What is the point of EOS?

This article was first published on FlatOutCrypto on the 22nd June. If you enjoy this article then please follow me @flatoutcrypto.

The original vision of Satoshi Nakamoto and the Bitcoin whitepaper:

“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”

Their thoughts on the problem with current systems:

“The problem with this solution [a trusted central authority] is that the fate of the entire money system depends on the company running the mint, with every transaction having to go through them, just like a bank.”

The decree put out by EOS on June 20th, just two days after their launch:

I wonder which camp Satoshi would place EOS into.

That said, I’m not quite sure why people are as surprised as they are, because this ‘feature’ of EOS has been touted on many occasions. It is part of the ‘benefit’ of having a network where so few (21) parties are the sole providers of consensus.

I have some sympathy for the viewpoint that any network to truly go mainstream requires such an ability to address flagrant abuses and thievery. It rectifies some of the more cutthroat aspects of other networks, where one mistake can lose a life’s savings. I suspect the public may end up being more accepting of such a provision than the crypto community. Many fear what they do not understand, and most people are technically inept. They will worry that they too will one day be in need of such a provision to avoid being one of the countless victims that have lost significant amounts in crypto either due to their own incompetence or the conniving predators that feast upon the weak of the herd.

However, EOS has once again shown the tone deaf nature that plagues many operations in the space, all of whom ignore the importance of ‘optics’.

The “ECAF Emergency Measure of Protection Order” itself is a masterful piece of trumped up legalese could not be closer in tone to a rogue dictatorial student body notice if it tried. It concludes that the “logic and reasoning for this Order will be posted at a later date”, a fitting footnote summing up the pitiful nature of a note that will be used in countless anti EOS pieces in years to come.

I believe that the accounts suspended likely were the victims of fraud and the recovery of their funds in a vacuum is a good thing. But it highlights the difficulty of actually implementing a proper governance system, because the nature of the decree throws up as many questions as it does answers. Off the top of my head:

Route for extraneous intervention

What happens if a government demands the Block Producers (BP) seize a user’s funds? The obvious answer is that the BP will refuse to do so or that there are 21 other BPs located worldwide who are not subject to the demands of one government. This ignores the obvious problem that the US in particular has demonstrated a judicial ability to convict corporations and individuals located outside of their borders. Some, but not all, BPs will cave to this demand.

The rights of others

How does a user get notified that his wallet address is suddenly on the blacklist? How do they defend themselves? What happens if the thief sends his funds on to an unsuspecting party? How do the arbitrators know if the accused has simply sent the stolen funds to another account they control or if they’ve already moved them on to someone else? What is the deadline to respond?

The EOS Core Arbitration Forum

How does the ECAF come to decisions? How many people are involved? How will they scale to cope with thousands of requests (which will happen now potential bad actors have another attack vector to assault, this time focusing squarely on the fallibility of human decision making)? Who is Sam Sapoznick? What legal training do they have? Who chooses the ECAF personnel?

Who is in charge?

At least with 21 BPs you have 21 different parties to process transactions. This was an order to those BPs that they were directed to enforce. So what’s the point of having 21 BPs if you have one ECAF who can seemingly decide on network immutability decisions?

Conflict of interests

What happens if a BP gets hacked? Or someone friendly with a BP/the ECAF takes advantage of such a relationship? How are conflicts of interests declared by ECAF/BPs and taken into account?

What is the point of EOS?

My sympathy for those who argue that this sort of governance is necessary for adoption only stretches so far. It is true that every network has a learning curve and that decentralisation is not necessarily achieved at launch, but may need to be worked towards. But this is not what this is. This is a flagrant attempt at enforcing centralisation. My distaste for Delegated Proof of Stake networks and my belief they do not constitute decentralisation is well established, but there are some DPoS implementations that are worse than others. EOS falls squarely into the ‘worse’ category.

The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which — George Orwell, Animal Farm

Add this arbitration facility to Bitcoin and it would not have achieved the success it has, because it would be the exact same as all the problems we have with current systems, if not arguably worse. Who would you trust more –BPs and a quasi-anonymous ECAF team or the heavily regulated banking industry and the numerous ombudsman’s other channels that exist? I would trust my bank over this backwards step in a heartbeat.

If transactions can be reversed this easily, if my funds can be frozen this easily, if even BPs are ordered to follow the notice of an arbitrary body then tell me again, what’s the point of EOS?

Find my work covering the cryptoasset space at flatoutcrypto.com and follow me @flatoutcrypto