EOS: The $4 Billion Blockchain That Fell Apart

Throughout the history of cryptocurrencies, there have only been a few projects to secure as much hype and funding as EOS. At the time of its record-setting ICO, this blockchain promised unmatched scalability, developer support, and all the bells and whistles a blockchain network can offer.

However, despite the company raising $4B in funding, the project has seemed to fizzle out and fade into obscurity. A combination of mismanagement, unfulfilled promises, rising competition, and community backlash transformed this once inspiring project into a cautionary tale.

Here’s why EOS is seen by many as the biggest disappointment in the blockchain sector and how a dedicated community seeks to regain its former glory under new guidance.

What Is EOS and Why It Mattered

The crypto market rejoiced when, in May 2017, Block.one shared its EOS plans with the public at the Consensus 2017 conference. The market was in the midst of a crisis. Congestion issues continued to hinder large-scale adoption and innovation.

In particular, Ethereum, the world’s largest dapp ecosystem, was feeling the crunch. The network was nearly unusable due to congestion caused by the launch of the Cryptokitties NFT collectibles game and other projects gaining popularity.

Big Promises

The crypto firm Block.one promised to alleviate these concerns and many more via EOS. The company officially published the EOS whitepaper, in which they claimed it would provide several key upgrades that gave the EOS network the nickname “Ethereum Killer”  according to its developers and community.

For one, the EOS blockchain used a Delegated Proof-of-Stake (DPoS) consensus. This mechanism enables higher transaction throughput, scalability, and efficiency according to documents. Notably, the consensus mechanism was created by EOS founder Daniel Larimer.

Larimer was the Chief Technology Officer (CTO) of Block.one at the time of EOS launch and remains an instrumental mind within the sector. He has founded several other blockchains and helped to pioneer unique blockchain protocols and strategies for over a decade. As such, his influence and reputation also helped EOS gain notoriety.

Why EOS Was Dubbed an ‘Ethereum Killer’

The market was in desperate need of a scalable and programmable blockchain that could host and run decentralized applications. At that time, dapps were the most effective way to educate people and integrate blockchain assets into everyday users’ lives. As such, projects like Ethereum saw massive adoption due to their developer community.

However, Ethereum had a major problem in that it had outgrown its technical capabilities. For example, the network’s consensus algorithm was designed to increase fees during congestion as a way to reduce spam. Unexpectedly, Ethereum was ill-prepared to handle the sudden influx of users that its ever-growing popularity provided.

Source – usethebitcoin – Dan Larimer

This situation left the market open for competitors to step in. As such, there were several projects that entered the sector with the express purpose of competing with Ethereum. These networks promised big upgrades, but many of them were unable to deliver on their promises. EOS was supposed to be different.

Scalability

According to the EOS whitepaper, EOS could outperform Ethereum on nearly every metric. For example, Ethereum was in the midst of congestion-related performance issues. In comparison, EOS’ whitepaper claimed that it could easily scale to handle thousands of transactions per second (TPS).

No Transaction Fees

Another game-changing aspect of the EOS network was its elimination of transaction fees. In traditional blockchain networks, these fees are what is used to reward network nodes for their services. However, EOS found a clever way to eliminate these fees. Instead, they used staking rewards as the funding to pay node operators.

Community Governance

Another key aspect of EOS was that it gave the community a voice. The project’s governance protocol enabled users to vote on crucial upgrades, fees, feature changes, as well as funding for promising projects. This type of decentralized governance has remained a core feature of modern blockchains today.

EOS ICO Details

The EOS ICO officially started on June 25, 2017,​ and ran until  June 4, 2018​. At the time, it was the largest ICO ever, securing $4,197,956,000 via the sale of 900 million EOS tokens, which equates to 90% of the project’s 1,000,000,000 total supply. Notably, participating investors received approximately 306 EOS per 1 ETH on average, with prices fluctuating throughout the event.

How Did EOS Raise Over $4B?

The EOS ICO was a resounding success for many reasons. For one, the ICO craze was in full swing. Investors and blockchain firms were just starting to realize how effective this method of securing funding was and how it afforded access to an international clientele base.

Additionally, the ICO went on for much longer than most projects. The EOS ICO lasted for one year. To put just how extensive the event was into perspective, Ethereum, the world’s largest Dapp ecosystem, held its ICO for only 42 days and raised around $18.3M. EOS would go on to trample these numbers over a year of campaigning to investors.

Another cool aspect about the ICO was that investors could trade their token on exchanges during the sale. This maneuver opened the door for more participants and community hype surrounding the project. Of course, the biggest factor in EOS’s success was its founders and community.

EOS’s founders are some of the most respected minds in the industry. Daniel Larimer invented the DPoS consensus mechanism and remains instrumental in the market. Additionally, Brendan Blumer co-founded Block.one and is a well-known entrepreneur in the sector.

What Did Investors Believe the $4B Would Go Toward?

Leading up to and during the year-long fundraising event, Block.one made promises to token holders pertaining to how it would use the massive amount of funds they raised. First and foremost, they promised to spend a significant portion on improving the EOSIO tech stack with the goal of driving efficiency and scalability.

Block.one also stated they would spend the funding on helping to cultivate and expand the developer community. The company said it would create a $1B developer fund as part of this strategy. Additionally, they would put some funding towards the creation of a blockchain consulting firm that would be specifically developed to promote EOS capabilities and integration.

Lastly, the funding would be used to cover the daily operating expenses for the project. These tasks would cover facilities, hardware, community events, and rewards. However, as time passed, the community began to notice a troubling trend – missed deadlines and unfulfilled promises.

EOS Mainnet Launch (June 2018)

The EOS blockchain officially saw its mainnet go live on June 14, 2018. This launch coincided with the distribution of a 1 billion token supply. Block producers began operating shortly after a community voting session authorized their start. As soon as the project launched, expectations met reality.

Did EOS Meet its Performance Claims?

As you probably guessed, EOS didn’t fulfill its promises to the community. Its launch was supposed to be a celebrated moment, ushering in a new age of convenience and scalability for blockchain developers and users alike. However, it only succeeded in revealing all the shortcomings the network had and its lack of leadership.

EOS Didn’t Scale as Promised

Right off the top, there was a huge discrepancy in what Block.one promised in terms of scalability and what the network was capable of providing. According to the EOS reports, the network could achieve +1000 TPS. However, an independent test proved that it could really only support 250 TPS in optimal conditions.

In real-world use, the network fared much worse with its TPS hitting less than 50 TPS during live tests. This low throughput caused a lot of headaches and shattered many developers’ hopes of escaping the congestion debacle they had faced with Ethereum. To put this TPS in perspective, the older PoW version of Ethereum was capable of 20 TPS.

Centralization Concerns

Another area in which EOS underdelivered was in terms of decentralization. The project’s developers felt that they needed to trim back decentralization to improve scalability. As such, the DPoS consensus mechanism used only 21 block producers in total. These block producers had to be elected as well, further limiting decentralization and restricting network participation at the highest levels.

The EOS centralization issue got even worse when discussing who held what tokens. Blockchain explorers revealed that the top 11 wallets held more than half of the voting power. This situation led to larger exchanges using their weight to snuff out normal token holders’ input.

Validation Concerns

Another major issue was the network’s ability to permit retroactive block validation. The EOS voting mechanism enabled the block producers to decide if they wanted to reorganize the chain, thereby eliminating true finality from the equation. This flaw was a major risk that cut EOS out of the financial dapp sector completely.

Low Adoptability

The EOS community wasn’t pleased with the empty promises, and they took to social media to express their discontent with the project. This outpouring of complaints effectively poured cold water on any momentum the project had remaining.

Why did Developer Activity Decline?

At the forefront of EOS’ failure was the rapid exit of developers from the community. This migration was due to several reasons. For one, they were unimpressed with many feeling like they had been duped by Block.one’s empty promises. Additionally, the centralization issues began to become more evident as funding started to go towards other projects outside the EOS ecosystem.

Another reason why EOS suffered was that it wasn’t developer-friendly. The network used C++ and could support WASM. However, C++ was the only one of the options to have a fully developed tool set and support. As such, many developers found the transition from Ethereum to EOS to be cumbersome, time-consuming, and not worth the overall headache.

Additionally, the project didn’t deliver on its $1B developer fund. This fund never took flight, and a majority of the funding was invested into other projects, further degrading trust from the developer community. This lack of incentives, support tools, and morale led to a mass exodus from the EOS ecosystem.

Where Did the $4B Go?

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It’s hard to fathom how a startup could secure $4B and still drop the ball. However, EOS provides clear insight into how this monumental debacle can occur. For one, the company supposedly allocated $1B to the ecosystem directly, seeking to drive development and adoption.

However, reports show that only $675M was ever used to expand the EOS ecosystem. The other funding was used for a myriad of unrelated ventures. This obvious betrayal left the community and the EOS Network Foundation angry and eager for redemption. It also drew the attention of regulars, who would eventually find their way to Block.one’s doorstep.

How Much Went into Other Ventures?

The majority of the EOS ICO funding went towards the launch of other projects that Block.one deemed profitable. Specifically, the company invested billions in the social media platform Voice and the cryptocurrency exchange Bullish. To add insult to injury, neither of these platforms operated on the EOS network.

Block.one wasn’t shy about this use of funds. It was reported that they had set aside $10B in total to push their Bullish Exchange project. Further reporting finds that the company used a large portion of the funds spent on EOS simply to conduct buy-backs, with the explicit goal of boosting its shareholders’ profits at the expense of the project’s token holders.

Why did Block.one’s Involvement Decline?

At the same time, Block.one began distancing itself from EOS. For example, the project’s momentum slowed significantly following the departure of Larimer from Block.one and EOS in 2021. This exodus was followed by several other key developers and members of the executive team, effectively reducing the company’s overall capabilities by more than half.

Regulators Step in

Responding to a growing number of complaints from token holders who felt wronged, the SEC stepped in and hit Block.one with several penalties. The SEC settled with the firm after the company agreed to pay a $24M civil penalty. Many of the token holders felt that this fine was too lenient, as the company secured $4B in funding.

Did Investors Receive Any Restitution?

These sentiments were exacerbated by the fact that the SEC didn’t order any reimbursements to token holders. However, this SEC ruling didn’t mean that the token holders gave up. Notably, the company recently settled another class action lawsuit in January 2025.

In this agreement, they stated they would pay $27.5M to the plaintiffs. However, the amount was reduced to $22M since it only included US investors. This decision also led to a revitalization of those still left in the community.

How did the EOS Community Respond to Block.one Stepping Away?

The EOS community expressed frustration with Block.one and was very pleased to see the company begin to phase itself out of the project. Of course, there were still a lot of ongoing debates surrounding intellectual property, token ownership, and governance.

What is the EOS Network Foundation (ENF)?

Notably, the EOS Network Foundation was pivotal in keeping EOS afloat. This group made public statements urging Block.one to relinquish its control and intellectual rights. They claimed that the lack of investment in the ecosystem was a breach of contract and have since taken up the mantle in terms of guiding the project. Today, the ENF is responsible for funding, ecosystem expansion, and funding strategic partnerships.

What Lawsuits or Legal Actions are Underway?

The ENF remains vocal about its discontent with Block.one’s actions and has taken the company to court seeking damages.  The foundation officially filed a lawsuit in 2024, citing core discrepancies in what was promised and what Block.one delivered.

Specifically, the lawsuit points out that Block.one raised $4B, yet it invested less than $1B back into the ecosystem. It also cites the last class action lawsuit payout as insufficient, given the sheer scale of the deception and value of the funding secured.  As part of this strategy, the ENF stopped any network payments directed to Block.one.

There isn’t much public information on this lawsuit at the moment. However, Block.one will likely have its work cut out for it. Especially, since it has already lost several other trials regarding similar complaints.

The State of EOS Today

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The EOS community has once again shown its resilience after rebranding the project to Vaulta and breathing new life into the ecosystem. Today, the platform ranks 120th with a $427.12M market cap and $42.51M in daily trading volume. As part of the rebranding, Vaulta introduced a new utility token dubbed (A).

Notably, the core details of the project remain the same. The rebranded platform still uses the EOS DPoS blockchain. However, the community has refocused efforts towards making the platform institutionally friendly. To that end, the community’s efforts have kept the network alive and somewhat relevant.

Competition Keeps Eating Away

The blockchain sector is much larger and more established than 2017, and developers have a lot more options in terms of programmable networks. At the end of the day, there are so many more capable blockchains that deliver on their promises. As such, EOS has lost most of its shine in this competitive atmosphere.

Lessons for Investors from the EOS ICO

There are several key lessons that EOS should help to teach investors. For one, it demonstrates how getting caught in the hype can lead to future losses. Also, it shows how decentralization is vital to keeping a blockchain community fair and balanced.

Perhaps the most important lesson that Block.one taught investors is still to be learned. If the ENF can succeed in its plans to get retribution for token holders, it will send a strong signal to all blockchain companies that they need to adhere to their promises.

EOS – A Cautionary Tale About Greed

The entire EOS saga is a prime example of why it’s ok to take your time joining investments. The added research and caution could prevent you from ending up taking losses while project leaders are spending their funding frivolously on other networks.

For now, the EOS community awaits news on the ENF lawsuit as it continues to attempt to regain some lost footing.