Could there be trouble brewing the in the future for EOS? This could very well be the issue, as the ECAF, referring to the EOS Core Arbitration Forum have recently announced the freezing of EOS accounts allegedly belonging to thieves who had stolen funds by deceiving users via phishing and scam attacks. However, this action and the overall position of the ECAF has caused much discomfort within the EOS community. As a result BlockOne CTO Dan Larimer, the creators of the EOSIO token has proposed a complete overhaul of the current constitution. However, this request would reduce the power of arbitrators, such as the ECAF, over decisions affecting the network. These developments have further complied problems for EOS, in what has already been a very turbulent few weeks since their official mainnet integration.

EOS Overview

Originally based on the Ethereum network, EOS is a blockchain platform used for the development and execution of decentralized applications (DApps). It aims to take the difficulty out of developing such Dapps by providing complete support for the functionalities that will allow businesses and individuals to create blockchain applications, very similar to web-based ones. A prime example of EOS’s services would be similar to Google’s Play Store and Apple’s App Store.

EOS has aimed to enable instantaneous transactions and great scalability.

➡️By having an emphasis on decentralization being a key focal point of their security, EOS aim to tackle the ‘trifecta’ problems of blockchain: Security, scalability, and speed.

➡️This would have a strong appeal to cryptocurrency traders as an improvement on the trifecta could vastly improve the EOS token’s liquidity.

EOSIO 1.0 Release

EOS recently completed their year-long token crowdsale, raising a total of $4 billion, making it by far the largest ICO to date. Following this, their platform- EOSIO 1.0 was released, marking a major point in the future of the project. Prior to the release users which participated in the EOS Ethereum-based token sale needed to take part in a token swap, for the native EOS token. The project currently is the 5th most valuable project as measured by market cap, with a valuation of $6.1 billion. The Huobi Platform currently allows users to be able to trade EOS with a variety of pairs including USDT, BTC, ETH and HT, for those who are wanting purchase EOS tokens.

As well as this functionality, Huobi also has their very own weekly YouTube show, Huobi Talk in which the current guests include 7 EOS block producers who help provide clarification on EOS’s current state of affairs.

ECAF Problems

EOS’s governance structure is currently divided into three distinct groups- block producers, arbitrators and token holders. They are representative with the executive, constituency and judicial of any governed system. If a situation arises with dispute in the network, the ECAF is responsible for solving the issue.

The governance crisis started when in an effort to stop several thefts; seven EOS accounts were frozen by 21 EOS block producers on June 17. While this may seem like a warranted move, the implication for the constitution and current governance in EOS could be far-reaching. The block producers while deciding this course of actions did not go with the arbitration, only instead consulting with them. This was a decision made knowingly in violation of the constitution. Article IX from the EOS constitution states:

“All disputes arising out of or in connection with this Constitution shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.”

The ECAF, the body to which the initial problem was delegated to argued initially that it didn’t have jurisdiction, thereby refusing to rule. But the ECAF later issued a retroactive order on June 19th, allowing the block producers to freeze the accounts.

EOS New York Refuses ECAF Authority

Further exasperating the situation, was on June 22nd an order was made by the ECAF to freeze a further 27 accounts and would state their ‘logic and reasoning’ at a later date, essentially providing no official reasoning for their actions. This was then followed by another order, appearing to demand that certain addresses have their tokens revoked, but this order was outed as being fake. This caused large tensions within the community as many took to social media to complain of the ECAF, with some campaigning to eliminate the ECAF entirely.

Proposal: Eliminate the ECAF from r/eos

Consequently, among all this craziness EOS New York took the massive decision, that until they can be certain about the authenticity of the ECAF, it will dismiss any ECAF decisions, or any claiming to be of such. The group stated:

“Because EOS New York is unable to verify any subsequent opinion of ECAF in a transparent and secure manner on-chain, we cannot with confidence execute any statement claiming to be an ECAF opinion. We will resume normal processing once communications can be established on-chain which such that they can be audited by both EOS New York and the community.”

The EOS New York statement further explains the great misunderstanding of the ECAF within the EOS network and includes suggestions to the ECAF such as:

➡️Maintaining a set of rules for dispute resolution

➡️Maintaining a database of member arbitrators who are independent of ECDR and in good-standing

➡️Assisting claimants with the administrative aspects of arbitration from filing to closing.

BlockOne Attempts to Build New Constitution

As a result of these actions by the ECAF, Dan Larimer of BlockOne, has argued for a completely new constitution. He proposes to change the EOS constitution to put an end to arbitrary decisions by the creation of a new voting system for block producers. EOS proposes Constitution v2.0 would see the end of protocol-level arbitration orders, essentially stripping the ECAF of its powers and limiting it to specific smart contracts:

“Block.one suggests ending all protocol-level arbitration orders other than to render non-binding opinions on the intent of the code. We believe the elected block producers should be the jury and must render a 2/3+1 decision to alter a broken contract.”

In his article, entitled “The ‘Intent of Code’ is Law” Larimer highlights the importance of code as ‘law’ in blockchain and how that should be the primary emphasis for arbitrators. The BlockOne proposal makes a clear stance on transactions accepted to the blockchain, emphasizing that any disputes regarding the validity of a signature which fall back to the arbitration cause more issues than it solves. Larimer continues to state:

“We have seen that if you give people arbitrary power to resolve arbitrary disputes then everything becomes a dispute and the decisions made are arbitrary. The more power the arbiter has, the more vicious and petty the disputes become and the less predictable the outcome.”

Larimer noted that the platform’s Ricardian contracts, a combination of ‘free form and code terms’- are causing debate, due to certain users requests to contain specific terms. He states the requirement for objective boundaries which help users feel safe and secure with some guarantees.

“If everything on the blockchain is subject to mob-rule, then no one is safe. If the community does not have strong, objective, organizing principles, then everything is subject to interpretation and becomes unpredictable and arbitrary.”

Smart Contract Arbitration in Future

For the foreseeable future, Larimer suggested users are to opt-in smart contracts if they’d like to see the elected block producers and/or ECAF protect their interests. This would result in the block producers and/or ECAF being given powers and a contract must clearly define the powers that they have in execution of said contract. This is as such to avoid further centralization-related controversies. Ricardian contracts must clearly set out the arbitration process, which would completely be enforced by the code.

Future for EOS

My personal opinion is that there is no doubt; the current EOS situation is mayhem. What should’ve been a simple mainnet integration followed by a bull run on the price hasn’t quite panned out as expected. That’s not to say it won’t happen in the near future, but until this governance situation is resolved, the project might be in limbo for the foreseeable future.

Understandably there has been a loud reaction from the community in regards to these latest developments. Supporters were initially happy that steps were taken to root out bad influences on the EOS Blockchain; this was my initial thought. But how can EOS be a champion of decentralization when one group, be it the block producers or the ECAF have such power to act unilaterally. This, in essence, is centralization at its core and beggars the question to just how decentralized EOS actually is and if it’s truly trustless. What’s stopping the block producers acting again in such a manner, despite not having the constitutional authority to do so? The comparison to a centralized project such as Ripple was made by one user:

If crypto mass adoption involves someone having the power to control, freeze or reverse a transaction.

If it involves someone having the power to edit or reverse data on the chain.

If it involves losing immutability.

Then crypto mass adoption is not worth having. https://t.co/RRHuZKattE

Charlie Shrem (@CharlieShrem) June 19, 2018

While another user commented on the flaws of such a process:

In EOS a few complete strangers can freeze what users thought was their money. Under the EOS protocol you must trust a "constitutional" organization comprised of people you will likely never get to know. The EOS "constitution" is socially unscalable and a security hole. https://t.co/WusEqBMGBp

Nick Szabo⚡️ (@NickSzabo4) June 19, 2018

I truly believe that for all of EOS’s intentions the current state of governance is too centralized and structured with too much concentration of power to the block producers and other actors such as ECAF. This leads it open to potential abuses and corruption. While I feel Dan Larimer’s attempt to re-write the constitution does help, it will be problematic as it runs counter to the EOS constitution. Until EOS has developed a system which actually has complete decentralization, similar to Bitcoin, there will be repeats of the most recent controversies and impede EOS from being able to truly explode in a way that it’s more than capable of doing.

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