Hi investors, let's talk about the latest EOS drama.

EOS.

The EOS community is in turmoil following the unilateral freezing of 7 accounts linked to phishing activities by Block Producers (BPs).

In EOS freezing an account means that a majority (15/21) of BPs decide not to include transactions from and to a particular account into their blocks, effectively blacklisting the account and making it impossible for it to communicate with the blockchain.

The freezing was part of an initiative dubbed "EOS911" aiming at combating private-key phishing by malicious actors, a practice that has become rampant in the past few months surrounding the launch of the EOS main-net.

Many observers and media outlets promptly condemned the move as a breach of the EOS Constitution.

But the reality is a bit more nuanced.

Now, what does the EOS Constitution have to say about account freezing?

Unsurprisingly absolutely nothing, the term "account freezing" isn't even mentioned in the Constitution.

The only clause remotely close to providing constitutional ground for punishment in this case are:

Article II - Perjury
Member shall be liable for losses caused by false or misleading attestations and shall forfeit any profit gained thereby.

or

Article VI - Restitution
Each Member agrees that penalties for breach of contract may include, but are not limited to, fines, loss of account, and other restitution.

Fine, what entity has power to establish the existence of a breach of contract then?

Again, this is not entirely clear but according to Article XII of the Constitution:

Article XII - Dispute Resolution
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.

As far as we know this case was not submitted to the ICC for arbitration by BPs before they decided to freeze the accounts. So proper procedure as per the Constitution wasn't followed.

Instead the BPs went to ECAF which:

• Is an Arbitration Forum for and by the EOS Community;
• Comprises of carefully vetted, independent Arbitrators [...] specially trained to consider the special context of arbitration of blockchain disputes.
• Is based on arbitration rules that are globally applicable and have been developed by combining the latest thinking on blockchain dispute resolution, as well as best practices from international arbitral forums"

...to propose their plan to freeze the scammy accounts.

According to their own internal rules, ECAF is competent to hear requests for account freezes as per its mission of resolving disputes between community members.

However, ECAF responded that:

"It did not believe the interim constitution granted it any authority to do so."

So the block producers went ahead and decided to freeze the accounts unilaterally.

Notice, ECAF refused to litigate the case not because the Constitution does not give it the power to litigate in the first place (although this power belongs to the ICC) but on the basis that the EOS Constitution is an "interim" document.

In my view this reasoning is flawed for multiple reason:

• ECAF refused to litigate because the Constitution is, according to them, an "interim" document,i.e. a draft which hasn't entered into force yet;
• Yet, even if the EOS Constitution had been legally binding at the time the ECAF decided not to arbitrate the case, it wouldn't have granted ECAF this power anyways since that power belongs to the ICC;
• So the fundamental problem in this case is ECAF lack of constitutional authority but since this constitution is only "interim" and has no legal force so why didn't ECAF take this opportunity to fill a judicial void and veil the freezing with at least some kind of legitimacy.

I believe the whole affair is a considerable missed opportunity for ECAF and also a clear indication that the Constitution needs to be amended to provide more clarity regarding who has the power to do what and possibly enshrine ECAF as a legal recourse for arbitrating disputes.

At the end of the day, I think the BPs were right to freeze the accounts and the fact that they submitted their proposed course of action to an entity that seemed legitimate indicates that they were acting in good faith to protect the network.

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