In an effort to stop several thefts, seven accounts on the EOS blockchain were frozen on June 17.
At face value, many will see this move by the 21 block producers (BPs) in charge of validating transactions on the newly live blockchain as a success in stopping malicious actors from bilking several users out of more than $20,000 in EOS. But others are concerned that such a decision will have far-reaching implications – and not just for EOS, but many other blockchains as well.
But first, it’s helpful to understand what happened last weekend.
As the migration from the ethereum blockchain to EOS’s own blockchain took place, EOS holders had to register their new EOS wallet addresses. In the mayhem during the transition, some users were duped by fraudsters into handing over their private keys.
Within the cryptocurrency space, that typically means a user’s crypto is gone forever, in the case of the EOS blockchain migration, the fraudsters weren’t able to immediately sell the tokens and run off with them. Within the EOS rules, all but 10 of users’ EOS tokens were staked when the blockchain went live. To withdraw tokens, users had to unstake their coins, which would then start a 72-hour waiting process.
While many EOS holders reported fraud, only seven disputed accounts had moved to unstake, the first step toward selling. Their cases were among the many before the EOSIO Core Arbitration Forum (ECAF), which is supposed to rule on disputes between users. But ECAF didn’t rule, arguing that it didn’t yet have jurisdiction.
So less than 24 hours before the stolen tokens were available to be sold, the BPs acted(unanimously), freezing those accounts until ECAF could make a valid ruling, in order to protect those who rightfully purchased tokens during the nearly year-long initial coin offering (ICO) the blockchain’s creator, Block.one, executed.
While the BPs move to prevent theft appears defensible, still, some are speaking out against the decision.
The argument revolves around the fact that the rules governing the EOS blockchain – what stakeholders are calling its “constitution” – haven’t been decided on and made official yet.
And even setting aside the larger legal questions about such a document’s legitimacy before a court, BPs are currently left in this authoritarian grey area until the constitution is ratified by users.
As such, those on EOS are debating whether the proper course of action was taken, and those off EOS are convinced this shows that EOS’ delegated proof-of-stake mechanism – which was used to create a faster, more scalable blockchain – is prone to centralized control and, in turn, potential censorship.
Like a military in a weak nation-state, the action illustrated the fact that BPs have the real power over EOS with or without a governance process.
As Dean Eigenmann put it in a Medium post:
“The entire model of EOS seems like an oligarchy veiled in a democracy that can be easily corrupted through various means.”
And others went so far as to claim the systems’ rules are a bad idea either way since it could eventually endanger other blockchains.
Backing up, when Block.one released the code for the EOS blockchain, the EOS tokens on the ethereum blockchain were locked up in a smart contract – gone forever.
Naturally, this confused some users, and where confusion and crypto meet, the opportunities to steal assets abound.
While most of the world’s EOS holders were just watching and waiting to see if EOS would ever manifest as a public blockchain, a small subset of holders were panicking over the fact that one website or another had tricked them into losing control of their tokens on EOS.
A few user groups then put together a site called EOS911 to help those that had been duped.
The theory was that if a user could prove they controlled the private key that had held the EOS when it resided on ethereum, then that proved they should own the EOS on the new public blockchain, or mainnet.
While more accounts then these seven have been identified as being hacked by phishing websites and other malicious actors, the other accounts private keys haven’t yet moved to unstake the tokens they controlled, and as such, those accounts have not been frozen.
And while many see this move as in line with EOS’s mission to be a more user-friendly blockchain, some question whether or not solving a few people’s immediate problems creates a long-term threat to EOS and even other blockchains…