REX only earns 1%, does that mean EOS is not a good place to be in finance?

On May 1, the DeFi project Resource Exchange (REX), which had been on EOS for eight months, went live. Within five days, it attracted funds from 54.39 million EOS, accounting for 5.5% of the total, or about 1.68 billion yuan.

Numerically, REX lockers are close to matching MakerDao, the largest decentralized financial lending product on ethereum. As the largest DeFi application on ethereum, MakerDao, which has been running for nearly 2 years, has attracted 2.01 million ethereum, or about 2.17 billion RMB.

Just five days after EOS 'REX went online, EOS founder BM reproposed to cancel the 4% EOS annual additional issue during the discussion between the telegraph group and community members. EOS now has a 5% annual secondary offering, of which 1% is for node award and 4% is temporarily put in the Woker Proposal, which is supposed to reward people who contribute to EOS, but it has not been changed.

Then on May 8, after a vote by the shareholders, the 4% issue was burned down, totaling 34 million EOS, worth 1.08 billion yuan.

BM first proposed to cancel the 4%EOS additional issue in August last year, which was about the same time as the REX proposal. What's the relationship between REX and the additional issue rate? Is EOS really suitable for financial applications?

What problem is REX trying to solve?

Resource Exchange, as the name implies, is a Resource Exchange on the EOS blockchain and a CPU Resource rental market for EOS.

The market is divided into two parts: on the one hand, users pledge EOS to REX in exchange for REX tokens, and to the mortgagor, REX tokens are like a mortgage voucher, proving that the mortgagor has so many EOS in the market. Users with CPU requirements, on the other hand, can rent the mortgaged EOS in this market for a small amount of EOS. Use the borrowed EOS for CPU use, and return it a month later for a 30-day lease.

These EOS rents, along with some of the other proceeds, are counted as REX's proceeds and will be distributed to the REX owners, that is, to the REX owners Users of EOS who are mortgaged to this market will receive the proceeds, which will be settled by the system. This is the first time that EOS, which is based on DPoS, has the similar staking function of PoS.

In the network of PoS consensus, users can entrust their own tokens to the node and pledge them to the system, so as to obtain the reward brought by the system additional issuance. However, EOS does not allow users to take rewards. Users entrust their EOS to the node, but according to the regulations, the node cannot give rewards to the user, because giving rewards to the user is suspected of buying votes. This creates a problem where users have no financial incentive to participate in the mortgage. This is the problem that REX wants to solve in the first place. If users want to get REX as collateral, they must invest EOS in the node and participate in the delegate to get REX and reward.

The second problem that REX wanted to solve was CPU demand. During the popularity of DApp, the CPU on EOS often appeared the problem of exploding popularity (the amount of CPU already used exceeded the amount of CPU allocated to you). On October 17 last year, the mortgage price of CPU skyrocketed. 2000 EOS could only mortgage 1.3 seconds of CPU resources, which directly led to ordinary users being unable to execute transactions.REX wanted to solve the problem of high CPU prices.

But how did REX do?

REX's revenues and usage are not good

Judging by the data, REX is running at an annualised rate of only about 1 per cent, well below EOS's annual inflation rate of 5 per cent.

In the general PoS network, the yield rate of the mortgage is to beat the increase rate, so that users have the motivation to mortgage. For example, the annual increase rate of Tezos is 5%, and the annual return rate of users' mortgages is about 7%, which is higher than the inflation rate. This is a relatively normal ecology. However, the current EOS users' mortgage yield cannot beat the inflation rate at all, which may be the reason why BM has repeatedly stressed to cancel the 4% issue.

If 4 percent of rights issues were eliminated, EOS would have an annual rights issue rate of only 1 percent so REX's yield would be equal to the rights issue rate.

And the guaranteed rate of return is that someone is going to rent EOS, so how many people are renting now?

Within five days, only 261 accounts had borrowed EOS from REX market, and of the 54.39 million EOS pools, only 1.32 million, or 2%, were rented.

There are two types of users who rent EOS for cpus: developers and DApp enthusiasts. Obviously, there is no need for these two types of users to rent cpus.

"Resources are cheap now, and we can mortgage them ourselves." JOY of the EOS JOY team told Blockbeats. Because DApp has not been popular for a long time now, CPU has not exploded in popularity for a long time, for the development team with funds in hand, directly in the system to mortgage for resources can be, do not need to spend money to buy CPU.

And the DApp market is not a lot of enthusiastic players. Although there are more and more dapps on EOS, there are not many really useful ones. The new dapps are also gambling games, and the ones with the largest daily life are basically gambling games. Still play gambling now, basically also be to dig mine reward. EOS's DApp market has a daily turnover of 137,000 people and only 200 accounts to rent the CPU, which also indicates that the real number of DApp users is not as large as the data shows.

As wu zizhen, once the second largest holder of RAM, puts it, "the amount of money you can make on REX is negligible at this stage." If the resources are not in great demand for leasing, it is difficult to make REX's revenue outpace the additional rate by relying solely on RAM transaction fee, account auction and other benefits, which is probably the reason why BM should destroy 4% additional.

Is EOS suitable for finance?

The premise of financial application security is network security. The EOS network is less secure than the more decentralized ethereum.

Once the EOS community had an ECAF responsible for security, but now ECAF has proved to be a failed experiment. Recently, a number of people who have submitted complaints to ECAF have received emails saying that cases will not be accepted after 3 months. ECAF's own inefficiency and lack of clarity led to a huge backlog of cases, which have now been abandoned. This is all the more evidence that the ECAF route to safety is a dead end.

Blockbeats has reported that EOS 'nodes failed to follow ECAF's orders and update the blacklist twice, leading to easy theft of users' assets by hackers.

On November 12 last year, a domestic node failed to update its blacklist according to ECAF's order, and hackers stole 552 EOS from users within six seconds of the node issuing the block. On February 22 this year, node game.eos also failed to update the blacklist, and hackers took advantage of the vulnerability to steal 2.09 million eos, worth 60 million RMB. Specific process can refer toHigh IQ crimes in the blockchain world: how to steal 60 million RMB worth of EOS

At present, EOS is completely dominated by 21 nodes. Before adding the node alliance known before Blockbeats, EOS becomes more and more centralized, and its security degree is far less than that of eethernet with PoW as the consensus.

Even if ethereum were to be replaced by PoS consensus, under the current plan, only 32 ETH would be nodes, with a very low threshold, which would still guarantee a degree of decentralization.

This means that financial products deployed on the EOS blockchain are at risk of being controlled or monopolized by interest groups. To store financial products like MakerDAO on an incomplete decentralized blockchain system, it needs to deal with two levels of risks: first, the vulnerability risk from the smart contract itself, or layer-2 application Layer risk; Then there is the consensus layer, the security risk of the EOS blockchain run by 21 nodes.

The former can be fixed through code audit and code upgrade, so who can fix the risk caused by node alliance?

The launch of REX provided EOS users with an official mortgage for the first time, but the 1% return was negligible. Instead of thinking about how to increase REX's return to attract users, BlockOne and the development team on EOS should think about whether this network is suitable for financial applications.

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