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  • RFC: Creating an Innovative New DeFi Instrument to Bring New Exchanges to Telos

    Author: Douglas Horn

    Executive Summary

    This document is a request for comments on a new financial instrument that could be deployed on Telos at the chain level to provide funds specifically for securing hard currency funds for pursuing listing on top cryptocurrency exchanges more aggressively than current funding methods allow at current prices. These funds would come from the ‘tlosrecovery’ account which consists of unallocated funds that were reclaimed from Telos genesis accounts that were never used for even one action within the one-year claim period. The proposed financial instrument would be the first smart contract analogue of a bond that either is payable at maturity or alternatively can be claimed at regular intervals. By selling these instruments at a discount to face value in exchange for hard currency to fund listing on larger exchanges now, TLOS from these sales would be locked up for a period of time so that the sales would not immediately send more TLOS to exchanges to depress the price, with the intent that by the time the bulk of these TLOS are unlocked that the additional liquidity from being listed on more and higher volume exchanges would reduce the impact of such sales and allow TLOS time to benefit from the positive news it has been regularly receiving by being available to more buyers. Additionally, by structuring these instruments as nonfungible tokens (NFTs) with the ability to be sold on a secondary market, a new and perhaps vital financial market could emerge that would create a new type of DeFi product that would add value to Telos overall.


    Building Value on Telos

    Telos has faced many challenges over the past two years and the community has pulled together to find and build consensus around solutions using what we have had available to us. This has allowed Telos to grow and tackle its problems head on. We’ve built governance features, attracted new dapps and users, and raised the Telos profile significantly with regular articles in the crypto press to name just a few. Each of these advancements have helped Telos move towards greater adoption and usefulness. However, the Telos token price remains low compared to smart contract platforms of similar performance.

    One likely reason for the low TLOS price is the difficulty for new users to purchase and trade TLOS tokens due to the small number and lower visibility of the exchanges where TLOS is listed. (Contrast this with the relative ease of selling TLOS for those who already have it or are earning it and are already signed up with these exchanges.) Getting TLOS listed on more exchanges may improve the token price. Another challenge related to price is that currently, many cryptocurrencies experiencing the most price growth are those related to decentralized finance (DeFi) products and Telos is not yet viewed among these. This RFP will propose a way to address both of these challenges by providing an innovative new DeFi product in the form of a tradeable nonfungible token (NFT) that would allow the purchase of unallocated funds from the ‘tlosrecovery’ account at a discount in exchange for a lockup period when the tokens cannot be sold or staked and therefore will not immediately create sell pressure on the TLOS price. The aim would be to use these funds to list TLOS on more accessible exchanges to general cryptocurrency investors so that the promising news stories we are generating can translate into buy orders from a broader base of investors before these tokens become available for sale.

    The Purpose

    This proposal has two purposes. First, to create a way to turn unallocated funds from the Telos Recovery account (‘tlosrecovery’ account) created when unclaimed Telos genesis accounts were liquidated in December 2019, for the express purpose of providing hard currency for exchange listing fees and for exchanging for TLOS to fill the hard currency needs of the Telos Foundation, Block Producers via the Economic Development Funds (‘econdevfunds’ account) and possibly voter-approved Telos Works proposals — therefore delaying market sell-pressure. Second, to create an innovative DeFi product to expand the Telos offerings and create more interest in Telos as a DeFi platform.

    Raising Hard Currency Funds without Crashing the TLOS Market Price

    Raising funds in hard currencies such as US Dollars (USD) or Bitcoin (BTC) has always been a challenge for organizations like the Telos Foundation. Each time a new expenditure needs to be made in one of these currencies, either a direct or “over the counter” (OTC) trade must be made, which reduces exchange activity and TLOS purchase demand, or the tokens must be sold on the market, which can reduce themarket price. OTC deals also can have the appearance of being “behind the scenes” or unavailable to any potential Telos buyer, whether or not that is actually the case. What would be preferable would be the ability to sell TLOS tokens without them going onto the market immediately. Typically, such a restriction on asset liquidity demands a commensurate price discount.

    Telos has a source of funds that has not yet been allocated: the funds from the Telos genesis accounts that were never claimed by their owners and now reside in the Telos Recovery account. One option discussed for these would be to flow them into the Exchange Reserve Fund that powers Telos to operate without creating new TLOS tokens. Adding these funds to the Exchange Reserve would extend the period of time that this can continue, but it would not address the present problems of low exchange access for Telos due to the inability to pay sufficient amounts in exchange listing fees — a move that is hoped will have an immediate and positive effect on the price of TLOS tokens. Therefore, the advantages of using these funds are in the future, but the need for them for crucial exchange listings is current.

    Expanding DeFi Interest

    Telos has added a number of potential DeFi tools including continuous liquidity pools through Evolution Dex, automated Bancor swaps from Telos Swaps, multi-blockchain offerings through Transledger and BOS IBC, and Telos REX among others. These have not yet garnered interest among DeFi buyers. The difficulty of buying TLOS on well known exchanges is certainly a contributing factor. Another is that DeFi options tend to be more attractive when there is a wide array for users to combine in interesting ways in the hopes of compounding returns, and Telos does not yet have the variety of options available on Ethereum. This proposed solution could address both issues.

    The proposed token would be unique among current DeFi offerings: An NFT that would be tradeable on secondary markets and allow the owners with the ability to claim funds as they are earned periodically using a claim function. This is analogous to a US Treasury Bond, or “T-bill” in NFT form. They are purchased at a discount from face value related to how long they are locked up. US T-bills and other sovereign debt instruments form the backbone of the world economy and have a market many times larger than all major stock markets combined. It is likely, therefore, that such a unique blockchain DeFi product would be of significant interest to investors and “yield farmers” in the Telos DeFi ecosystem and would possibly be used in similar ways. It would even be possible in the future to create the opposite type of instrument using hard currency reserves paid into the system to allow wrapped Bitcoin or USD token funds to be sold with similar transferable NFTs which could create a very robust and highly liquid “bond” market on Telos — perhaps the first such market in the DeFi landscape.

    “Wrapped” tokens are tokens from another blockchain that have been securely transferred and are represented as a 1:1 amount of divisible and transactable tokens on the new chain for each token locked up on the native chain. Wrapped tokens hold value because they can easily be returned to the native chain to unlock the same amount of the native token and do not have to be unlocked by the same account or in the same amounts. Currently, Transledger provides a fully working solution for providing wrapped BTC, ETH, EOS and other tokens on Telos. Wrapped BTC, ETH and EOS already exist and can be traded on Telos today with a decentralized exchange coming from Transledger very soon. Such tokens could be used for purchase of the NFTs and could be withdrawn to their native chains when hard currency is required without needing to directly sell TLOS on exchanges. A further advantage of this system is that it would create additional usage and liquidity of these wrapped tokens in the Telos ecosystem, accelerating their usefulness to other dapps.

    System Operations

    The proposed system would work as follows:

    1. TLOS would be made available from the ‘tlosrecovery’ account into a Telos NFT DeFi Bond account. Likely there would be an initial amount for sale (perhaps 5M TLOS) with an additional amount added each month (perhaps 1–2M TLOS). This amount could be modified by block producer MSIG within a range set by the Telos voters.

    2. Funds in the Telos NFT DeFi Bond account would be available for sale for hard currencies, either on an ongoing basis, or at specific times. There could be either a fixed discount to face value based on how long tokens are tied up, or an auction process where buyers bid for lower discounts, which is similar to how T-bills are sold. The lock-up and release of funds would be controlled by smart contracts developed by the Telos Core Developers and under the control of the Telos block producers. These NFTs could either become payable at maturity or have a constant amount of yield come available on a regular basis for claiming. Or a variety of products and approaches could be used.

    3. Purchasers of these NFT tokens would have the ability to claim funds in TLOS (either continuously or only at maturity depending on the product).

    4. These NFTs could be bought and sold on secondary markets in decentralized exchanges. They would provide a hedge against the prospect of dropping Telos REX returns, for example. Their actual value (in TLOS) would be calculatable at any time based on the yield and time to maturity and market forces could increase or decrease this theoretical value. These could also be used to leverage expected TLOS price action by buying and selling versus other wrapped tokens such as USD or BTC. This would provide a sort of de facto futures market for TLOS which would serve to reduce volatility. Trading bots could continuously calculate and arbitrage these NFTs, creating one pillar of a robust and sophisicated DeFi market to augment any other Telos or, with IBC solutions, EOSIO or Ethereum DeFi ecosystem.

    5. Hard currency such as Transledger-wrapped BTC would collect in the Telos NFT DeFi Bond account. When Telos has an opportunity to become listed on exchange, the block producers would approve paying the listing fee from these hard currency funds and therefore would not have to sell TLOS for BTC on the open market or through OTC deals. When the Telos Foundation or other approved entities require BTC, they would have the option of using the TLOS from their account to purchase wrapped BTC with the permission of the Telos block producers. In this way, TLOS from the Telos Foundation, Economic Development Fund, and possibly voter-approved Telos Works proposal winners, would be sold to this fund instead of on the open market, further delaying sell pressure, hopefully until a time when greater availability on prominent exchanges would create more buy pressure to offset these sales.

    6. All sales and purchases would use the price from the Telos price oracles system (already deployed and in use at the ‘delphioracle’ account) for transparency.

    The TEDP 2

    The Telos voters recently approved the Telos Economic Development Plan 2.0 (TEDP 2), which reduced the number of tokens available to block producers, the Telos Foundation, Telos Works, and the Economic Development Fund each month. This proposal may seem counter to that initiative. That will ultimately be up to the voters to decide, but this proposal is not intended to circumvent the TEDP 2.

    A primary reason for the TEDP 2 was to limit the sell pressure on TLOS tokens on the market. By locking up tokens for a period of time, these instruments would delay the availability of funds. If the thesis that it is the difficulty of onboarding new buyers to Telos due to the lack of prominent exchanges (and to a lesser degree the lack of exciting DeFi products) is correct, then the ability to free up funds now to pay multiple exchange listing fees is likely to unlock additional buy interest for TLOS to offset the sell pressure when these tokens ultimately come onto the open market.

    The original TEDP designated funding to the Economic Development Fund which is a fund intended to pay for exchange listing fees and similar uses at the discretion of the block producers. However, partly due to the current TLOS price and partly due to the high cost of exchange listing fees, relying on these funds would mean that it will be many months before Telos can be listed on bigger exchanges, with no certainty due to the potential for further price erosion.

    Exchange Listing Fees and Opportunities

    The primary roadblock for listing TLOS on more and better exchanges is now our ability to pay listing fees. Over the past 18 months we have grown into a very respectable chain and a leader in many areas. We have also obtained a letter from an attorney with a highly reputable US cryptocurrency practice who, in fact, represents some prominent exchanges. With funds available to pay listing fees, Telos could rapidly appear on a number of high volume exchanges.

    The TLOS token is currently listed on Probit (#38 on Coinmarketcap’s exchange ranking by volume), P2PB2B (#51 on CMC), CoinTiger (#59), CoinLim (#214), and Newdex (#306) exchanges. None of these are widely used compared to other exchanges. For illustration only and not to cast aspersions on any of our valued exchange partners, it is reasonable to call most of these D-level exchanges due to their volumes and general prominence. While each person has their own definitions, generally speaking, A-level exchanges would be long established, high volume, high reputability companies like Binance (#1 on CMC), Coinbase (#3), Kraken (#4); B-level exchanges would be well known but smaller exchanges such as KuCoin (#16), OKEx (#17) or Gate.io (#23); and C-level exchanges would be smaller but still recognizable exchanges with lower volume and reputation like HitBTC (#26) or Bitrue (#32).

    While we cannot discuss the specifics of the exchanges where Telos is pursuing listing, these efforts are ongoing. In general, A-level exchanges take the longest to be approved for listing on and have the highest standards. Some do not have listing fees, but for those that do, the fees at this level can be high. Most B-level exchanges charge some listing fee which is usually less than A-level but occasionally more. C- and D-level exchanges naturally follow this same general pattern, although there are some more affordable options at each level and sometimes it’s possible to negotiate better rates. Additionally, there are certain exchanges where listing opens up the opportunity to be listed on popular services like Changely or MoonPay that increase trading and on- or off-ramps to fiat currencies.

    The funds that are currently available via the Economic Development Fund are sufficient to get listed on one or two new C-level exchanges every 3–5 months, or perhaps one new B-level exchange every 5–7 months. If the price of TLOS rises, the available funds would increase, but the reduction of TLOS sent to the Economic Development Fund would also be reduced by the TEDP 2, which would work against this. Due to the high price of exchange listing fees, it will take a long time to become listed on the larger number of exchanges that could finally allow a large number of new buyers to have access to TLOS trading. We had hoped that because Telos had never performed an ICO or because Telos is now one of the highest capacity/activity blockchains or one of the most advanced governance blockchains, or that Telos is now appearing in top crypto news outlets weekly, that exchanges would wish to list TLOS without charging a fee or at least at a reduced fee. But this has not been the case and that appears unlikely to change until TLOS trading volume increases significantly — which requires more exchange listings.

    Improving Telos value

    In short, Telos could be seen as being in a chicken-and-egg situation that will not naturally resolve itself for the better. To resolve this situation requires freeing up funds for new exchange listings more rapidly than the TEDP 2 Economic Development Funds alone will allow. This proposed action is intended to break Telos out of this situation by selling TLOS via NFT “bonds” that delay the time when these TLOS can be sold in exchange for present hard currency funds at a discount so that the hard currency funds could be used immediately to pay for listing fees on more prominent exchanges, which will open up TLOS trading pairs to investors who currently cannot purchase them without opening accounts on the more boutique exchanges where TLOS is currently listed. If the difficulty of buying TLOS on its limited exchanges is, indeed part of the explanation for the current low TLOS price despite constantly improving dapp and user onboarding and other Telos advancements, then the increased ease of purchasing TLOS on more and more prominent exchanges could be expected to offset the current sell pressure from TEDP 2 funding. Further, some of these TEDP 2 funds could also be exchanged via this pool of funds, further delaying current sell pressure until a future time.

    This RFC requests comments from members of the Telos community about this approach, whether it is deemed worth pursuing and various details about the implementation still to be decided before submitting a formal Telos Amend proposal. Ultimately, only the Telos voting community can decide if this is a prospect worth trying. Fortunately, we have the ability to achieve consensus on this type of proposal fairly rapidly and with a high level of transparency.


    Discussion Points

    Claiming continuously or at maturity

    Should the NFTs use continuous daily or weekly claiming periods, where the amount of tokens available to claim are released at a regular interval, or should they work more like a savings bond where no funds are released until the maturity date? As a DeFi product, continuously claimed NFTs would gradually lose value up until their expiration, while claim-at-maturity bonds would gradually gain value. There are analogs in traditional financial markets for both approaches.

    Claim-at-maturity NFTs would tie up funds longer, but would therefore require a higher discount to face value. This would also create a regular bolus of funds coming available at roughly the same time that would potentially create price fluctuations at these maturity times. Continuously claiming NFTs would spread this claiming over a longer period of time. It’s also possible to have both types of products.

    Token sales limits

    How many TLOS tokens should be drawn from the Telos Recovery account? Should there be an initial amount to start the program and allow rapid payment of new exchange listing fees? What should the ongoing monthly amount be? Should there be a set amount, or should the block producers manage this on an ongoing basis based on anticipated needs?

    As an initial proposal, 5M Telos to start and 2M Telos per month thereafter would allow Telos to immediately be listed on a number of new exchanges. However, allowing the block producers to set the number based on anticipated need would allow even more rapid onboarding. There seems to be a number of C- and B- level exchanges that would list TLOS almost immediately if funds were available for exchange fees.

    Yield

    How much yield should be paid on these NFTs or what discount to face value would they receive? TLOS token holders who stake their tokens in Telos REX can expect a reasonably predictable rate of return with full liquidity. Therefore, the yield/discount should be greater than this anticipated REX return. The greater the yield/discount, the more attractive the NFTs would be and the faster they would accrue hard currency funds.

    Sunset policy

    When should this program end or “sunset”? Is there a maximum about of TLOS that should be sold? Is there a maximum amount of time? Is there a maximum number of exchanges that should be funded? Should the program be offered indefinitely as a DeFi product? The Telos Amend governance system allows for updating the system as needed if it is not meeting the community’s needs, but some initial goals should be determined.

    Approved hard currency purchasers

    Should certain entities such as the Telos Foundation and others receiving TEDP 2 funds be allowed to sell TLOS against hard currencies in this pool as a way to further reduce or delay market sell pressure on TLOS? Who should this apply to? Could this eventually become an open liquidity pool, possibly with market or auction rates to create yet another DeFi offering on Telos?

  • GoodBlock is accepting applications to expand our dStor team

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    This is a great opportunity to join the GoodBlock team and help launch a killer new product, dStor. If you have serious skills, current availability, and a passion for blockchain and Telos, this could be your chance to help change the world! Also, if you can connect us to a candidate who fits one of these roles, there are 5,000 TLOS thank-you/referral bonuses if we end up hiring them. (Must introduce us to someone we don’t already have a relationship with.)

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  • Telos Governance Offers Protection Against Exchange Takeover

    by Douglas Horn

    Today, the STEEM blockchain was apparently taken over by an unprecedented coordinated attack led by Tron’s Justin Sun and the centralized exchanges Binance, Poloniex, and Huobi. What makes this more egregious is the fact that the tokens that the exchanges used to enact this hostile takeover of the chain were owned by their customers and further, these exchanges locked up these customer tokens for 13 weeks in order to gain this power. Customers who entrusted their tokens to these exchanges will not be able to withdraw them for some time.

    As a result of what appears to be a startling breach of trust, there is concern in the communities of other blockchains using Delegated Proof of Stake (DPoS) that such hostile takeovers could also occur there as well. To allay fears that such a situation could occur on Telos, I’d like to discuss how the existing Telos governance actively protects the chain from a centralized exchange takeover.

    Telos governance is defined by the Telos Blockchain Network Operating Agreement (TBNOA) and other governance documents. (View at tbnoa.org) The Telos developers and block producers built tools and practices founded on these documents.

    Exchanges cannot vote customer tokens

    The first protection that Telos has only beneficial owners of tokens can vote them. This is spelled out in Clause 21 of the TBNOA:

    Only a token’s true beneficial owner or a voting Proxy recorded on the blockchain may vote tokens. Any Member holding tokens in trust for another beneficial owner, such as a centralized exchange, may not cast votes for or assign to a Proxy such tokens.

    Exchanges do not have the right to vote TLOS tokens owned by their customers. The Telos block producers have made each exchange listing TLOS aware of this rule and to date, each exchange has understood this and has not voted any tokens. Of course, that was the same situation with these exchanges on STEEM, so a document alone cannot be relied upon. The Telos block producers have additional tools available.

    Preventing sock puppet delegate nodes

    DPoS chains are operated by validator nodes that are empowered through the delegated votes of staked tokens on their chains. On STEEM these delegates are called Witnesses and on Telos, Block Producers, but they play essentially the same role. Once voted into power, these delegates can perform a wide variety of actions by a supermajority vote of about 67%. However, it requires a number of delegates and to pull off a coordinated attack requires these delegates to be controlled by the same organization or colluding organizations.

    The attack on STEEM required not just the large majority of staked token votes, but also collusion from 20 witness nodes. Each of the witness nodes that took part in the STEEM takeover was newly registered in in February 2020 and were quite obviously colluding.

    Aware of this potential exploit, Telos governance addresses it in a number of ways. First, Telos block producer organizations must identify their owners. Further, no one may own any part (5% or more) of more than one block producer. This is documented in the Telos Regproducer Agreement (Clause 17) that each block producer signs as part of registration on the network. Telos block producers are also not permitted to collude (Clause 11).

    Further, the Regproducer agreement (Clause 13) requires compliance with the Block Producer Minimum Requirements, one of which is to produce blocks for at least 7 days on the Telos testnet before registering on the Telos mainnet as a block producer.

    Together, these rules and requirements mean that it is very difficult for new block producer to come onto the network without being scrutinized for compliance. All current block producers have followed these rules and the small number of block producers that failed to comply were removed by the prescribed enforcement actions. Block producers who have not met the 7-day minimum requirement on testnet are typically removed or self-remove when they discover this until the requirement is met. This becomes a crucial first opportunity to notice and engage with potential bad actor block producers. During this time, block producer candidates are required to disclose their ownership and show compliance with all other requirements. This creates an opportunity to search for signs of co-ownership across entities. If signs of this arise, further scrutiny is brought. In the past, the Telos block producers have removed candidates due to strong evidence of single entities owning more than one block producer. Once removed, these nodes are kicked from the network for an amount of time prescribed in the Regproducer agreement.

    In order to execute a network takeover of Telos, at least 15 coordinated new block producer candidates would need to be brought onto the network, which is highly unlikely given that the Telos governance rules give block producers time, authority and mechanisms to assess new block producers for signs of co-ownership or collusion and react before an attack could be carried out. If an attacker instead chose to acquire or coerce existing block producers to be complicit in the scheme, there is a high likelihood that at least one would reject such overtures and alert the other block producers.

    Telos tokenomics

    Telos launched with a flat economic token distribution compared to most cryptocurrencies. Despite some subsequent large acquisitions by a few accounts, the distribution remains enviably egalitarian. This contributes to a voter base of small accounts that determine the Telos top 21 block producers. The top eight Telos block producers each have more than 64 million votes. To break 15 new nodes into the top 21 block producers, therefore, in addition to onboarding these block producers without revealing their collusion and/or co-ownership, an entity seeking to take over Telos would need to control the voting of at least 64 million TLOS. However, Telos has one of the lowest token supplies among DPoS chains, with just 355,208,371 tokens of which 114,002,154 are currently liquid (of which 66% are stored in REX for 15.7% staking rewards). High REX staking rewards have proven to be an effective method of limiting the amount of TLOS available for exchange.

    An attempt to purchase the 64 million TLOS would require an attacker to quickly deplete all TLOS sell orders on every exchange without coming anywhere near the goal. These and further purchases would certainly drive the price of TLOS token up significantly and the rapidly increasing price and ensuing FOMO would further increase this price runup. It is difficult to calculate the cost of acquiring essentially 60% of the available TLOS tokens, but it would be an expensive venture and one likely to rouse interest within the community.

    Large voter coordination

    While Telos is a highly decentralized blockchain without collusion, in the face of an overt attack, key stakeholders in the network could be expected to work together for a limited time needed to fend off the overthrow. Like many chains, some of the larger token holders on Telos are the original launch group and current block producers who already have strong working relationships that would prove to be an asset in a time of attack. In addition to the other channels of communication that they use, Telos block producers must all provide working emergency telephone numbers and email addresses as a minimum requirement and these are checked periodically to ensure general compliance — so coordination could be swift. While the stake of large TLOS holders is proportionately small compared to many more centralized chains, they are adequate to temporarily present an even more formidable front against takeover once alerted to this rise in centralized token ownership and the appearance of 15 new block producers. This would most likely be expressed in shoring up the stake of block producers lower on the top 21 list. Factoring in this temporary coordination of large holders and proxies the amount of TLOS needed to control the network is likely to be even higher than 64 million.

    Network destruction attempts

    Finally, we must consider that the aims of such a hostile takeover might be to destroy the chain rather than to seize control. This can be accomplished on a DPoS blockchain by gaining control of about 38% of the active block producers. On a chain like Telos or EOS with 21 block producers in the schedule at any time, this requires eight colluding block producers to get into a position of be in the top 21 and then destroy their signing keys in a coordinated move over a short period of time. Telos is designed to remove block producers that do not produce blocks over about a two hour period so all eight would need to destroy their keys prior to any of them being kicked for missed blocks. Without recovering at least one of those eight signing keys, the chain would not be able to move forward and its current form would become nonviable.

    Telos would, of course, use all of the aforementioned protections to prevent this. There is a significant disincentive for anyone to perform such an attack as they would need to purchase nearly the same amount of TLOS tokens needed to take over the network with 15 block producers, but they would destroy all value they had invested in the process.

    Following such an destruction of the network, the remaining Telos block producers would have the ability to revert to their most recent common backup state that did not include all eight malicious block producers. These backups occur regularly on Telos and would likely occur on a rolling basis every 5–10 minutes once the chain was alerted to a scuttling attempt. The outcome would likely be that the non-colluding block producers would roll back the chain to a state not long before the previous chain was destroyed. All transactions would be retained except for the brief period between the last backup and the attack. The block producers would then likely fork off a new chain at this point, zeroing out the balances of the colluding block producers and all those that voted for them at the time of the attack as a penalty. (This would probably first occur as a freeze of these accounts pending an arbitrator action under the Telos Resolve dispute resolution process.) As such, the effects of an attempt to destroy the Telos network would be short lived and come at a high cost to the attackers.

    Conclusion

    I hope that this explanation of some of the protections built into Telos governance can ease concerns among the Telos community about an attack such as the one that occurred today against the STEEM blockchain. Of course, the greatest protection offered by the Telos governance system is the ability for the highly engaged Telos community to propose and vote to adopt changes to the operations or governance of the chain and adapt to such threats. This gives Telos unparalleled power to protect itself while maintaining decentralization and participatory governance.


    About the author: Douglas Horn is the Telos architect and whitepaper author and a Telos core developer. He is the founder of GoodBlock, a Telos block producer and blockchain development company currently releasing the dStor decentralized data storage system.

    For more Telos related news: 
    telos.net

  • Blockchain Governance Advances to the Third Generation

    by Douglas Horn

    Governance is an important field of growth for the blockchain industry. New developments have advanced the state of the art of blockchain governance to a crucial third generation distinct from previous advances. Third-generation blockchain governance is characterized by a high degree of protocol-level, participatory governance that is extended to dapps and DAOs deployed on the blockchain as well.

    Third-generation Blockchain and Governance

    To date, the term, third-generation, in blockchain has referred to the blockchain protocols themselves. In this model, Bitcoin is a first-generation blockchain based on proof of work consensus; Ethereum is a second-generation blockchain which adds the ability to run smart contracts but still uses proof of work; and EOS and Tron are third-generation blockchains using delegated proof of stake consensus mechanisms to allow much greater speed, capacity, and computing power for smart contracts with ease of use features such as simple account names and no transaction fees. However, with recent advances in blockchain governance tools and protocols, blockchain governance, itself is now entering a third age.

    The three generations of blockchain governance are:

    First-generation governance (e.g. Bitcoin): The blockchain is governed by its protocol to ensure that blocks and transactions are valid. The process of updating those protocols, however, is an off-chain process.

    Second-generation governance (e.g. Tezos): The blockchain’s protocol applies to validating blocks and transactions but also includes an on-chain method to update the protocol, itself.

    Third-generation governance (e.g. Telos®): The blockchain’s protocol provides methods for validating blocks and transactions, for updating the protocol and other governance functions, and extends these protocol-level governance functions to dapps an DAOs deployed on the blockchain as well.

    The Evolution of Blockchain Governance

    The history of blockchain governance has largely been about simply ensuring that all transactions are valid. This is still the case for the vast majority of blockchains. Many bitcoiners take pride in the fact that math alone determines consensus. However, this approach ignores the very real need to update the protocol or blockchain source code from time to time. With first-generation governance, this process generally occurs off the chain with developers setting a direction and deploying new code. Most users and miners have little input on what is included or excluded from the new code. Mining pool operators may decide whether or not to support new protocols and miners may decide whether to support the decisions of these pools by directing their hash power to them, but this is the extent of participation.

    In a situation where there are two protocols that could be selected (old and new), the one that receives the greatest amount of hash power will be deemed the valid one and the other option either withers or becomes an alternate coin, such as the Bitcoin and Bitcoin Cash split of August 2017. End users only “vote” with their economic involvement: they can buy tokens they like and sell those they don’t. The outcome of first-generation governance for blockchains is often slow and divided development efforts, disconnection of general users from the ongoing development, and occasionally contentious forks when projects have no inclusive method for determining the direction of the project.

    With the advent of second-generation governance, blockchain projects incorporate into their protocols methods to modify the protocols, themselves based on some on-chain selection criteria. Second-generation governance blockchains provide ways to iterate on the blockchain’s very design based on determinations made on the chain itself, such as voting. Tezos was one of the first blockchains to incorporate second-generation governance in September 2018 by allowing users to vote on proposed code changes with the winning code automatically updating the chain’s protocol. Second-generation governance allows communities to better determine the direction of a project so that they can avoid contentious splits or divided development efforts. In turn, it allows continuous iteration of protocols, empowering faster evolution and adaptation.

    While second-generation blockchains promise important advantages, these are limited to the operation and iteration of the chain, itself. Third-generation blockchain takes this to a crucial new level by extending the protocol-level governance features to dapps and DAOs (Decentralized Autonomous Organizations) deployed on the blockchain, meaning that a wide array of dapps and DAOs can incorporate common tools from the chain, itself, to govern their own operations and development.

    Third-generation governance greatly empowers dapps and DAOs to be managed by their users without relying on an entrenched set of developers or leaders. As important as core blockchain protocols are, dapps and DAOs are how the vast majority of future users will interact with blockchain technologies. These dapps have the same needs to evolve and adapt, to maintain cohesive user communities, and to focus development resources as blockchains do. More so than the underlying blockchains, in fact because dapp resources are generally more limited than those of the underlying chain. By extending protocol-level tools maintained and advanced by the chain’s core developers, and adopted by the chain’s users via governance tools, blockchains with third-generation governance allow the dapps and DAOs deployed on them to more rapidly advance than dapps attempting to incorporate governance tools through their own ad hoc development efforts.

    Third-generation Governance on Telos

    The first blockchain to incorporate third-generation governance is Telos®. The Telos mainnet launched in December 2018 as a third-generation blockchain based on EOSIO with second-generation governance. Telos incorporates a number of advanced governance features including the election of validating nodes, allocation of work proposal system funds via Telos Works, dispute resolution with elected arbitrators via Telos Resolve, and the update of the Telos protocol, itself, based on user votes and controlled entirely by on-chain smart contracts via Telos Amend.

    An update to the underlying Telos governance functions has now extended all of these features to dapps and DAOs on Telos via a suite of governance tools called Telos Decide™, which are maintained by Telos core developers at the protocol level.

    Telos Decide offers dapp developers a number of types of voting for ballot initiatives and elections, and committee building and management functions. All functions are highly configurable for things such as voting quorums and passage thresholds, terms of office for elected positions, and voting powers and requirements for committees. The tokens used to empower these governance features are also highly configurable, allowing divisible, transferrable tokens that serve both governance and economic functions, to limited-use tokens solely for governance that cannot be transferred or divided — and many possibilities between. For DAOs, Telos Decide will also soon offer modular tools for proposing and voting initiatives that have specific smart contract transactions triggered by their outcomes. (Alpha versions of these can be previewed at app.telos.net.)

    While projects like Aragon have previously enabled the creation of configurable DAOs controlled by smart contracts, they were generally standalone dapp projects themselves with no connection to the underlying blockchain protocols and governance tools. Telos takes this to a new level, which allows a greater set of common programming standards and user interfaces due to the common programming interface. This will greatly unlock the potential of dapps and DAOs to govern themselves and adapt to issues that may have been unforeseen at the project’s outset.

    The Future of Third-generation Governance

    While Telos is the first blockchain to create third-generation governance, it’s unlikely to be the last. Dapp developers understand the many advantages of self-sovereign, participatory governance as a way to build and maintain community, and to adapt and iterate based on the decisions of the users. Dapps are decentralized applications and to be truly decentralized, they must not be reliant on a small group of founders or developers for their decision-making and growth. Chains with third-generation governance features offer the dapps and DAOs built on them with the ability to fully deliver on this decentralization using common tools that all developers and users on the chain can quickly become familiar with using.

    To learn more about Telos third-generation governance features, there is a Telos Governance Reference article and a Github repository of Telos Decide features.

    ###

    About the author: Douglas Horn is the Telos architect and whitepaper author and a Telos core developer. He is the founder of GoodBlock, a Telos block producer and blockchain development company currently releasing the dStor decentralized data storage system.

  • Telos Sets the New Standard in Blockchain Governance

    by Douglas Horn

    The Telos® blockchain has provided leading governance features since the project launched its mainnet in December 2018. However, recent upgrades by the Telos Core Developers have catapulted Telos governance ahead of every major blockchain project by not only providing powerful, participatory, smart contract-controlled features to the Telos blockchain itself, but by seamlessly integrating these chain-level tools to any dapp deployed on Telos to easily adapt for their own governance needs. This suite of tools, called Telos Decide™, allows any dapp or group to easily incorporate decentralized governance features such as initiative ballots, committee or custodian elections, and committee management with highly configurable ballots that can trigger smart contract actions upon completion, such as assigning control of accounts and funds, performing transfers, setting configuration parameters, or managing permissions.

    Participatory blockchain governance is valuable because it allows a project to rapidly evolve and adapt based on the priorities of its members. The most often cited advantage of this is that it prevents communities from splitting based on unresolved divisions in priorities by various subgroups. The ability to transparently poll a project’s community does, indeed, serve this purpose of regularly resynching various groups so that ingrained factions are less likely to emerge. A less recognized but equally important advantage of fluid governance decisions is the ability for continuous and ongoing iteration in the operation of the chain to optimize various parameters over time as a modus operandi permitting experimentation that can rapidly be reversed or adjusted if it proves detrimental, or expanded incrementally when changes prove beneficial.

    Telos Governance Overview

    Telos governance is comprised of several key pieces: validating node election, governance document amendment, work proposal funds allocation, and dispute resolution.

    Validating node election

    Voters elect the validating nodes (called block producers) that operate the Telos blockchain via a Delegated Proof of Stake (DPoS) consensus mechanism which is similar across most third-generation blockchains. Like other EOSIO-based blockchains, Telos has 21 block producers elected by the votes of token holders based on their staked token balance. This election process is constantly updated based on these votes with a resolution of about two minutes. Block producers execute updates to the blockchain by multi-signature transactions which must be signed by at least 15 of the 21 block producers in the current producer schedule in order to be executed. These changes typically involve the updating of configuration parameters or adoption of new software versions. In this way, Telos is essentially identical to EOS in the election of its validating nodes.

    Telos diverges from other EOSIO chains in that it also has up to thirty standby block producers, also elected by users (the runners-up in the same block producer voting process) and one of these is constantly rotated into the producer schedule in lieu of one of the top 21 elected block producers to verify their ability to perform block producer functions when needed and to provide top block producers regular infrastructure maintenance intervals. Typically, standby block producers rotate in twice each month for 12 hours and while performing as block producers, they have all the privileges and responsibilities of any other block producer including signing multi-signature transactions. In this way there are generally 51 or more independent validating node operators validating blocks on Telos in any given 30-day period which provides a high level of decentralization. Telos block producers must meet minimum standards and must agree to a block producer agreement governance document proscribing certain actions and defining the penalties and enforcement mechanism for infractions. Non-compliant block producer candidates are temporarily removed by votes of the current block producers. Telos block producers have established a precedent of judicious enforcement.

    Voting for Telos block producer validating nodes via telos.bloks.io.

    Governance document amendment

    Telos has a unique process for amending its governance called Telos Amend, which aims to make this process accessible to general users who may not have a strong technical knowledge of computer code but still wish to be involved in the blockchain’s governance.

    Telos governance is described in the Telos governance documents, which all users agree to abide by when first creating or using a Telos account. The primary governance document is the Telos Blockchain Network Operating Agreement or TBNOA. Each of these documents is stored on the Telos IPFS system (soon to be updated to the dStor decentralized data storage system) as a series of independent clauses. Each document exists as a table of links to these clauses on the Telos IPFS system. Any Telos user may submit a proposal to amend any of these governance documents using the Telos Amend process.

    Telos governance documents are stored and amended on chain. A live viewer is available at tbnoa.org.

    When a Telos Amend proposal is submitted for a document, any clauses proposed to be added or modified are uploaded to the Telos IPFS system as markdown-format text files with a unique SHA256 filehash as its resource locator. Proposals are voted over a 29-day (5 million block) period and pass if they receive a quorum of at least 15% of Telos voteable tokens and a supermajority of 60% yes votes over no votes. (A voteable Telos token is a TLOS token contained in the balance of an account that has called the Telos Decide voting registration action.) Upon passage of a Telos Amend proposal, links to these new clauses replace the former links in the table of that document’s clauses (or they are added if new). In this way, Telos governance documents may be dynamically amended by the votes of the users in a process that is entirely controlled by on-chain smart contracts.

    When a governance document has been amended, developers, such as the Telos Core Developers (TCD) group must then modify and test the appropriate Telos source code to reflect this change and the Telos block producers must further test and then implement this code. (Telos maintains both an ongoing testnet and ad hoc staging networks for core source code testing purposes.) This is analogous to the process that almost any traditional democracy uses where a legislative body votes on a new law and an executive administration then enacts it. For example, if a national speed limit is changed, it generally does not become effective until there is a chance for the speed limit signs to be replaced. The Telos block producers and core developers serve at the pleasure of the voters who may vote them out if they do not fulfill their mandates in a timely manner. Unlike most blockchain projects, there is no official, entrenched core developer group, instead the Telos core developers are, by definition, those developers whose source code contributions are paid via user votes and implemented by the Telos block producers.

    Telos Amend voting via Chainspector.io

    Work proposal funds allocation

    Telos has a work proposal system (WPS) called Telos Works for allocating funds for core development, marketing, dapp and tool development and onboarding, and any other project selected by the Telos voters. Telos Works is also entirely controlled by on-chain smart contracts and may be voted by anyone currently staking the Telos system token, TLOS, with their voting weight directly proportional to their staked TLOS tokens. As the Telos project was entirely bootstrapped by its community without any ICO or other form of fundraising, Telos Works provides the primary funding mechanism for all promotion and development.

    Telos Works has been extremely successful by any measure. There have been over 110 proposals to date and several groups receive consistent, ongoing funding from the 29-day voting cycles. In addition to Telos core development and marketing, a number of new dapps and tools have been solely or initially funded through Telos Works. WordProof, a WordPress plug-in for providing proof of publication on Telos and other blockchains is an example of an important tool that was first created via Telos Works funding and went on to become a successful business. As the only user-voted WPS on any EOSIO blockchain, Telos Works is also the sole consistent source of funding for several projects that provide key infrastructure for the entire EOSIO ecosystem such as Scatter wallet or Chronicle history tool development.

    Telos Works voting via Telos mobile wallet

    Dispute resolution

    Telos governance provides for a dispute resolution process and service called Telos Resolve which seeks to create a path to dispute resolution for entirely on-chain conflicts using user-elected arbitrators and a smart contract-based arbitration management process. Users may file dispute cases against another account and provide evidence to assigned elected arbitrators off-chain with key events in the dispute resolution process recorded on-chain via smart contract in order to avoid immutably writing personally identifying or private evidence to the blockchain. The process is governed by the Telos Blockchain Network Arbitration Rules and Procedures (TBNARP) governance document and Telos Resolve case decisions are referred to the block producers for execution. This seeks to be an avenue for resolving disputes due to smart contract errors or lost or disputed account keys, for example. Strong evidence is required for any decision with cryptographic proof being the general standard. While the Telos Resolve smart contracts have been instituted for some time, the system is still in its early stages of use as arbitrators receive training and discuss standards and practices. As yet, there has been little call for dispute resolution. This is expected to change as Telos continues to grow and attract more dapps and users.

    Telos Decide

    While the governance of Telos is quite advanced in many areas, a distinguishing feature is its ability to offer these many governance features to any dapp or group deployed on the blockchain. This suite of tools is known as Telos Decide. As important as blockchain governance is to the base blockchains themselves, it offers even greater advantages when it can be similarly deployed by any dapp without duplication of effort. The Telos core developers spent over a year advancing these features into the most extensive and nuanced in the world and by giving these same abilities to other dapps will vastly simplify development tasks for tens of thousands of dapps to follow.

    Telos Decide allows any dapp or group to create smart contract-controlled governance rules and processes that incorporate a variety of forms of voting and token management that are fully configurable to its needs. Voting is centered around a dapp’s or group’s unique token, which can be configured as transferrable or non-transferrable, divisible or indivisible, governance use only or governance and economic use. Various forms of voting can be implemented for different use cases, for example, one vote per account, one vote per token, or one vote per token with quadratic scaling to reduce the voting power of the largest stakeholders while still respecting varying levels of stake. With these tools, one project may have a single indivisible, non-transferrable, governance-only token for each user account giving every participant a single vote while another may offer transferrable, divisible, governance and economic tokens that confer stake-weighted voting rights. Ballot initiatives can be similarly configured in terms of the type of voting, required quorums in terms of number of voters, number of tokens voted, or both, and the size of the majority required to pass a ballot.

    Telos Decide also enables elections of boards or committees either in standard elections, where multiple candidates run for each individual seat or leaderboard elections, where multiple candidates run for multiple seats and the top vote earners are elected from a single candidate pool. Any election or ballot can trigger a predetermined transaction upon successful completion. (Telos transactions can be comprised of multiple distinct actions.) These can include any valid transaction but are typically the transfer of funds or assignment of account signing permissions to the control of the winning candidate’s account. Board seats can therefore be transferred to election winners for a configurable term. These board accounts, themselves, may possess non-transferrable governance function tokens that allow voting on board or committee ballots, based rules that each dapp or group may configure to its own specification. Such board actions can, in turn, trigger additional transactions such as spending money or the further election of executive positions with control over specific permissioned accounts.

    Telos Decide leverages the powerful system of Telos account privileges, which allows an account to assign different signing abilities and requirements for different accounts and functions within an account. For example, an account may allow a seat winner to transfer tokens controlled by the account, but not to change permissions. Permissions can be controlled from other accounts and permissions may have variable weights as part of multi-signature transactions.

    The TCD is in the process of further modularizing both the Telos Decide smart contracts and user interfaces so that developers can use either a common set of voting and governance tools or create their own white label implementations of web and mobile applications. Telos Decide is the only governance toolset that is implemented at the core blockchain level and maintained by the project’s core developers directly. This offers enormous advantages in consistency, bug detection and elimination, and common voting tools. Users have no need to learn a new interface for each individual dapp and developers can focus on their own dapps’ features rather than building and testing core governance functions. This common approach also portends more rapid development and testing of new features than would be possible with varied, application-level implementations. Combined with funding of ongoing development via Telos Works, Telos Decide aims to outpace any competitors.

    Interacting with customized Telos Decide voting groups via app.telos.net.

    The Telos Foundation

    The Telos Foundation should be mentioned because it is often mistakenly seen as having a governance role. In fact, the Telos Foundation is strictly a promotional body meant to provide an entity that can interact with more traditional businesses. Fully decentralized blockchains like Telos are challenged in conducting business with traditional entities for purposes such as advertising or conference participation or sponsorship because there is no entity that can sign agreements. The Telos Foundation fills this role for Telos. Its board is elected using committee election and management tools that were a precursor to Telos Decide. This mechanism is expected to be updated in the near future to incorporate the revised system and expand its voter base.

    Telos Decide-type voting for the Telos Foundation board via Sqrl wallet.

    Comparison to Other Leading Blockchain Projects

    Blockchain governance is a rapidly developing field. Several blockchain projects include impressive governance features and Telos has benefited greatly from their example. The Telos Works WPS, for example, was largely modeled on the success and evolution of the Dash WPS. The most significant differences being that Telos Works is entirely controlled by smart contracts and voteable by any token holder.

    Tezos has been considered by many to be the current leader in blockchain governance due to its ability to vote on core protocol changes. Tezos and Telos bare similarities beyond their names. The Tezos mainnet launched just months before the Telos mainnet in 2018. Tezos also allows the updating of its core code via highly participatory votes by its token holders, like Telos Amend. The difference between these two processes is mostly in approach. Proposed amendments on Tezos are in the form of executable core code, which users vote on the implementation of, with successful ballots being enacted directly into the core protocol code immediately. Telos Amend, on the other hand, allows users to vote on adopting human language governance clauses which must then be implemented and executed in code by developers and block producers. Both of these approaches are entirely valid with their own advantages and drawbacks. The Telos Amend process could be seen as more inclusive to non-programmer voters but slower to implement, whereas the Tezos amendment process is implemented immediately upon successful voting, but requires general users to rely on the interpretation of Tezos programming experts. Both processes have significant merit.

    Aside from these amendment processes, however, Telos stands out from Tezos significantly due to its additional governance structures such as Telos Works WPS, Telos Resolve dispute resolution, the election of validating nodes, and most significantly, the ability to extend all of these governance functions to any dapp or group on the blockchain through Telos Decide. No other blockchain project offers similar core-level governance features to Telos Decide. The Ethereum project Aragon also offers useful DAC and DAO creation and management features. However, it does not operate at the chain protocol level, and is subject to the scaling issues and per-transaction fees of Ethereum.

    A Telos Works funding proposal for the Telos core developers via Chainspector.io.

    Telos Governance in Action

    It is not surprising that Telos Works has been one of the most popular and successful components of Telos governance. The world of open source software and blockchain have more fans than funding opportunities, so a program that offers people a way to earn money or secure funding for new projects is bound to draw attention. What may not be obvious, though, is what an effective attractant and onboarding tool Telos Works has become. The ability to fund projects has supported and grown the ranks of Telos core developers and attracted new dapps and tools to Telos. Obtaining seed funding is challenging for most projects, particularly in the blockchain space and more so at the end of a long bear market. Telos Works enjoys a wide variety of project proposals. A number of applicants are receiving regular, ongoing funding which allow key initiatives to build momentum.

    The Telos voters participate in extensive discourse about the relative merits of funding proposals and there is an expectation of regular reports and visible results from those projects receiving funds. This is representative of the governance culture emerging within the community. Telos voters are also proving vocal about expecting enforcement of rules and debating the current configurations of voting parameters required for passage, among other topics.

    Telos Amend is less often used but inspires strong reactions within the community. The first Telos Amend proposal to pass was the Telos Economic Development Plan, (TEDP) which addressed a number of issues with Telos economics such as block producer pay and funding for Telos Works and the Telos Foundation. The TEDP passed with overwhelming acceptance and was quickly implemented, coinciding with an increase in the Telos token price and adoption of more dapps and users. A current Telos Amend set of proposals gives the Telos voters options for modifying the passage requirements of Telos Works proposals, due to concerns that the current configuration may be allowing more proposals to pass than is optimal for long term sustainability. Three increasingly stringent proposals are being voted simultaneously, with a fourth possibility of no change in the parameters if none of the measures pass.

    Culture is often the forgotten pillar of governance; without a culture that shares a common belief in the value and efficacy of voting, no democracy or quasi-democracy can function. Telos voters are regularly seeing their votes being counted and directly influencing the outcome of various initiatives, which provides a positive feedback loop towards participation and personal investment in ballot measures and outcomes. By making voting transparent and convenient, Telos is largely avoiding voter apathy that can plague many democratic systems.

    Dapps have begun implementing governance features through Telos Decide. A good example of this is the SEEDS regenerative economy dapp that makes use of these features in administering its governance, selecting projects to fund, and determining when milestones have been reached. SEEDS is aligned with a decentralized organization called Hypha. These organizations can use human-determined voting to redefine decentralized organizations from a Decentralized Autonomous Organization (DAO) model where decisions are arrived at through automated, deterministic business logic rules contained in smart contracts to a Decentralized Human Organization (DHO) model where the smart contracts still impart autonomy and determinism, but do so by providing structures for human voting that determines outcomes. Hypha in particular, supports holocratic governance so the DHO in its case could also stand for Decentralized Holocratic Organization. Holocracy is a form of decentralized governance where decision-making is distributed throughout self-organizing teams empowered with decision-making abilities as opposed to a traditional top-down structure. Telos Decide provides tools for holocracies that Hypha is further developing and extending into a robust holocracy toolset.

    The word telos means the purpose of something and Telos is designed to empower people to organize around common purpose, using blockchain-based governance tools. In addition to the holocracy tools Hypha is building, Telos Decide is providing an interface to quickly organize groups organized to specific purposes and provide tools to make decisions, elect custodians, and allocate funding. The early versions of this interface can be seen at app.telos.net. As these tools evolve and gain acceptance, it’s quite possible that a concept of telocracy, or governance by or for purpose, may emerge where groups coalesce around accomplishing a shared purpose and organize and manage themselves using blockchain governance tools such as Telos Decide.

    The SEEDS Passport app employs Telos Decide features to manage its governance.

    Telos as a Smart Contract Platform

    The strong governance features of Telos are enhanced by the technical traits of the network. Telos operates at the block time of one half second per block providing high resolution data recording and low latency that users expect from mobile and web apps. Telos also has enormous capacity, boasting the second-highest record for the amount of transactions performed per 24 hours (32,217,207 tx) among all blockchains tracked by Blocktivity.info. The Telos resource staking model means that individual transactions on the Telos blockchain do not incur transaction fees. Instead users stake TLOS tokens, which are not consumed, in order to reserve network resources. Telos is further simplifying this resource management by allowing dapps to stake resources for their users and by implementing a limited number of “universal basic transactions” (UBTX) each day for low-resource accounts — which is in line with the free account creation Telos has offered since launch as a way to reduce onboarding friction for users.

    Telos is a powerful platform for deploying smart contracts due to the growing EOSIO developer ecosystem with many services and tools available. Telos smart contracts are written in C++, which is a familiar programming language with a large base of developers. These contracts are compiled to run on Web Assembly (WASM) to ensure fast execution. Telos is able to run any smart contracts developed for other EOSIO blockchains and provides a number of unique developer tools for added benefits. Telos Decide is an example of one of these toolsets. Another example is the dStor decentralized data storage system which is currently entering beta release. Taken together, these governance tools and strong technical aspects make Telos a leader for smart contract deployment, particularly for any dapps planning to incorporate governance features.

    The Future of Decentralized Governance

    The emergence of cryptocurrencies and blockchains is, in many ways, a result of dissatisfaction with the world’s existing financial and monetary systems. Decentralized governance will be a likely result of growing dissatisfaction with the world’s existing governance systems. The world is currently witnessing even mature democracies challenged by populism, nationalism, authoritarianism and other internal and external forces — and these are often the more stable and established governments. Less developed nations face even steeper challenges. Just as Bitcoin created a global peer-to-peer monetary system that transcended national boundaries, emerging decentralized governance platforms like Telos will allow people to organize, manage and govern self-sovereign groups in a peer-to-peer manner that need not be bound by existing borders. For some participants, this will present new forms of participatory self-governance. For others, currently living in areas without representational governments, Telos may provide the first opportunities to participate in any form of transparent governance. It’s likely that millions of people may one day cast the first consequential votes of their lives on such a decentralized governance platform. Telos is building these tools today to empower all people to live with more freedom, self-determination, and purpose.

    ###

    About the author: Douglas Horn is the Telos architect and whitepaper author and a Telos core developer. He is the founder of GoodBlock, a Telos block producer and blockchain development company currently releasing the dStor decentralized data storage system.

  • RFC: Amending Telos Works Voting Thresholds

    Proposals to Update Telos Works

    The Telos Works work proposal system has been a clear success for Telos, allowing the Telos token holders to vote on funding all manner of development, marketing, and user acquisition proposals. However, there has been discussion in the Telos community about increasing the standard for passage from the initial figures of 5% voter participation and 50% majority to something more stringent. These values were created before the system was live as a best guess of what might be appropriate with the understanding that the Telos voters would have opportunities to adjust this through the Telos amendment process. With the Telos Works system passing 100 proposals, this seems like an excellent time for Telos users to consider what we’ve learned about Telos Works voting and consider making some adjustments.

    For the past two weeks, we have discussed this topic in various Telos discussion groups to gauge the community feeling on the matter. It comes as no surprise that the thoughts are quite varied, from no changes needed to very stringent passage requirements and many shades between. For this reason, I propose multiple competing proposals at various degrees of change occurring simultaneously.

    I propose submitting three proposals of increasing stringency (the fourth option, to leave the system as is, will be the result if none of these proposals reach the required passage threshold for a Telos Amend™.) Each of these proposes to alter the language of clauses 27 and 28 of the Telos Blockchain Network Operating Agreement (TBNOA) as follows:

    Proposal A:

    Increase the voter participation from 5% to 20% of voteable tokens.

    Proposal B:

    Increase the voter participation from 5% to 20% of voteable tokens and increase the passage requirement from >50% Yes vs No votes (excluding Abstain votes) to >55%.

    Proposal C:

    Increase the voter participation from 5% to 20% of voteable tokens and increase the passage requirement from >50% Yes vs No votes (excluding Abstain votes) to >65%.

    Each of these proposals will also increase the threshold of votes required to receive the submission deposit from 0.1% of voteable tokens to 5%.

    Because the proposals are additive in their increased difficulty of passage, if more than one Telos Amend proposals is approved, then the most stringent of the approved proposals will be enacted, not the one that receives the greatest amount of votes. For example, if both Proposal A and Proposal B pass the Telos Amend voting requirements, Proposal B would be enacted even if Proposal A receives more votes overall.

    Voters should be aware that they can (and should) vote Yes, No, or Abstain on all three proposals.

    Starting the Vote

    The Telos Amend system is about to receive a long-awaited update that will allow users to vote with the weight of their TLOS staked to REX as they can when voting for BPs. This is expected to greatly increase voter participation. Therefore, these proposals will not be submitted until the new voting system is implemented — most likely less than a week from now.

    Comments are requested for this proposal via the main Telos Telegram group @HelloTelos – https://t.me/HelloTelos. The proposed text of each proposal is listed below.

    Current Text from the TBNOA

    ## 27. Worker Proposal Submission Fee
    A submission fee of 3% of the requested amount with a minimum of 50 TLOS will be required as part of the submission. The fee shall be refunded to the Proposer if the worker proposal reaches a minimum threshold of 20% YES vote amongst all votes and a minimum voting total (YES or NO) of at least 0.1% of all TLOS tokens at the end of the Voting Period.

    ## 28. Passage of a Worker Proposal
    Any Worker Proposal that receives a simple majority of YES votes and a minimum threshold of 5.0% of votes from all voteable TLOS tokens at the conclusion of the Voting Period shall be an “Accepted Proposal.”

    Proposal A

    ## 27. Worker Proposal Submission Fee
    A submission fee of 3% of the requested amount with a minimum of 50 TLOS will be required as part of the submission. The fee shall be refunded to the Proposer if the worker proposal reaches a minimum threshold of 20% YES vote amongst all votes and a minimum voting total (YES or NO) of at least 5% of all TLOS tokens at the end of the Voting Period.

    ## 28. Passage of a Worker Proposal
    Any Worker Proposal that receives a 50% or greater majority of YES votes over NO votes, excluding ABSTAIN votes, and a minimum threshold of 20.0% of votes (YES, NO, or ABSTAIN) from all voteable TLOS tokens at the conclusion of the Voting Period shall be an “Accepted Proposal.”

    Proposal B

    ## 27. Worker Proposal Submission Fee
    A submission fee of 3% of the requested amount with a minimum of 50 TLOS will be required as part of the submission. The fee shall be refunded to the Proposer if the worker proposal reaches a minimum threshold of 20% YES vote amongst all votes and a minimum voting total (YES or NO) of at least 5% of all TLOS tokens at the end of the Voting Period.

    ## 28. Passage of a Worker Proposal
    Any Worker Proposal that receives a 55% or greater majority of YES votes over NO votes, excluding ABSTAIN votes, and a minimum threshold of 20.0% of votes (YES, NO, or ABSTAIN) from all voteable TLOS tokens at the conclusion of the Voting Period shall be an “Accepted Proposal.”

    Proposal C

    ## 27. Worker Proposal Submission Fee
    A submission fee of 3% of the requested amount with a minimum of 50 TLOS will be required as part of the submission. The fee shall be refunded to the Proposer if the worker proposal reaches a minimum threshold of 20% YES vote amongst all votes and a minimum voting total (YES or NO) of at least 5% of all TLOS tokens at the end of the Voting Period.
    ## 28. Passage of a Worker Proposal
    Any Worker Proposal that receives a 65% or greater majority of YES votes over NO votes, excluding ABSTAIN votes, and a minimum threshold of 20.0% of votes (YES, NO, or ABSTAIN) from all voteable TLOS tokens at the conclusion of the Voting Period shall be an “Accepted Proposal.”

    ###

    About the author: Douglas Horn is the Telos architect and whitepaper author, and the founder of GoodBlock, a block producer and app developer for the Telos Blockchain Network.

    More about GoodBlock can be found at: www.goodblock.io

    Join us on Twitter @GoodBlockio

    Vote for GoodBlock on the Telos Blockchain Network @goodblocktls

  • GoodGrant Recipient: Peeranha

    The GoodGrant program supporting Telos applications is proud to announce its support of Peeranha, a decentralized question and answer website that rewards users for their contributions. Peeranha is in the final stages of testing before being deployed on the Telos mainnet with the goal of going live before the end of December 2019.

    Users will find Peeranha similar to a decentralized version of Stackoverflow with numerous questions and answers. While Peeranha expects to expand into many areas of Q&A, it will initially focus on serving blockchain projects. Most of these projects are too small for Stackoverflow and do not have a place to send users for Q&A, even though this is essential for building searchable and structured knowledge base for the community. These communities also understand the value of being rewarded for contributions in tokens. Peeranha contributors will be rewarded with PEER tokens, which should appear on exchanges soon after launch.

    “Peeranha has an opportunity to change the way user created content is owned and how value is generated from its distribution. Previous solutions generally flowed all the revenues to the platform providers, leaving the contributors empty-handed, even though they create the bulk of the value within the system. This is a business that’s ripe for disruption because once contributors realize they can also receive a fair share, the old business model can lose their content quickly,” says Telos architect, Douglas Horn. “For an app like this to take off, though, it needs to leverage the strengths of EOSIO, the underlying software of the Telos platform.”

    Peeranha CTO Sergey Ilin also notes the importance of an EOSIO-based platform to meet their goals. “Like many other developers, we were very excited about the promise of EOS to build a blockchain with free transactions for the end users. In my opinion, poor user experience is one of the major reasons for slow user adoption of decentralized applications. However, high RAM prices and recent CPU congestion issues made EOS not a feasible option for us. We believe that Telos is learning from EOS’s mistakes and through their BP and developer engagement, will deliver the blockchain that we all have been waiting for.”

    With the award of the GoodGrant, Peeranha will receive a year of staked CPU and NET resources and an initial grant of RAM. This will allow Peeranha to cover resources invisibly to their users, which is key to bringing in users from outside of blockchain. Horn notes, “I like Peeranha’s approach to onboarding users at their own comfort level, whether they’re crypto experts or have never used a blockchain dapp before. I think it’s a great approach and will bring in a lot of new blockchain users without requiring a lot of preexisting knowledge in order to participate. Telos sees this as an important progression in user acquisition and we are actively building tools to help facilitate this for apps.”

    Ilin agrees and notes that the transition to Telos from their planned release on EOS was very easy. “Deployment to Telos blockchain was very smooth and not different from deployments on EOS. We did not have any technical issues and did not have to make any changes in our smart-contracts code.”

    Peeranha is expected to be live on the Telos mainnet before the end of this month. To learn more, go to peeranha.io.

    Developers looking to deploy apps on Telos may apply for resource staking grants from GoodGrant can learn more about the program, requirements and application process at: goodblock.io/goodgrant

    ###

  • Happy 1st Birthday, Telos!

    One year ago on December 12th, 2018, the Telos® mainnet was launched. Almost a week later, the network activated with block producers elected by the voters taking charge of the chain operations and TLOS tokens available for unstaking and use. This was the culmination of over six months of concerted effort by a grassroots community of developers, dreamers and blockchain believers who built many unique new elements of eosio software without ever raising a penny from investors. It was a monumental effort achieved without outside funding and with no promise of future value.

    Now, a year later, Telos has earned a reputation as a truly decentralized public blockchain with effective user governance, excellent performance, and the ability to bootstrap not only itself, but other projects as well through our Telos Works work proposal system. We are now ready to roll out the world’s leading blockchain governance features to any dapp that deploys on Telos through Telos Decide™ voting. And as we will discuss more over the coming days, our revolutionary decentralized storage offering, dStor is at the cusp of launching its beta program. Telos has faced many challenges head on and has emerged as the yardstick by which other governed blockchains will be measured. This deserves a celebration!

    None of the achievements of the past year would have been possible without the efforts of the Telos community which has supported the block producers, developers, and users throughout this journey with their ideas, contributions, votes, and shared vision of making Telos the blockchain for the future.

    We at GoodBlock are extremely honored to have the support of the Telos community in our work as Telos core developers and block producers. We could not do this without the community. Thank you to everyone who has engaged with Telos so far. Whether you joined before the whitepaper announcement or just an hour ago, you are here in our first year and that makes you a Telos Founder. Congratulations for your vision. Telos has an amazing future ahead of it as we blaze the trail for how public, decentralized, high performance blockchains can determine their own futures.

    I especially want to thank the many people here at GoodBlock who worked so hard to build Telos through that period. My deep personal thanks go out to the GoodBlock team working on Telos during the launch: Beth Farnham, James Davis, Peter Bue, Ed Silva, Craig Branscom, Stephanie Sunshine, Lee Hundley, Josh Manderville, Ava Masucci, Erika Elder, Justin Brown, Marielle Saums and Nathan Horn. I’m awed by how much we all accomplished with so few resources, in so little time.

    Thank you!

    Douglas Horn

    GoodBlock.io CEO & Telos chief architect

  • GoodGrant Recipient: Sesacash

    The GoodGrant is pleased to announce its support of Sesacash, an on-demand digital finance and payments platform for individuals and businesses across Africa; built on the Telos blockchain. Sesacash is currently deployed on Telos in beta with an anticipated full release date of December 1st, 2019. Users can sign up now at sesacash.com.

    Sesacash is the new name of Yensesa, a micro-currency exchange on Whaleshares. Over the past two years, Yensesa built a large community by incentivizing social blogging through micro-transactions. Its app includes a multi-currency wallet to hold USD as well as Nigerian Naira (NGN) and Ghanan Cedi (GHS) fiat currencies. It also supports cryptocurrencies BTC, LTC, ETH, TLOS, EOS, and BTS. Users can earn and transfer funds locally or across national boundaries and be paid fiat currencies via bank transfer or mobile money. The app has increased rewards over what Yensesa offered, which are earned in its currency YENT (YNT). To fuel its growth, the company sought a more powerful, EOSIO based blockchain, and quickly decided on Telos.

    Sesacash CEO Blaise Bayuo notes, “The lower cost of deployment on Telos along with zero transaction fees were key in our decision to migrate to Telos. Additionally, Telos is making clear inroads into communities in the African nations we serve, which is unique in the EOSIO blockchains.”

    In receiving the GoodGrant, Sesacash will have all of its Telos resource staking requirements for CPU and NET covered for its first year of operation. Due to high levels of RAM required for this specific application, Sesacash is also receiving an initial grant of RAM for its first six months of operations. The GoodGrant is a program from Telos block producer GoodBlock intended to remove resource staking costs as a barrier to dapps deploying on Telos.

    “In evaluating Sesacash, it was immediately apparent that this was a project deserving our full support,” says founder Douglas Horn. “They had already built an impressive user base and application and they are serving a real need in an area underserved by traditional financial services. There’s every reason to believe Sesacash could grow into a full-fledged financial services provider for this region. They already had great developers, all they needed was some network resources to get started.”

    Sesacash is currently serving users in Nigeria and Ghana, but plan to expand to neighboring countries in the near future. With several user groups and block producer teams already growing in these areas, Sesacash and Telos are a great match. Bayuo also found the Telos community and developer support helpful in migrating to the network. “It was much easier than we expected to deploy on Telos. We got all the support we needed from the community to understand the Telos ecosystem. Their outreach makes the process quite smooth. It’s a powerful community in that way.”

    Users can sign up for Sesacash now at https://sesacash.com and receive a reward of 5 YNT for completing the KYC process.

    Developers looking to deploy apps on Telos may apply for resource staking grants from GoodGrant can learn more about the program, requirements and application process at: https://goodblock.io/goodgrant

  • RFC: Telos Resource Improved Management Plan

    Managing EOSIO Resources

    Recent events on various EOSIO chains have illustrated operational weaknesses in the current design of how these chains manage their resources. In short, the combination of inexpensive CPU resources purchasable from the REX (Resource Exchange) staking pool makes it extremely inexpensive to flood an EOSIO network with usage. This usage can then overwhelm the ability to free up staked REX resources, locking up the system and preventing use for many. This is the situation that has been plaguing the EOS mainnet for weeks, driven first by an attacker who was able to drain 30,000 EOS from EOSPlay and later by a coin meant to consume all EOS free resources by incentivizing “resource mining” to earn tokens in a seemingly valueless project. There may be other potential network attacks using this exploit aside from theft and crippling congestion. Those entrusted to operate EOSIO networks must address this situation.

    Telos is not exempt from this exploit. We have been spared the gambling dapp exploit because there are few casinos operating on Telos and those that exist have very limited volume, making such an attack economically non-viable. We have experienced a version of this worthless coin mining and have seen little impact in usage largely because Telos users had the benefit of already seeing the drastically falling value of these coins from the trading pattern on EOS — and therefore have declined to participate in meaningful numbers. However, Telos should not become complacent about these attacks. As more dapps deploy on the network and the Telos value rises, our network will become a more attractive target. In fact, the very high amount of REX staking on Telos makes such an attack much less expensive than on other EOSIO chains. Fortunately, Telos has a culture of facing problems head on and implementing solutions. The Telos community should act swiftly to address these areas of concern.

    The TRIM Plan

    It has been noted by prominent members of the EOSIO community that, in fact, this exploit is really just an outcome of the system operating as designed. While this is true, it points to a flawed design. When flaws are exposed, they must be addressed and the system improved. The TRIM Plan seeks to address these flaws and improve how resources are managed on Telos to keep the network usable for all and greatly reduce the incidence of attacks that render the network essentially useless for many users.

    No single solution has emerged as a magic bullet to address this, despite much consideration by those knowledgeable about EOSIO software. This suggests that there is no simple solution possible. Rather than an exploit of a bug in the code which could be fixed and redeployed, this is an edge-case attack on the way that the system is designed to operate. Therefore, in improving how network resources are managed, it’s likely that the most effective solution will consist of several actions, each designed to mitigate some element of the attack. Perhaps none of these alone would be highly effective. This is just the nature of problems: some have elegant solutions, others just need to add more goalies to better protect the net.

    The TRIM Plan incorporates seven points that seek to give the users and block producers more latitude to protect general usability without imposing limitations on users’ ability to employ their staked or purchased network resources any way they see fit. In seeking to improve usability, it’s essential that Telos does not allow any centralized entity to assert control over any user employing their resources as they choose.

    The proposed steps of the TRIM Plan are:

    1. To reduce ease of REX purchase attacks and prevent a REX lockup, set a maximum amount of resources any account can purchase from REX without being whitelisted by the block producers and update the REX algorithm purchase cap to be configurable, allowing block producers to manage it as needed.

    2. To ensure a small number of free transactions to every Telos user, direct some of the TED Plan (Telos Economic Development Plan) REX contributions to purchase resources for a pool offering a configurable amount of CPU/NET for a limited number of free transactions per user each day or week

    3. To allow higher frequency users the ability to have more transactions without managing resources, implement tokens from wallets or explorers that provide guaranteed transactions in exchange for inexpensive tokens.

    4. To make attacks more expensive, revise the REX bancor algorithm to set a floor price for REX purchases configurable by block producers.

    5. To allow users to not need any resources to interact with apps, encourage all apps to utilize the ONLY_BILL_FIRST_AUTHORIZER feature.

    6. To acclimate users to high usage situations, transition Telos to low-leeway mode at all times.

    7. To reduce access to the network from users seeking to exploit an app that individual API node operators or block producers deem harmful to the network, allow API node operators to filter access to such contracts and individual block producers to blacklist accounts.

    None of these remedies threaten the decentralized nature of the Telos network and no central party controls their implementation.

    Step by Step

    Below is a breakdown of each action in the TRIM Plan.

    1. To reduce ease of REX purchase attacks and prevent a REX lockup, set a maximum amount of resources any account can purchase from REX without being whitelisted by the block producers and update the REX algorithm purchase cap to be configurable, allowing block producers to manage it as needed.

    In one version of this attack (the first demonstrated on EOS), a single account could buy any amount of REX resources up to the cap and singly overwhelm the system. As I noted in my previous article, Addressing the EOSIO REX Exploit, limiting the percentage of REX that any single account could purchase would make such an attack more onerous, but more importantly, it would encourage highly used apps to stake at least some percentage of the resources they need in CPU and NET.

    An implementation of this modification has been written by Ryan Jones from the block producer Teleology and is awaiting testing on the Telos testnet. It is configurable by the block producers and allows them to whitelist certain accounts to allow them to purchase REX amounts over this general cap. Following testing, the code would need to be implemented by the block producers.

    To increase the price of REX purchases as demand increases, REX uses a bancor algorithm to set its pricing. To prevent this price from approaching infinity in extreme edge cases, a cap is placed on the total amount of REX resources that can be purchased at any time. However, this limit was set unnecessarily low as a default. REX sales cease once they reach 80% of the available amount. The optimal level is unknown, but almost certainly higher than this, as the current situation on EOS demonstrates that REX can effectively be halted rather inexpensively at this level.

    The simplest solution is to deploy new code to increase this level. Rather than hard-coding a new value, it is preferable to make this figure configurable by a 2/3+1 vote of block producers so that it can be rapidly updated in the future without requiring new code to be deployed.

    To implement this, the Telos code must be revised and tested by the Telos Core Developers (TCD) and implemented by the block producers.

    2. To ensure a small number of free transactions to every Telos user, direct some of the TED Plan REX contributions to purchase resources for a pool offering a configurable amount of CPU/NET for a limited number of free transactions per user each day or week

    Telos makes it free to create new user accounts, but grants these new accounts with very low stakes of CPU and NET (0.9 and 0.1 TLOS respectively) which will likely be reclaimed in the future to allow more free accounts to be created. To ensure that every Telos account can always perform a minimum number of transactions each day or week, a pool could be created to facilitate this. While the TED Plan is in effect, this pool could be funded by directing some of the monthly distribution from the Exchange Reserve Fund to buying REX resources instead of simply adding to the REX rewards pool. (As the TED Plan winds down in some years, funds could be allocated towards a permanent staking pool for this purpose.) For REX stakers, the effect will be the same returns but for REX buyers, the cost of REX resources will rise as some is being used for this pool.

    The goal of this purchase would be to ensure that every Telos account holder could perform some minimum number of transactions each day or week even without any resources staked or purchased. This amount would be configurable by block producers but 3–5 free transactions per day or 20 per week would be reasonable initial values.

    Jesse Schulman of CalEOS has been working on code to implement this, however it appears that Greymass also recently developed an application that accomplishes this same end. To implement this feature the TCD will evaluate the various approaches and adopt or create code to be implemented by the block producers.

    3. To allow higher frequency users the ability to have more transactions without managing resources, implement tokens from wallets or explorers that provide guaranteed transactions in exchange for inexpensive tokens.

    Users who perform more daily or weekly transactions than the free pool permits would normally need to stake TLOS tokens for resources or purchase them from REX. As a middle ground for more frequent users, who may not be sophisticated about the ins and outs of EOSIO, or who simply choose not to manage resources, wallets and explorers could use tokens to ensure free resources. This allows even frequent users to have an alternative to staking which makes Telos more palatable for general computer users, aiding mass adoption.

    Marlon Williams of Telos Miami has already instituted such a token with the SQRL token that allows users to consume SQRL in lieu of using their own resources. Any number of other wallets may use a similar token for these purposes, greatly aiding usability for higher volume users who do not wish to manage resources. This will also create a market for transactions separate from REX resource purchased which will drive further efficiencies within the system.

    4. To make attacks more expensive, revise the REX bancor algorithm to set a floor price for REX purchases configurable by block producers.

    The price of REX resource purchases is dictated by the bancor algorithm in the eosio.rex system contract. However, the bancor algorithm has proven itself to be less configurable than is optimal for the management of large decentralized networks. As described in this deep-dive into the bancor algorithm as used for REX, the primary controls on the algorithm are the “connector weight” operator (total_rent) and the amount of tokens injected into the contract through lending and borrowing. This low level of manageability is responsible for several shortcomings seen in EOSIO, such as the explosive price of EOS RAM at launch. Telos addressed this by modifying the initial amounts of RAM in the contract to prevent the rampant speculation seen on EOS, but the difficulty of sufficiently managing bancor-based contracts persists. This is particularly true of REX resource pricing because the amounts of resources are constantly in flux. Reconfiguring the connector weight control (total_rent) is one possibility and should be tested empirically. If it proves to be of little practical utility then a better algorithm is needed. It is possible to modify the bancor algorithm to include a floor price for resources. This will allow REX to be more expensive to purchase, thus increasing the cost of resource attacks.

    Currently, the ratio of TLOS to REX for purchases is around 3,000:1. This means that 3,000 CPU worth of resources could be purchased from REX for one month for just 1 TLOS. This high ratio encourages attacks by making them extremely inexpensive. This is a by-product of the high staking rewards paid into Telos REX via the TED Plan. Other points in the TRIM Plan can be expected to increase this price to some extent.

    Setting a floor price, configurable by block producers, of around 600:1 to 800:1 would mean that Telos REX resources would still be extremely inexpensive for legitimate purchasers, but more expensive for those seeking to exploit the network or lock up usage. There are two desirable by-products of such a modification: those staking resources to REX would receive a somewhat higher rate of return due to extra funds paid into the pool, and the TLOS price may appreciate as its true utility of staking to reserve resources becomes slightly more valuable. While mathematical modeling of these resource model adjustments is worthwhile, because there is little data to base decisions on, moderate adjustments accompanied by empirical observation and further adjustment is likely the most practical approach.

    To implement this, we can test changing the bancor total_rent parameter using the setrex action. This should be tested on the Telos testnet before considering the update on the Telos mainnet. If this proves insufficient, the Telos code must be revised and tested by the TCD and implemented by the block producers.

    5. To allow users to not need any resources to interact with apps, encourage all apps to utilize the ONLY_BILL_FIRST_AUTHORIZER feature.

    The activation of EOSIO v.1.8 protocol features in October created a number of improvements in how Telos operates. Of these, the most important to this plan is ONLY_BILL_FIRST_AUTHORIZER, which allows apps to pay for any resource usage by those using their apps. (This is how SQRL tokens are used to pay for transactions, for example.) Encouraging the widespread usage of this feature by apps will remove the need for users to manage resources for most app interactions. This means that the previously mentioned changes of enabling the chain to pay for the first few transactions and special tokens to cover other usage, need only apply to transfers and other types of transactions not made with an app.

    This change requires no new code at the system level, only informing Telos-based apps of how to utilize this feature. This is already occurring as new and existing apps are informed of how to apply these changes.

    6. To acclimate users to high usage situations, transition Telos to low-leeway mode at all times.

    Telos currently performs far fewer transactions than its capacity. While the network is in this state a high amount of leeway is given to any account that has already used its staked resources to execute transactions anyway. As a result, users may become accustomed to staking less TLOS for resources than they actually require. At times when there is much higher network usage, this leeway is removed or eliminated and accounts can only perform the transactions they have staked or paid for. This is currently the situation on EOS.

    The lack of resources is compounded by the unfounded expectation of being able to perform a large number of transactions with few staked resources as when the network is under a low load and high leniency is given to users.

    By removing or greatly lowering the leniency offered to users with insufficient staked resources, Telos users will become accustomed to more realistic expectations when the network is under a heavy load. In conjunction with the other actions recommended under this plan, reducing the resource usage leeway for accounts would encourage all users and apps to reserve an appropriate amount of resources for their needs. This also increases the overall amount of resources accounts are likely to stake, reducing the impact of resource type attacks. As an ancillary benefit, the TLOS price may appreciate as the token becomes more needed for its primary purpose of reserving network resources. With the other accommodations to users under this plan, casual users are unlikely to be effected by this and higher volume users will learn appropriate staking while the network is not under a high load, which will make adjustments far easier. This step would ideally be implemented after many of the prior steps to ensure smooth use of resources by casual users.

    7. To reduce access to the network from users seeking to exploit an app that individual API node operators or block producers deem harmful to the network, allow API node operators to filter access to such contracts and individual block producers to blacklist accounts.

    Most Telos users interact with the network though an API node operated by a block producer, app developer, or other party, rather than operating their own node on the network. While each Telos block producer is required to provide an active API node for accessing the system, it is not required that they permit every type of action via this API node. API node operators who are not block producers have absolutely no requirements as to what types of actions they may pass or block. This is essential in a freedom-based system. For example, a node operator may wish to support the network but not support interaction with a particular app that is against their beliefs, values or interests. No one can prevent an app from deploying on a truly public, decentralized network like Telos, but API node operators do not need to interact with them. Instead, they can block certain contracts on their own nodes. This may also be necessary for some node operators to comply with local laws.

    An app that does not receive service from any API nodes is free to operate their own API node to allow users not operating their own nodes to interact with their app. Users who wish to interact with contracts filtered by other node operators may run their own node to do so. This is decentralization in action.

    In the case of an app that is behaving in a way that any given API node operator deems harmful to the network, that operator is free to block interactions with that app from passing through their node. The app operator is free to inform users of API nodes that will process their transactions or to provide their own. So if a “resource mining” app threatens to overwhelm the network and make it unusable, API nodes may restrict access to it. Certainly, this does not eliminate access to that app, but it is likely to markedly restrict it to users who run their own network node or can access a limited number of public API nodes, thus reducing the impact on the network to more acceptable levels.

    A more extreme version of API node filtering is block producer filtering of interactions with an app or contract. This would likely be considered a last resort by many block producers to be considered in the event of a malicious or unintended attack on the network’s availability to the majority of users. The Telos governance documents (specifically the regproducer agreement) prohibit eliminating or reordering transactions for profit, but do not prevent block producers from blocking transactions that they deem to be attacks on the network, illegal in their jurisdiction, or for some other reason not related to unfairly profiting from their privileged position. This is commonly referred to as “blacklisting” accounts or contracts. Accounts could be blacklisted for attacking the network, for engaging in illegal activity such as child pornography, because they hold suspected stolen funds or other reasons.

    When a block producer blacklists and account, other block producers may still process these transactions when it is their time to produce blocks. These are individual decisions made by each block producers and if the Telos users feel that this is undesirable, they can vote to remove any block producer filtering transactions that they do not agree with. Moreover, if 2/3+1 of the block producers view this filtering as being against the terms of the regproducer agreement, they may sanction the block producer doing it. This is how a governed delegated proof of stake is designed to work.

    Therefore, when network threats are particularly dangerous to the overall usability of the network, each Telos block producer may, based on their own judgement, elect to blacklist transactions to that contract. They will be answerable to the Telos voters and other block producers for their decisions. (Those block producers who allow such transactions to continue at the expense of network usability will also be judged by the users.) These decisions will be made by each individual block producer, not by a vote on chain. It should not be considered censorship by the chain, but merely the individual decision of each block producer. Only when most or all of the block producers opt to blacklist an account will it become unusable and the Telos voters will have the ability to vote such block producers out of service if this is against their wishes. Therefore, any app blacklisted by all the block producers so that they can no longer operate will have been blocked with the tacit approval of the Telos tokenholders.

    Implementing the Plan

    Unlike the TED Plan, the TRIM Plan deals with the operation of network code and functions which the Telos block producers are already empowered to revise. Therefore, no governance amendment would be required to implement these changes as long as 2/3+1 of the Telos block producers agree.

    Additionally, no deep protocol changes are required to implement this plan. Each change made to the EOSIO code requires testing every time the code is updated in the future. This not only increases the expense of running the network, but also reduces the potential responsiveness of Telos Core Developers and block producers in the future should critical patches need to be deployed because these will require testing to incorporate such changes. For this reason, it’s preferable to keep the core Telos code as similar as possible to the EOSIO reference software.

    Several aspects of this plan are currently underway. Others require no coding, only education and advocacy. Some will require new code to be written, tested, and implemented. Once fully implemented, Telos will have a variety of controls by which the block producers may rapidly respond to any future attacks on the network. Users will also have greatly simplified resource management options to the point where only power users and app developers need ever pay attention to resource management. These are two very large wins for usability and further network resiliency of the Telos blockchain network.

    Support

    The following Telos block producers and other parties support implementation of the TRIM Plan:

    GoodBlock, Telos Miami, CalEOS, Infinitybloc, BlindBlocArt, EOSZA, Teleology, Cryptosuvi, Scatter, EOS Tribe, Telos DAC, Telos Voyager, Telos Global, Telos UK, Malta Block