Background on Alethio

At Alethio, which is a ConsenSys formation, our mission is to make blockchain data accessible for a variety of use cases. Through data, we can empower users of blockchain systems to further understand transactions and behavior, leading to increased recognition of how these systems work — a critical tool for both retrospective thinking and prospective planning by the various actors in the systems.

Our proprietary analytics platform, fueled by data science and semantic modeling, is useful in achieving real time data analysis but it is equally useful in retrospective study. We call this type of retrospective analysis blockchain archeology.

Scope

Over the last two years or so, we have seen Token Sales evolve into an important element of the crypto and blockchain ecosystem. The issue of price volatility aside, they have allowed legitimate projects and teams to raise money, build a network effect, and gain market recognition. We’ve also seen exaggeration and fraud. Our nascent industry is still in the process of establishing standards and best practices for token sales. With Alethio’s data analytics platform, we can tap into the transparency of the Ethereum network to investigate high-profile token sales and help the community understand their mechanics. By helping entrepreneurs, investors, regulators, and enthusiasts understand the nuances behind token sales, we aim to contribute to a more equitable, transparent, and secure decentralized future.

Why EOS?

EOS.IO [1] is a blockchain platform created by the company block.one. To fund this new blockchain, block.one launched a year-long, uncapped token sale on the Ethereum blockchain by issuing an ERC20 token known as the EOS token. The EOS token sale is the largest crowdfunding event ever as of the time of this writing [2]. By the time the token sale ended in June of this year, EOS received over $4,000,000,000 in contributions and had risen to one of the highest market caps of all blockchain systems at over $10 billion implied value [3]. Moreover, in October 2017, block.one promised a third-party audit of its token launch[4][5], for which the blockchain community is still waiting [6][7][8]. Today, all EOS tokens are locked on Ethereum and have been “transferred” to the EOS blockchain.

Given the publicity, market cap, and promised audit of the EOS token sale, we believe it to be a worthy subject for some archaeology. We hope that through these expeditions, we can unearth data that allows us to investigate and suggest best practices of token sales in general. Below, we will present some unique characteristics found from the EOS token sale with original data and visualizations.

Note: in this post, we will use token sale, token launch, and crowdsale interchangeably.

Methodology

Because the EOS token launch lasted one year (June 26, 2017 to June 1, 2018), we collected and analyzed data between block 3,904,416 and block 5,810,294. In these roughly two million blocks, we examined the flow of funds (Ether and EOS tokens) to and from the EOS Crowdsale Contract and studied their origin and destination addresses.

Specifically we have looked at the following aspects:

All messages sent to the Crowdsale Contract (messages are transactions plus resulting smart contract actions).

All EOS token transfers resulting from these messages.

The transfer timeline of funds between the EOS Crowdsale Contract and the EOS Funding Wallet.

Addresses that received ETH from the Funding Wallet, and subsequent flow of funds.

There are some areas where we do not possess all the information needed to make definite conclusions on some of our arguments throughout this piece, which is an academic exercise. We make it clear when assumptions are made, and we apply our best objective judgement to areas with unclear or incomplete data. We encourage response and collaboration from the blockchain community, including and especially the EOS community. Readers will note that many data gaps occur when information moves off-chain or to centralized exchanges without transparency, while data abundance occurs where transactions are decentralized and conducted on-chain.

Unique Aspects of the EOS Sale

The EOS crowdsale displayed some uncommon attributes. We especially looked into the effects of the following features of the sale:

Fund Withdrawals Throughout the Sale

During the EOS token sale, funds were permitted to be transferred out of the token sale wallet before the token sale ended. Just five days after the beginning of the token sale, block.one first withdrew funds from the token sale wallet, and continued to withdraw throughout the crowdsale. We note that this is an unusual feature of the token sales we’ve studied, with most prohibiting transfers out of the receipt address until completion of the sale either through code or contract.

Token Sale Length

The EOS sale ran for a period of one year. A one year sale is significantly longer than other well-regarded token launches during the same time frame that exhibited significantly shorter windows for participation.

Token Trading Availability on Exchanges

Due to the length of the sale and the fact that EOS tokens were distributed to purchasers while the sale still commenced, EOS tokens were available for trading on centralized exchanges for the duration of the token sale [9]. The availability of tokens of an ongoing crowdsale on centralized exchanges is uncommon, according to our research.

Centralized Token Holding

EOS’ Constitution states that no user shall own more than 10% of token supply [10]. Adherence to the Constitution, however, is impossible to verify because multiple wallets could be owned by the same party, which would not be apparent based simply on blockchain addresses.

With original data, visualizations, and insights, let’s dive into the EOS and other token sales to learn more about the mechanics and strive towards the derivation of some token sale best practices.

Part 1: Token Sale Length and Withdrawals

We analyze these features in tandem, as one appears to facilitate the other.

The Virtue Poker Token Sale: A Representative Baseline

In order to compare the EOS token sale against others, we analyzed the Virtue Poker Token Sale (disclosure: VirtuePoker is a ConsenSys formation), which lasted from April 25 to May 9, 2018 (shown in Figure 1). The green block labeled VPP indicates the length of Virtue Poker’s crowdsale. The first vertical red line to the right of VPP marks the first transfer of funds out of the sale wallet. Each vertical red line afterwards marks another withdrawal. The lines only indicate the point in time of a withdrawal, not the magnitude. The VPP sale ended on May 9, but funds were not first withdrawn until May 30. This type of visual will also be used for the other token sales below.