s proof-of-work (PoW) or Ethereum’s proof-of-stake (PoS) to around 100,000 per second, DPoS avoids the centralization of power from big players pooling together either their resources of money or hashing power – as happens with bitcoin mining pools. Another core difference between this protocol and PoW and PoS is that not just anyone with enough computing power can join the network as a block producer, you must be voted in – much like in real world voting processes.
DPoS also eliminates the need to wait until a certain number of untrusted nodes have verified a transaction before it can be confirmed.
How does DPoS compare to real shareholder voting?
Tesla may provide a real-world antithesis to the autonomous company that Larimer is trying to achieve with DPoS.
On Tuesday shareholder activists proposed to break up the power of Tesla’s board and its CEO come-chairman, Elon Musk, citing the need for an independent chairman at its annual shareholders meeting. A shareholder group representing pension funds also urged shareholders to vote against all three of its directors: Antonio Gracias, head of Valor Management, 21st Century Fox CEO James Murdoch, and Musk’s brother Kimbal Musk arguing that issues including continuously missed production targets and vague promises showed the board has been insufficient in governing Musk and the company.
“We think we might be able to do for a lot of them [cars] same day body repairs. It’s possible.” – Elon Musk, Tesla shareholder meeting 2018
It was a bold statement but in the face of a charismatic CEO/chairman who is the company’s largest shareholder with 21 percent of the stock (his brother is third largest) and who has a cult-like loyalty from customers, the protests had very little chance of success. So the status quo at Tesla continues.
When the average uncontested director at companies in the S&P 500 stock index gets elected with 97 percent of votes cast in their favor, and only one director fails to get a majority vote each year, it is no wonder retail investor turnout is so low at corporate elections. At just 27 percent in 2013, it appears retail voters are apathetic when faced with the voting power of large shareholders.
In contrast, the decentralized company of DPoS uses the process of approval voting to ensure that even someone with 50 percent of the active voting power is unable to select even a singleproducer on their own.
Code over conflation
Despite his erratic public behaviour and being concurrent CEO of three other companies (from high-speed rail tunnel boring to intergalactic exploration and many other vested interests) Musk has been allowed to rule Tesla like a personal fiefdom through a combination of blind faith, nepotism and his major shareholding.
Unlike the concrete parameters of code, Musk’s litany of missed targets and grandiose promises of the future – “we are going to build the biggest building (Gigafactory) in the world” – are allowed to snowball without any consequence.
Larimer, on the other hand, has delivered four complete blockchain projects in four years, with Steemit now an exemplar of the technology functioning in real life. BitShares is self-funded, self-sustaining, self-regulated and continues to be developed by a decentralized group of developers directly hired by the blockchain through stakeholder election. Today, the BitShares shareholders collectively control a funding pool of $290m worth of BTS.
BitShares and Steem are entirely operated without any central authority or servers – Steem proving social media doesn’t actually need a Mark Zuckerberg.
With the tokenization of companies and securities the inevitable future of legacy stockmarkets could there also be potential for a change to the shareholder voting system? Musk has built his empire on the power of automation – why not him next?
While Tesla is focused on autonomous driving, in the crypto world EOS is focused on autonomous companies that would reduce or remove the megalomaniacal influence that CEOs like Elon Musk have in the running of their companies.