The EOS Arbitrator Problem: A Crypto Governance Breakdown Explained

“They have to figure their own shit out.”

Those were the harsh words of one of EOS’ top “block producers” – the network participants in charge of maintaining the blockchain – on Monday as the world’s fifth largest cryptocurrency attracted public ridicule for its current state of confusion.

As told to CoinDesk by Kevin Rose, co-founder and head of strategy at EOS New York, the statement could reflect the broader snags the software has faced since release, but this comment was focused specifically on the EOS Core Arbitration Forum (ECAF).

So far, it seems many both inside and outside the EOS community aren’t clear what ECAF, the main body tasked with resolving disputes between token holders on the network, is and what control it has over transactions.

That’s largely because ECAF’s role and duties were discussed back and forth over months of forum discussions, but clear methods and processes don’t seem to have been decided on. It’s become apparent over the past few days that this mess of information now needs to be organized and clearly communicated to the community.

Stepping back, all this turbulence began on June 17, just three days after the network’s launch, when the network’s top block producers unanimously intervened to stop seven addresses from making transactions. That decision was retroactively endorsed by an ECAF order (the arbitrator had initially refused to rule on the issue).

Then on June 22, an order made the rounds that ECAF wanted to freeze 27 more accounts, to which “the logic and reasoning … will be posted at a later date.” On June 24, another order was seemingly issued, demanding that tokens be revoked from some addresses.

That order, however, turned out to be a fake.

With all the mayhem, EOS New York made a big decision. Until it can be reasonably certain about their authenticity, the block producer wrote on Sunday, it will ignore ECAF decisions – or decisions that appear to be ECAF decisions.

“We cannot with confidence execute any statement claiming to be an ECAF opinion,” the organization said, adding:

“We will resume normal processing once communications can be established on-chain such that they can be audited by both EOS New York and the community.”

Adding to that, Rose pointed to what he called a “rampant misunderstanding about what arbitration is” on the EOS network. According to him, ECAF needs improved processes, more transparency and ultimately, competition.

Roshan Abraham of EOS Authority, another top block producer, agreed that ECAF’s processes are flawed. Meanwhile, EOS Telegram chats are abuzz with complaints, speculation and unanswered questions about the arbitrator.

The judge and the bailiff

Still, these folks are supposed to be held to predictable and rational governance rules, those within the EOS “constitution,” although that ruleset is still at an early stage.

And that seems to be somewhat at the heart of the issues.

After the fake order to revoke tokens from some addresses, Rose told CoinDesk, “I woke up to a scanned PDF on Twitter claiming to move property and I spent the next 45 minutes trying to figure out if it was real.”

He continued:

“I don’t have time to do that, that’s not secure, that’s not how professionals work.”

Rather than having to “spend its time analyzing the merits and evidence of a case,” Rose said, a block producer should be able to leave the arbitration to “somebody who is trained to do that” – an arbitrator who can “just tell us what to do.” In other words, he said, block producers should be like courtroom bailiffs.

“He’s not going to do anything unless the judge is asking him to take someone away … it doesn’t make him stupid, that’s his job,” he said.

So far, though, such credulousness on the part of block producers has been impossible, given the quality of ECAF’s efforts. Its decisions are not stored in any one repository but passed around social media as screenshots of PDFs signed by hand.

ECAF has a website, but “you’d think it was some shady shell company,” said Rose.

And that could lead to misinformation – if not outright scams, like the fake order displays – which thrives in such a crypto environment.

The situation is especially embarrassing for EOS, though, which has attempted to reject most cryptocurrencies’ state of borderline anarchy: EOS has erected quasi-official institutions, governed by quasi-legal structures, laid out in a written constitution.

Not about centralization

It’s important to note, though, that Rose himself, EOS New York and other block producers are not upset about alleged centralization, which is what caused an uproar among the broader cryptocurrency community.

All of these events – and in particular ECAF’s promise to explain “at a later date” – led critics, mostly from outside EOS, to call block producers a “junta” and a “cartel,” “bankers” and “centralized.” ECAF, with its use of flowery legalese, was compared to “kids” playing pretend, while the EOS network as a whole was accused of conducting “consensus by conference call.” […]

Read Full: The EOS Arbitrator Problem: A Crypto Governance Breakdown Explained