Much has been made online over EOS’s handling of its first arbitration case earlier this week. For those who don’t know, a group of the chain’s block producers made a decision to freeze specific accounts in response to an apparent theft. An arbiter has ruled to freeze the tokens for now and return them from the alleged thieves to their original holders. It appears, from the evidence, that the block producers judged the situation correctly as an attempted theft and that justice was served.
However, despite the seemingly happy resolution of this specific incident, the way it was handled raises important and troubling questions for EOS and the broader blockchain community, as many observers have noted in the days since the event. Crucially, the decision was made by an anonymous group of network insiders with no input from the broader community or recourse to challenge the decision. This inequitable decision-making power – you might call it centralization – seems to go against the egalitarian ethos of the blockchain community as well as EOS’s own Constitution.
This is not to imply that EOS is wholly in the wrong. As blockchain entrepreneurs ourselves, we are intimately familiar with the unexpected twists and turns inherent in building a technology platform. We are inclined to agree with those who say EOS’s action was an understandable, one-off fix to a fast-moving situation in which the correct action was clear. It was a fudge, but an understandable one, and certainly preferable to the alternative in that instant. Nevertheless, it underscores how much work there is left to do if we are to build an industry with strong, transparent, reliable safeguards for smart contracts.
There are some concrete solutions to which we as a community can make a commitment in order to build the strongest possible blockchain future. In the case of smart contracts and arbitration, businesses should adopt a few fundamental best practices.
First, we must remember that a strong blockchain platform provides the tools for people to make good decisions. Decentralization does not mean insulation; it just means that participants have control over their assets and information and with whom they decide to share them. Mechanisms for dispute resolution must be robust, but transparent. The reason so many commenters are upset with EOS is the opacity with which it and its block producers acted. All participants must understand and be able to trust the parameters of any transaction they enter into. This transparency must extend to the arbiters, and the community should be able to remove them if they are judged to be corrupt. Transparency, an understanding of best practices, and a strong, equitable system for resolving disputes will be increasingly important as the space matures.
EOS has certainly achieved a great deal already, and we celebrate the progress they have made in moving the technology forward. But that should not distract us, as this recent incident makes clear, from doggedly continuing to establish the tools and safeguards the blockchain space will need if it is to be successful. Transparency and reliability in smart contract dispute resolution are a great place to start.