EOS Was the World’s Most Hyped Blockchain. Its Fans Want It Back

Block.One created the EOS blockchain and raised $4 billion in a record-breaking ICO. Now, its members have taken over.
Illustration of a network of cubes morphing from organized to chaotic.
Illustration: Jacqui VanLiew; Getty Images

On a Wednesday morning in November, Yves La Rose, a member of the EOS blockchain community, addressed a virtual gathering of China-based users. “EOS, as it stands, is a failure,” he said.

Built using open source technology created by Block.one, a Cayman Island-based company, EOS promised more efficiency than any other cryptocurrency network at the time. At one point, a running joke among crypto enthusiasts was that EOS stood for “Ethereum on Steroids.”

Ahead of the launch of EOS in June 2018, Block.one had raised over $4 billion in the biggest initial coin offering of all time. (ICOs let startups rake in eye-popping sums in exchange for cryptocurrency tokens to be used on a not-yet-built blockchain platform.) From those early days, La Rose devoted himself to EOS. He had even helmed the EOS Nation “block producer,” a kind of digital umpire responsible for validating the transactions taking place on the blockchain.

Nearly four years later, EOS was in free fall. Its user base was shrinking, it supported just a handful of popular apps, key developers were leaving, and the value of its token, also called EOS, had plummeted from $10 in June 2018 to $4.40 in late 2021. In the virtual session last fall, La Rose said that he and everyone else in the community had become casualties of a venture that profited off their work and left them with nothing.

“Block.one knowingly misrepresented their capabilities,” the 39-year-old Canadian entrepreneur said in the meeting. “And this amounts to negligence and fraud.”

La Rose is still a believer in EOS’s potential; his grievance is with Block.one, which he believes has driven the project into the ground. La Rose has a plan to save EOS: He launched an organization called the EOS Network Foundation (ENF) with the goal of nursing the blockchain back to life and, importantly, to hold Block.one accountable for the project’s decline.

He wanted Block.one to go away—and to give at least some of the money back.

Block.one had no intention of complying with his request. In May 2021, it announced that it would launch Bullish, a cryptocurrency exchange whose liquidity derived in large part from the proceeds of the EOS ICO. It registered Bullish in the Cayman Islands—with subsidiaries in the Caymans and in crypto-friendly jurisdictions including Delaware, Hong Kong, Singapore, and the British Overseas Territory of Gibraltar—planning to take it public via a $9 billion merger with a special purpose acquisition company (SPAC) called Far Peak Acquisition Corp by March 8. After two extensions, the deadline is currently set for July 8, 2022.

Bullish is emblematic of the fallout between Block.one and the EOS community. The legal documents underpinning the EOS ICO assert that Block.one can use the money as it pleases, while the ENF says the company has failed to live up to its public pledges. In December 2017, Block.one CEO Brendan Blumer promised to invest $1bn from the ICO revenue through an investment arm called EOS VC in order to grow the blockchain technology underpinning EOS and fostering the startups building applications for it. But La Rose says that the company devoted much of its funds to investment in unrelated ventures instead, and kicked EOS to the curb.

“There had always been plans for an exchange in the background,” says Tama Churchouse, who worked at Block.one in various senior roles from its inception until February 2021. Work on launching the exchange, Churchouse says, had started sometime in early 2019.

The ENF also argued that Block.one had allowed the output of code meant to improve EOS to decline since the start of 2021, and that it was bound to get worse following the departure of chief technical officer Daniel Larimer and other senior developers in January. In an interview with Cryptonomist shortly after leaving, Larimer complained that Block.one had become unable to “to build and promote technology that frees people.” (Larimer declined a request for an interview.) All that, the ENF said, showed Block.one’s lack of commitment.

And so in November 2021, shortly after La Rose’s speech, the ENF gave Block.one an ultimatum: Reinvest money in the EOS blockchain, and gift the intellectual property of EOS’s blockchain technology to the ENF. Otherwise, block producers would put a halt to a process called “vesting,” which granted Block.one 100 million EOS tokens staggered over 10 years. All it would take to stop Block.one from claiming the tokens, they said, was a minor tweak in the blockchain’s code.

In an email to WIRED, Block.one spokesperson Abby Kuhanez pointed to publicly available documents relating to Bullish, the terms of the ERC-20 token sale, the “extensive support” for the community using their technology, and a token sale audit report conducted in 2019 by law firm Clifford Chance and professional services company PWC. Kuhanez said that “a number” of the assertions in this story “appear to be recycled from claims made in litigation at Block.One,” but did not respond to requests to elaborate.

“Block.one is the negligent one, Block.one basically ruined everything for everybody. They're the bad actors,” La Rose says.

Former Block.one insiders paint a different picture. They describe a company paralyzed by legal concerns and unable to bring any project to completion—a fiasco, but for one metric: its billions in crypto profits.

The company, founded in 2016 by infusing Brendan Blumer’s Hong Kong real estate firm ii5 with cryptocurrency technologists and influencers, made its first pitch at the industry conference Consensus in New York in 2017.

The team then embarked on a global road show to peddle EOS tokens—Ethereum cryptocurrency that could later be converted into tokens to use on the then hypothetical EOS chain—in a 341-day online auction. Over the following years, the auction attracted scrutiny from regulators and academics. In August 2021, John Griffin, a professor of finance at the University of Texas, released a study alleging that the EOS ICO showed signs of a technique called “wash trading.” He alleged that 21 accounts appeared to have acted in concert, making large purchases of EOS tokens only to sell them in less than an hour, a practice that Griffin argues would inflate the price of the token for other buyers.

The owners of those accounts, Griffin says, concealed their actions by passing the coins between multiple wallets between each purchase and sale. In a blog post, Block.one said that there was no coordination, and it pointed to the 2019 audit, which found no evidence of collusion. But Griffin notes the audit only examined accounts owned by Block.one, and not those associated with individual officers at the company. In any case, unmasking the owners of the accounts would require the cooperation of the crypto exchanges they had used. “This is as far as I can go,” Griffin says. The US Department of Justice did not confirm or deny that an investigation is underway.

A former Block.one executive says that despite the aggressive EOS marketing campaign, fronted and stage-managed by cofounder Brock Pierce, a crypto investor, former child actor, and budding politician, Block.one did not expect to make so much money from the ICO. The former executive says that at the very start, the company’s chairman, Kokuei Yuan, had made it clear that Block.one was a “marketing organization selling a token: We need to put up the minimum software necessary and then get out.” Another person familiar with the company’s workings confirms that account. (Most of Block.one’s former employees asked to speak anonymously because of nondisclosure agreements or fear of reprisals.)

The $4 billion bonanza focused minds. “We thought, maybe we should be doing more than just selling tokens, putting up the bare minimum software, and walking away,” the former executive says. “Maybe there's more to be done here.”

Larimer’s team created a viable chain, even if some features promised ahead of the ICO were not delivered. For example, the company backtracked on the ability to process millions of cryptocurrency transactions per second nine months into the token sale. But even after building the technology, the former executive says, Block.one’s leadership never developed a vision for it.

Block.one’s C-suite included chief strategy officer Andrew Lewis, a childhood friend of Blumer’s; Blumer’s sister Abby, who was in charge of communications; and the executive chair Kokuei Yuan, who also had a close relationship with Blumer, dating back to their first joint venture, Okay.com, in 2005. “Blumer really likes to be surrounded by people who will be very gentle with him and not challenge him and not make him do things that make him uncomfortable,” the former executive says. “But a CEO's job is to make decisions.” The former executive says that the company spent months deliberating where to open its US office until, in October 2018, it plumped for Blacksburg, Virginia—a town of just over 40,000 people with an unremarkable tech scene barring one resident: Larimer.

A former employee recounted their frustration at being asked to develop a business plan, putting hundreds of hours into it, only to see it abandoned without explanation. “They are only interested in appearing to be doing something,” the person says. Several Glassdoor reviews of the company echo this experience.

Another former employee from Block.one’s Hong Kong office—where Blumer, who renounced his US citizenship in 2020, was based—says that Blumer is a gifted salesperson but does not seem to enjoy his role as CEO. “He was rarely in the office,” they say. “He would not sit there and understand what the issues were and how to fix them. He would quickly lose interest.” That attitude, the former employee says, ended up entrusting a lot of responsibility to the company’s legal team. “A lot of the stuff [Block.one worked on] was just ideas that came from Brendan [Blumer], so you needed someone to be the adult in the room and try and figure out how to execute them.”

That resulted in an overly cautious approach to every single business decision—a foretold outcome, given the perilous regulatory landscape for crypto businesses. Between 2017 and 2019, the SEC was hell-bent on prosecuting companies organizing ICOs. A token sale can be construed as an issuance of unregistered securities when a company is too involved in running the blockchain it has raised money for. Block.one’s duty was to its shareholders, which include PayPal founder Peter Thiel and investor Mike Novogratz, rather than EOS token holders.

A Bloomberg report in May 2019, quoting a Block.one letter to shareholders, revealed that early investors had received returns as high as 6,567 percent during a buyback, and that most of Block.one’s money had been reinvested in government bonds and bitcoins. As of July 2021, Bullish owned 141,951 bitcoins, worth around $6 billion, according to an investor relations presentation.

According to Pierce, who left the company in early 2018—shortly after comedian John Oliver eviscerated his techno-hippie antics on Last Week Tonight—Block.one’s “hands were tied” due to compliance and legal requirements. For example, Pierce blames the SEC for the failure of Voice, a $150 million plan to build a decentralized social network on top of the EOS blockchain Block.one had launched with great fanfare in May 2019. “The reason why Voice wasn't ultimately successful was that the SEC wouldn't allow it to launch a token,” Pierce says. As of 2022, Voice has pivoted to selling NFTs.

Block.one’s dedication to staving off any legal quandary failed, but it hardly mattered. In 2019, the SEC said Block.one had not done enough to stop Americans from participating in sales of the tokens—deemed to be unregistered securities—and triggered a case that took over a year to resolve. The resulting settlement stunned the industry, which had been watching intently given the wider implications for ICOs: a $24 million fine, tiny compared with the $4 billion ICO. “Fuck, man, their lawyers are good,” cryptocurrency investor Katherine Wu wrote at the time. The company made no admission of wrongdoing as part of the settlement.

La Rose thinks that while the regulatory risk was real, Block.one might have used that as a cover for inaction. “Block.one uses the SEC card as a way to distance itself [from its commitments],” La Rose says. In particular, La Rose says that several of the companies in which EOS VC invested—such as the NFT platform Immutable and gaming companies Forte and Playable Worlds—ended up using other blockchains. More gallingly, Block.one invested in projects that could barely be construed as fostering the EOS system—including the bitcoin mining company Northern Data and LoopLand, a holiday resort in Puerto Rico, the US territory where Pierce has resided since 2018.

Pierce says that Block.one simply chose the wrong leadership for its VC initiative. “The general partners and the people that were brought on to oversee it were really more traders, and venture is a really hard business,” he says. “They just never ended up putting enough of the capital into the right organizations.” Michael Alexander, a Hong Kong-based investment banker who worked as EOS VC’s CEO between 2018 and 2020, did not reply to a request for comment.

Block.one’s EOS VC deployed its money through partnerships with other investors, including Novogratz’s Galaxy Digital firm, Asia-based investors Michael Cao and Winnie Liu, London-based fund SVK Crypto, and German firm FinLab. The former Hong Kong-based employee says this was a way to “outsource” the task to these partners, rather than spend time looking for companies using the technology that underpinned EOS, which according to the employee, Blumer regarded as “a distraction.”

“In the crypto space, people using EOS are small companies,” they say. “Brendan wasn't really interested in doing these small VC deals.”

Crunchbase data and Block.one’s own press releases show that Block.one injected around $675 million into the partnerships. But the whereabouts of some of the funds are unclear: $50 million invested in a partnership with TomorrowBC—a company run by Derek Rundell, a managing director of Eric Schmidt’s TomorrowVentures—has not been used as of 2022, barring a $750,000 investment in crypto-trading startup LogosBlock, according to PitchBook data. Rundell and Schmidt did not reply to multiple requests for comment.

Following the ENF’s ultimatum, on November 10, Blumer and Pierce flew to Canada to meet La Rose. In a blog post, La Rose says that he kept asking for a part of the ICO proceeds to be given to the ENF, but his requests were “swiftly rejected each time.”

Just before the meeting, Block.one had transferred some 45 million EOS tokens (worth $216 million at the time) to Pierce, in exchange for his stake in Block.one. On Twitter, Pierce suggested rescuing EOS through the launch of an investment firm called Helios, which would be endowed with the newly acquired tokens. “I'm no longer a [Block.one] shareholder, which means I don't have any limitations,” Pierce told WIRED in November. “I'm free to do whatever I think is necessary for the ecosystem at this point. “

However, his status soon became a problem during negotiations. Most of the tokens used to buy out Pierce were still in the process of being vested. “The network believed that those tokens are theirs, and Block.one believed they're theirs,” La Rose says.

Following weeks of futile negotiations, on December 7, EOS’s block producers enforced a script that stopped the vesting of Block.one’s tokens, including those that had been sold to Pierce, effectively blocking his buyout. Ahead of the decision, Pierce told WIRED that such a move would “have a very negative impact on trust” within the EOS ecosystem, and therefore he expected that it would be called off.

La Rose says Pierce did not take the eventual decision well. “Clearly he wasn't happy,” he says. “He was pissed off. He made death threats against me.” In an interview he did in late December with blockchain news website Bywire News, Pierce, donning a fedora in a Puerto Rican club while disco music blasted in the background, said he did not recall making threats, but apologized if he did.

“From Block.one’s side the divorce was quite clean,” La Rose says. “They now no longer need to worry about the network, which they didn't really care about and that was costing them time.” Larimer and other senior developers have now started working on EOS code again, under ENF. The foundation has announced grants for companies creating apps for the network.

The launch of Bullish, in La Rose’s opinion, is Block.one’s greatest coup. “They are essentially getting away with $9 billion,” he says. “And they did it in a legal way.”

On February 10, a post on ENF’s Medium page announced that it had hired a law firm with the goal of “holding Block.one accountable for its past actions and broken promises.” An accompanying tweet by La Rose hammered the concept home. “Review of ALL possible legal recourse to seek $4.1B in damages underway,” it read. “Let's do this together! #4BillionDAO coming.”

“We're victims,” La Rose says. “The community is reclaiming the chain for itself.”

Additional reporting by Greg Barber