Two weeks after the EOS Mainnet launch, founder/architect Dan Larimer has proposed ‘scrapping’ the platform’s constitution. Amid mounting concern about the company’s on-chain governance system, Larimer has called the model “unwise” and says that he wants to build an entirely new one.
EOS & the Crypto-Government
The EOS model uses a system called delegated proof-of-stake (dPOS) to validate the blockchain. In the proof-of-work system that underpins Bitcoin for example, anyone with the correct hardware can mine blocks. Users of EOS can not simply verify transactions on the blockchain, however. There are only 21 block producers, and they are constantly rotating; users can vote every two minutes. EOS pays block producers $10,000 per day to maintain the blockchain. As such, it’s hardly a surprise that over 350 candidates compete for just 21 positions.
Together, the block producers form a group called EOS Core Arbitration Forum (ECAF). ECAF serves as the ‘governmental body’ that resolves disputes between token owners but has recently come under fire. Users concerns include the poorly defined role of the forum and the control that they have over network transactions. A large number of crypto users are anti-ECAF, claiming that the centralization of power is antithetical to the goals of the community.
The block producers themselves, however, reject this reasoning. They say that supporters want a blockchain that’s fast and cheap, but also has the governance structure to make decisions in the best interest of the users. While a noble idea, the low-quality of their efforts to date have undermined user confidence in the group. ECAF circulates verdicts over social media as hand-signed PDF screenshots rather than stored in a secure location. This has led some to accuse the block producers of achieving “consensus by conference call”.
Judge, Jury, and Executioner
These accusations have only become more fervent after several orders to freeze accounts compromised by hackers. ECAF can censor transactions, angering the crypto-sphere. Their processes are also held to be unprofessional, angering EOS users. Both groups have valid points. The producers are meant to be held to predictable and rational rules of governance, although this rulebook is still very much in development.
The top 21 Block Producers unanimously agreed to assist in the defense and recovery of property when member’s private keys were compromised through hacking or scamming. This June 17th pledge was called EOS911, an initiative designed to help users with compromised private keys. What they couldn’t foresee were the unintended consequences.
The first freeze order stopped 7 compromised accounts from making transactions through a unanimous intervention by block producers just three days after launch. An order to freeze another 27 accounts followed 5 days later, with no reason given other than a promise of future justification. After two days, an order was given to revoke tokens from a handful of addresses; this order, however, was a fraud.
The (understandable) confusion begot chaos, as major block producer EOS New York announced it could not execute any ECAF statement with any confidence. EOS New York also added that normal processing would only resume when “communications can be established on-chain”. Co-founder and head of strategy reportedly commented that ECAF needed to “figure their own shit out”, specifically referring to “rampant misunderstanding about what arbitration is” on the EOS network. He also suggested that ECAF needs to develop improved processes and increase their transparency.
While troubling for the fifth largest cryptocurrency, the crisis appears to have spurred change. Telegram channels and forums abound with constructive conversation and debate about the future of the arbitration process. Sam Saopznick, who sent the second ECAF freeze order, previously stated that the arbitrator “is working… to address the outstanding issues”.
Block producers have been busy in the meantime. In South America, for example, EOS Argentina deployed network-based applications for document verification on the blockchain. Despite positive steps, the community may continue to thrash due to the widespread confusion over stakeholder and arbitration roles, compounded by the haphazard manner in which ECAF operates.
They have a website, but “you’d think it was some shady shell company,” according to Rose. That is exactly the sort of sloppiness that leads to misinformation (and indeed fraud) which still plagues the crypto-sphere.
A Fresh Start
The publicity appears to have spurred the shock announcement. Rose has started work on a new constitution, which only requires arbitration for the correction of smart contract intentions. Larimer explained “an arbitrator can render an opinion, and the parties can either comply or not and the arbitrator can indicate whether a party is in good standing … that is it.” He went on to say that an arbitrator should never have the unbridled power to control anything other than their own assets, and that such power is simply moving the potential for fraud up the ladder to the network governance level.
Many critics say that the EOS team should have foreseen this issue. Jameson Lopp, a Bitcoin dev, was less than shocked at the recent developments:
The EOS community has, for the most part, met Larimer’s statement with relief and support. They shouldn’t rest easy yet; there is still a large hurdle to clear. The current constitution requires a minimum of 15% of token holders to make an amendment. Supporters must also outnumber those against the amendment by 10% for a period of 30 consecutive days within a 120-day period. Essentially, don’t expect to see any constitutional changes earlier than 3-4 months.
A nightmare for any organisation, this disarray is doubly embarrassing for one of the only cryptocurrencies with a governance system. Instead of showing the way forward, EOS has taken a big step backward. For network users, the new constitution cannot come quickly enough; they too are acutely aware the whole world is watching.