EOS arbitration and constitution is a lesson in how not to do governance

EOS may abandon its constitution after only two weeks in operationEOS may abandon its constitution after only two weeks in operation

ECAF arbitration intervention led to an order to freeze 27 EOS accounts, but it now transpires that the order was a forgery. And in another set back for the network, its constitution faces the chop as the disarray surrounding EOS governance deepens.

The latest developments have led to a firestorm of protest, and ridicule, from critics. So too has the “seizure” clause in the presumptive constitution of the third generation blockchain platform that hops to displace Ethereum.

The barely two-week-old network’s  governance system is being attacked as flawed, to such an extent that it undermines its claim to be a decentralised blockchain. Altogether 34 accounts were caught up in freezing action when the seven accounts frozen two days after the network went live were included. The status of the 27 accounts subject to the forged order is not clear.

EOS’s written constitution includes provision for arbitration although there is no explicit mention of the EOS Core Arbitration Forum (ECAF) that currently acts as the judiciary, with the 21 elected block producers providing what can be viewed as the executive branch. The third part of the governance structure is the token holders who might be considered “the people”, although at this juncture it is a moot point as to whether they are sovereign.

The first accounts to be frozen were not as a result of an order from the ECAF, as that body had refused to act, and so the BPs took it upon themselves to execute the freeze, which some cite as an early example of the shredding of the constitution.

It has since emerged that the catalyst for the freezing action were appeals to the arbitrators from EOS token holders who had fallen prey to fraudsters operating phishing scams.

Phishing attacks

The majority of the cases the ECAF is dealing with could be of similar provenance.  There are two types of attack that seem to have been prevalent, with both involving luring EOS ICO participants into registering either their Ethereum or EOS public keys with illegitimate websites.

In the case of one reddit poster, he used an Ethereum key generator site that furnished him with a fake private key. This did not become apparent until the ICO closed and voting began.  To participate in the token sale contributors bought an Ethereum ERC20 token which was then exchanged for the EOS token proper. Token transactions were frozen for 72 hours after staking began.

Block.one, the creators of the EOS code, snapshotted the Ethereum blockchain when the ICO ended and so the registration of public keys can be used to check ownership, assuming the complainant agrees to forwarding ID or a transaction signed with the private key.

In one example, reddit user an_amnesia registered the EOS public key at the now defunct register-eos.org website which used it to generate what turned out to be a false private key, with the fraudsters generating the real one for themselves. It was only when he tried to vote in the first block producer election that he realised his account has been hacked.

The governance issues don’t end there.

A simmering controversy concerning Article XV has just blown up following a published online discussion by a community member with Dan Larimer, Block.one’s chief technical officer and the recognised unofficial thought-leader in chief and lead developer of EOS.

Article XV is as follows:

“A Member is automatically released from all revocable obligations under this Constitution 3 years after the last transaction signed by that Member is incorporated into the blockchain. After 3 years of inactivity an account may be put up for auction and the proceeds distributed to all Members according to the system contract provisions then in effect for such redistribution.”

That has been confirmed in the conversation with Larimer as entitling ‘EOS’ (not clear what sub entity of the network would be involved here) to seize the token held in an account after three years of inactivity.

Although there are good reasons why the issue of inactive accounts needs to be addressed in some way because it reduces the available resource on the network, it is the existence of seemingly of god-like powers in the hands of the few that is creating consternation.

Changing the constitution

The EOS constitution is interim at this stage but the quasi-legalistic language and the lofty aims of securing “life, liberty and property” that is at the heart of the Larimer vision for EOS seems to be undermined by Article XV.

There are now moves afoot to rewrite the constitution, stripping the ECAF of much of its powers, with some arguing that a constitution should be abandoned entirely, according to a discussion between Larimer and others on the EOSGov Telegram here.

Dan Larimer discussion in Telegram group about abandoning the EOS constitution

However, changing the constitution is not straightforward by any means: Article XI states:

“This Constitution and its subordinate documents shall not be amended except by a vote of the token holders with no less than 15% vote participation among tokens and no fewer than 10% more Yes than No votes, sustained for 30 continuous days within a 120 day period.”

EOS is currently trading at $7.69 according to coinmarketcap.



About the Author

Pete Winston
I live and breathe crypto and have a small holding (BTC, ETH, EOS and XLM) that isn’t life-changing, so move along hackers! You can email me here: petewinston@coinintelnews.com

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