The past of EOS arbitrage, the primary and secondary price difference business during the 350-day ICO, reminiscing about the low-hanging fruits of those years

Author: Huang Shiliang, Lightning HSL

EOS changed its name and is now called A, the A of abcd, which means that in exchanges, EOS will rank first alphabetically.

I have always had a good impression of EOS because during the first three months of its 350-day long ICO fundraising process, I participated in the primary market of EOS's ICO and arbitraged in the secondary market on exchanges, making a small profit.

That was the easiest money I ever made.

EOS started its ICO on June 26, 2017, and ended on June 1, 2018, raising over $4 billion in ETH, issuing 900 million EOS tokens. It was an incredible fundraising effort, unprecedented and unlikely to be replicated.

The ICO mechanism of EOS was quite novel at the time.

EOS initially conducted its ICO through a smart contract deployed on Ethereum, distributing tokens in two phases: the first phase allocated 200 million EOS tokens in a single distribution during the first five days of the ICO (from June 26 to June 30, 2017);

Then it entered the second phase, which was a daily issuance mechanism. Every day (approximately every 23 hours), the EOS smart contract accepted users' ETH contributions and proportionally distributed 2 million EOS tokens based on the ETH contributions of all participants at the end of that round.

This daily issuance phase lasted a total of 350 days, during which 700 million EOS were issued. Adding the initial 200 million, the total reached 900 million, with another 100 million EOS reserved for the project team Block.one, forming a total issuance of 1 billion tokens.

EOS's ICO sold 900 million EOS-erc20 tokens, receiving $4.2 billion, totaling 7.2 million ETH.

At that time, very few people in the industry studied how to operate Ethereum contracts, how to deposit into the contract, and how to claim the purchased tokens.

The tools back then were quite rudimentary, unlike today's contracts and wallets, which have very well-designed UI interfaces.

In 2017, the main wallet for Ethereum was MyEtherWallet, which I had a good impression of. The private key file was still a JSON file, and to operate the EOS ICO contract, various parameters had to be configured manually, which was somewhat better than command-line operations (DoS).

Now, wallets like Metamask and imToken have integrated various contracts and visually represented all operation commands in a very comprehensive manner, allowing users to complete all contract interactions with just a click of a button.

At that time, using MyEtherWallet to participate in the EOS ICO required importing the private key JSON file each time, selecting the contract, choosing contract parameters and commands, and filling in the amount of ETH to inject into the contract, including how much gas to use, which was all user-defined.

Then, when it came time to claim the EOS-erc20 tokens, several parameters had to be filled out again.

These operations were not commonly done at that time.

I was initially curious about EOS because I had previously played with various BitShares (the first project of EOS developer BM) around 2015. So I studied the EOS ICO on ETH seriously.

During the 350-day long ICO of EOS, it was also possible to trade directly on exchanges. This meant that both the primary and secondary markets were open simultaneously during the ICO period. However, the prices in the primary and secondary markets did not synchronize.

This created potential arbitrage opportunities.

At that time, I deposited ETH into the ETH ICO contract daily, and when the time came, I would claim the EOS-erc20 tokens and then directly deposit them into the exchange to sell.

This simple arbitrage had no hedging involved, no j8 strategies, just a straightforward bet that the primary market price would be cheaper than the secondary market price, and I was able to keep making money.

This profitable period lasted a long time. In the first three months, I hardly lost any money, but in the following months, I started to incur occasional losses, and after six months, I stopped.

Why did I initially dare to judge that the primary market price of EOS would be cheaper? Because there weren't many people buying tokens in the ICO contract.

At first, when checking the on-chain interaction addresses, there were fewer than 100 each day. For most of the first three months, the number was around 148 addresses, which I remember clearly. Later, the number of addresses began to increase, and then the profits disappeared.

In this arbitrage game of betting on price differences between the primary and secondary markets, I also observed the behavior of hackers attacking the chain for profit.

Due to the mechanism of ending a round every 23 hours, it was often possible to calculate the price in the primary market during the last few minutes of a round, as the amount of ETH in the contract was transparent. By comparing it with the secondary market price, one could determine if there was an arbitrage opportunity.

So often, in the last few minutes, a large amount of ETH would suddenly be deposited, potentially causing the primary price to be higher.

Then, in those last few minutes, hackers would construct terrifying transactions that consumed ETH gas, blocking the entire ETH chain and preventing others from depositing ETH into the EOS ICO contract.

After a failed deposit attempt, I learned my lesson. Every time I rushed to grab a share in the primary market at the last moment, I would max out the gas, which was a waste of money. After losing gas a few times, I stopped this game and let them compete; I did my best.

That half-year-long arbitrage battle did earn me some small money, but fortune and misfortune are intertwined, and in the following years, I realized it left behind disasters.

Because the EOS ICO had a mechanism of ending a round every 23 hours, the claiming time changed daily in a gradient of one hour, so the time for grabbing shares in the primary market and claiming tokens was constantly shifting, meaning that one-third of the time occurred when I should have been sleeping.

But for the sake of making money, who cares about sleep? I would get up at midnight or 3 AM to work.

This kind of thing, staying up late once or twice is fine, but doing it continuously for a week becomes troublesome. Moreover, this was not just simple staying up late; there were huge financial profits involved, making each session either extremely exciting or infuriating…

Of course, it wasn't just my health that suffered; I later realized there were even worse impacts.

At that time, I was leading a small team on a project. But my brothers saw me in this state every day, and if the boss wasn't motivated, it was even less likely for others to work hard.

Looking back, there was still a chance to succeed in this project, but I messed it up and harmed my brothers. Later, in 2018, several brothers left voluntarily.

Thinking about it, I was actually quite fragile, and it made me lose the courage to lead a team to work again.

This year, when Musk made a high-profile entry into politics, I thought that his companies, including Tesla, X.com, and SpaceX, might suffer, which would be a loss for the whole world. If the boss doesn't take the lead, the company is unlikely to do well.

This experience had another side effect.

In 2017, during the peak of the BTC scaling controversy, I was a staunch supporter of scaling and loved to write articles expressing my support.

Perhaps because I made money from EOS arbitrage, I became arrogant, and coupled with my lack of sleep, I might have expressed my opinions too aggressively in articles and groups, offending quite a few people.

Later, I was subjected to online harassment. Having experienced online harassment made me very timid on the internet.

To this day, I still feel quite cowardly online and no longer dare to insult others.

There were two experiences at that time that left a deep impression on me.

One was when the RSK (a Bitcoin sidechain project) team came to China for a roadshow. Because I had written many articles on sidechains in earlier years, their team invited me to join them for the presentation. I ungraciously criticized them over the phone for not being firm on scaling. Ah, I was really overconfident and foolish.

The night before the call, at 3 AM, I was still busy with the EOS ICO, too excited to sleep, and when I answered the phone, I had no energy to speak properly.

Another time, a reporter from a certain newspaper called me for an interview, asking about scaling. I blurted out, "Do you dare to publish my exact words?" because I said many things unfavorable to small block supporters. Ah, actually, if I had just talked about the technology, it might have been better.

I was too arrogant back then; in fact, I have always been a very humble person.

Time flies, and the EOS ICO has been 8 years ago. The money I earned has been lost, leaving only some memories.