reveals EOS’s new pared-back constitution

Posted: 2 July 2018 3:23 pm

EOS 2.0 shows a system where block producers can't do much, but can charge fees for it.


EOS has had an eventful year, raising billions of dollars worth of Ether to develop the ultimate Ethereum-killer platform. But in the absence of a useful product, EOS's Ethereum killing has so far been confined to expensive attempts to sell the bottom out of the ETH markets.

Like most cryptocurrency projects, EOS was always inundated with naysayers, and "fudsters" were out in force to point out its flaws and argue that it was doomed to fail. Unlike most cryptocurrency projects, EOS actually went live with a real product and immediately started proving its critics right.

EOS's vision was to bring the best side of humanity to the blockchain, with dispute resolution, customer service and all that other good stuff. In practice, this just meant sending humans to do a robot's job.

Decentralised decision-making was replaced by as a central authority to pick the 21 network nodes, and blockchain trustlessness was replaced by each block producer signing proposals with pen and paper, and dutifully uploading pictures of the results.

Any block producer who refuses to go along with proposals will be replaced by a more compliant node, which has instilled a dangerous level of mindless obedience into the nodes. At one point, someone even introduced a fake proposal to freeze 27 wallets, and the block producers just unthinkingly signed off on it without realising it was fake.

Between a rock and a hard place

This has put EOS into an unpleasant position. The most sensible changes are off-limits because they risk revealing the pointlessness of the entire EOS system. For example, just moving back to Ethereum and using a simple governance contract to more efficiently mimic the human element without the downsides is off the table because it would reveal how pointless EOS is.

A similar effect can be seen in bitcoin, whose unnecessary spat with Bitcoin Cash has left it unable to increase block size for fear of looking stupid, even if that's the most sensible option.

The challenge for EOS is essentially to get as close to "code is law" as possible, without accidentally revealing that it has no reason to exist.

The new proposed constitution, known as EOS 2.0, basically says that there will be human arbiters in the system while reassuring people that the arbiters won't actually do anything... at least not for free.

The main difference is that this system won't let arbiters freeze accounts, move funds or otherwise get involved in that kind of dispute resolution. They can only modify contracts that are not functioning as intended. They can also charge a "reasonable" fee or impose other requirements on customers in exchange for their help freezing malfunctioning contracts.

EOS 2.0

The new EOS 2.0 constitution according to

  1. If there is a dispute on intent of code, then intent shall be determined by a super majority vote of elected producers or an arbiter mutually agreed to by the parties to the dispute and enacted by producers. A super majority may, at their discretion, freeze a contract during an active dispute until such time as code to fix the contract is available. The parties to the dispute must produce proposed replacement code. The producers may charge a reasonable fee and/or place other reasonable requirements on the parties to the dispute. A super majority is defined as 2/3+1. Ricardian contractual terms that cannot be enforced by properly functioning code are beyond the scope of the producers authority to evaluate and enforce.
  2. Block producers shall not freeze or modify contracts that are operating as intended.
  3. Contract developers are not liable for damages caused by unintentional bugs in the code. All Parties are responsible for auditing the code and the Ricardian contract before use.
  4. All service providers who produce tools to facilitate the construction and signing of transactions on behalf of others shall present the full Ricardian Contract terms of this Constitution and other referenced contracts.
  5. No Party shall have a fiduciary responsibility to support the value of the EOS token. The Parties do not authorize anyone to hold assets, borrow, speak, nor contract on behalf of EOS token holders or the blockchain collectively. This blockchain shall have no owners, managers, or fiduciaries.
  6. A Ricardian Contract is deemed accepted when a transaction based on that contract is incorporated into the blockchain.
  7. Parties voluntarily consent for all other Parties to permanently and irrevocably retain, copy, analyze, and distribute all broadcast transactions and derivative information.
  8. Use of the blockchain shall constitute consent to its terms.
  9. This Constitution may be amended by a vote of the EOS token holders that attracts no less than 15% staked vote participation among tokens and no fewer than 10% more Yes votes than No votes, sustained for 30 continuous days within a 120 day period.

Can you trust EOS block producers?

The chaos of the launch strongly suggests no. As soon as they could, the block producers descended into rivalries, sabotage attempts, impersonations, scams and other not-so-great behaviour. Updating the constitution doesn't suddenly make them any more dependable, but anyone who wants to use the system will have to put their trust in a lot of eminently untrustworthy entities with an incentive to misbehave.

This constitution change will reduce the customer service load by leaving anyone who lost their funds or had their account compromised out of luck, and instead focus solely on letting block producers charge a fee for modifying existing contracts.

The value of this type of service is dubious. The most severe problem with contracts tends to be those that have vulnerabilities to allow the theft of funds, and in EOS as in Ethereum, those funds will now be gone for good whenever a broken contract is hit.

At the same time, parties to a dispute will now be able to buy a favourable verdict from the block producers, or simply buy a stalemate to prevent the rightful party from accruing the necessary 15 of 21 votes.

This system benefits no one except and the block producers. For anyone thinking of actually using the EOS blockchain, this set of terms and conditions, which looks an awful lot like an extortion license, will be tough to swallow. If a business wants to use EOS, that means putting the business entirely at the mercy of 15 to 21 unknown persons who can constantly observe your efforts and speculate that it would be a shame if someone were to freeze its contracts.

And from a sensible risk-management perspective, no large business could justify the risks of using EOS. Ethereum gas costs can be planned, budgeted for and managed around, but a human-powered blockchain like EOS is simply unpredictable and too dangerous to touch.

The only sensible step is for EOS and most other decentralised systems is to scrap these problematic human authorities entirely and move towards a properly decentralised system. But that would remove EOS's only value proposition.

Effective decentralisation is well worth the slog, but it's also extremely technically challenging and only a very serious project can pull it off. There's little reason to believe EOS is one of them. It is willingly walking away from true decentralisation and making some glaring oversights on the way, such as underestimating how many scammers there are, and how much work is involved in actually serving users as customers. And from a purely technical perspective, all signs point to it being a firmly average project.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Latest cryptocurrency news

Picture: Shutterstock

Get into cryptocurrency

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site