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Plz No Cat: The Future of Crypto Disputes Is Being Decided By Doges

Could you sneak a cat past the doges?

That’s the idea behind a new game launched by Kleros, an ethereum-based startup that raised $2.5 million in the first round of its crypto token sale in July. Called “Doges on Trial,” the game is designed around the principle of crypto-economics: the theory that a properly designed system of incentives based on cryptocurrency tokens will yield the desired user behavior.

In this case, Kleros wants to incentivize people using the platform to curate a list of images … of doges.

For the uninitiated, “doge” is a meme of an apprehensive-looking Shiba Inu. It’s captivated the internet, giving birth to a particular method of mangling English (“so scare,” “why this happened”), as well as a dedicated cryptocurrency, dogecoin, whose community is known for its playful antics.

So, while you might expect “Doges on Trial” to be much the same – just a fun activity to bring some lightheartedness to crypto – actually Kleros has much bigger, more serious use cases in mind for its decentralized dispute resolution protocol.

For instance, spotting fake news, resolving disputes on gig economy and e-commerce platforms, and helping ratings platforms curate their lists are all within the scope of Kleros’ mission.

The company’s founder and CEO Federico Ast told CoinDesk:

“We want to fill this need for the crypto ecosystem that’s going to be very useful for mass adoption.”

And needed it is. Recently dispute resolution, or more broadly governance, has been top of mind for many blockchain entrepreneurs and enthusiasts – especially for a new rash of protocols, think EOS, whose methods for making decisions that affect many stakeholders are opaque, to say the least.

Rather than building their own dispute resolution mechanisms, though, Ast hopes projects will delegate that aspect to Kleros.

And the way that Kleros, which is participating in the Thomson Reuters Incubator program right now, is proving it has the right crypto economics for the job is by running a cute little game in which users are rewarded for slipping forbidden cat images into a collection of doges.

The goal, Ast said, is “to have as many people as possible coming to test this and trying to break it” through bribery and other methods that bad actors would inevitably try to use against Kleros if it were deployed for higher-stakes purposes.

Remaining relatively quiet about the game that debuted on ethereum’s live blockchain, or “mainnet,” in July, the company is now ready to start communicating the system’s effectiveness to the broader ethereum community, said Ast.

Plz no cat

Backing up, it’s worth noting how the doge proof-of-concept has worked.

Over the course of the past couple months, a few dozen users, mostly investors in the platform’s native token, pinakion (PNK), have submitted more than 100 images for judgment and selection.

It works like this: a user submits their image – a doge, cat or otherwise – to the list along with a deposit of ether, ethereum’s native token. The image sits in limbo for a day, during which time other users can challenge it by submitting an ether deposit equal to the submitter’s.

If no one challenges it, the image is added to the list and the submitter’s deposit is returned.

At the end of the trial (for which no date has yet been set), successful meme-submitters will split a reward of 1 million dogecoin.

If the image is challenged – because it lacks a doge, is a duplicate, or contains a cat – it goes before a jury of three users, who have made a deposit of Kleros’ PNK token.

The jury then makes its decision to reject or approve the image. If you are a jury member that votes in dissent with the majority, you forfeit some PNK tokens, which get redistributed to the majority-voting jurors.

If the meme is accepted, the challenger’s ether deposit goes to the submitter, minus a fee for the jurors. If it’s rejected, the challenger gets the submitter’s ether deposit, also minus the fee.

doges challenged

The submitter of the image can appeal the decision, however, by making another ether deposit. Then, the same process as above repeats itself, but with seven jurors. And after that, the submitter can appeal the decision with a jury of 15.

The reason for increasing the number of jurors with each round of appeals, Ast explained, is that bribing a majority of the jurors gets more expensive.

“It’s going to cost you a lot of money to keep on attacking the system and to win,” Ast said.

One user, Tristan Roberts, tried this route, posting a picture of a cat with an offer to pay jurors 0.3 ether to break the rules. Roberts told CoinDesk that he found it “practically impossible to keep bribing the jurors, [since] the amount of ETH I would win would be less than the amount needed to bribe them.”

doges bribery

“All in all, I’m impressed with how the game theory dynamics worked out; I wasn’t able to break it,” said Roberts.

Although, at least one user does appear to have sneaked a cat onto the list. According to the Doges on Trial rules, they’re entitled to receive two ether and a CryptoKitty for beating the system. The ultimate decision as to whether the picture below contains an illicit cat will be left up to Coopérative Kleros, the legal entity behind the platform’s development.

doges cat

Such partnership

If Kleros proves its mettle with Doges on Trial, Ast said, the platform could serve as an arbitration layer for swathes of the blockchain ecosystem.

A number of cryptocurrency projects in different niches, such as e-commerce and gaming, are building out their own dispute resolution mechanisms, he explained, adding:

“Our vision is to tell all of these guys, just focus on your platform, on your product, and just delegate arbitration to Kleros.”

And already, some are interested.

In March, the Kleros team said it would integrate the platform with Ink Protocol, a cryptocurrency payment and reputation system built on ethereum. Ink’s native token XNK has replaced the credit system on Listia, an e-commerce site with 10 million registered users, in which individuals trade goods among themselves using credits rather than buying them from vendors.

The same month, Kleros announced a partnership with Dether, which allows users to buy and sell cryptocurrencies locally for cash.

For certain use cases, though, Kleros faces competition. Civil, for example, has developed a similar crypto economic system targeted specifically at identifying and weeding out fake news.

And the decentralized prediction market Augur shares Kleros’ goal of “keeping people honest on the blockchain through game theory,” according to Kleros crypto economics researcher William George, in a recent blog post.

Still, Ast remains optimistic that tons of use cases exist for the platform.

“There are lots of use cases of Kleros that we don’t even know [about yet] … people are going to find them eventually,” he said.

Doge meme images via DogesonTrial.dog 

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Nobel Laureate Oliver Hart to Advise Blockchain Startup

Blockchain economics and governance design startup Prysm Group has added Nobel Prize laureate Oliver Hart and former Microsoft chief economist Preston McAfee to its senior advisory board.

Prysm assists blockchain startups by providing “counsel in the complex economic fields of contract theory, market design, game theory and social choice. McAfee told CoinDesk that he was “excited” to join the group, adding that “blockchain enables a variety of new business models by permitting decentralization and publication of digital records.”

Moreover, “there is no other mechanism that simultaneously provides decentralization, secure privacy and verifiability,” he said.

McAfee added:

“Many blockchain applications involve creating economic systems [or] groups of agents who interact in multiple ways, with distinct roles. The challenge in designing such systems is that they have many interacting parts — various incentives, policing, contract rules, information provision, prices — that need to be simultaneously optimized if good performance is to be achieved.”

In a statement, Hart echoed McAfee’s words, saying it was “important” for the founders of blockchain startups to “understand the possible complications” that can come from creating code to replace traditional institutions and power structures, “so that they can design better systems that are more likely to accomplish their objectives.”

He told CoinDesk that he was “intrigued” by the ways blockchain technology could allow developers to “design better incentives and contracts.”

“Prysm Group is dedicated to the idea that economic principles provide a powerful tool for understanding the issues and I am excited by the prospect of working with them,” he added.

Hart’s statement suggests that there will be some parallels between the project and his past work. Hart and Finnish economist Bengt Holmström won the Nobel Prize in Economic Sciences in 2016 for their work on contract theory.

Oliver Hart image via Bengt Nyman / Wikimedia Commons

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Ethereum's Most Heated Tech Debate Is Proving It's Far From Over

Ethereum’s most polarizing debate is back – and, arguably, as complex as ever.

Largely undiscussed since April, the question of whether the world’s second-largest blockchain would consider a system-wide software upgrade as a way to return $239 million lost due to a mishap at a major startup resurfaced with a new round of infighting among stakeholders this week.

Sparked in the days prior to a meeting in Berlin meant to address decision-making challenges on the decentralized network, the issue revolves around a code proposal called ethereum improvement proposal (EIP) 999 and the specific way in which it has been reviewed.

At issue is not just how ethereum developers will handle this contentious code change, but those that may arise in the future as the platform grows and expands.

Still, this week’s events began on a smaller scale, with the planned meeting of the Council of Ethereum Magicians, a developer group launched in early 2018 as a forum for discussion on how ethereum should handle technical updates and code disputes.

Following the discussion Saturday, Afri Schoedon, communications manager at Parity Technologies, the startup whose code snafu caused the widely publicized fund freeze, suggested a change to EIP 999 – a proposal that seeks to reactivate the 584 wallets in which much of the lost funds remain.

A relatively minor suggestion, Schoedon asked to advance EIP 999 within the parameters of ethereum’s process for code review. Due to what he perceived as a lack of technical objections to the proposal, he inferred it should be set to “accepted” status.

But the move had wider repercussions, with sometimes vitriolic debate surfacing on Twitter, Github and Reddit. The reaction was swift, with those against the code even proposing a rival pull request to move the proposal to the “rejected” state.

“I wish people would stop using the EIPs repository for political grandstanding,” core developer Nick Johnson tweeted.

The move has sparked a heated reaction from those who don’t want to see the funds restored out of fear these requests will become too commonplace.

As the rationale goes, if ethereum users and developers are able to act like market managers, how are they different from today’s central monetary authorities?

“The Parity bailout EIP was just stealth ‘accepted’ by the Ethereum Foundation despite community rejection. Apparently the community found out and now the pull request has been closed,” one observer tweeted:

“Ethereum is completely centralized.”

Backtracking the code

But if the implications of the move have been lasting, the inciting incident was arguably brief.

Schoedon has since asked for the pull request to be closed, stating that his actions stemmed from a misunderstanding of how others believe the EIP process should be conducted (the subtleties of which are still being debated).

Complicating matters was that Schoedon, who initiated the pull request to move the proposal to “accepted,” is also the author of EIP 999.

More broadly, however, the issue appears to have exacerbated the very problems that many ethereum developers have acknowledged for some time – despite attempts to coordinate in person, digital communications hold the potential to vastly polarize users.

On top of this, there are concerns that, on the internet, competing projects could deliberately add fire to the controversy, swarming social media with fake accounts to create the illusion of outrage.

In an effort to ease the impact this could have on core developers tasked with accepting code changes, the controversy has forced developers to consider how to clarity the EIP process, the formal way by which code changes are organized in the ethereum repository.

One user summarized:

“EIP 999 is a great example of stalled governance and it just won’t go away, and it is consuming every discussion to the point of exhaustion.”

Ritual magic

But in response to the uncertainty produced as a result of Schoedon’s pull request, efforts to further clarify the EIP acceptance process have been attempted.

Micah Zoltu, a developer from prediction market Augur, submitted a pull request to clarify that the process should “focus on technicals not community sentiment,” in order to liberate core developers from becoming trapped in political debates.

The pull request sparked concerns on social media, though, with one Reddit user warning that “changes are being made to the EIP process which remove the need for gauging community opinion and bypass a core [developer] vote.”

Speaking on a forum, Zoltu explained that he wished to avoid the situation of “ritual magic or tribal knowledge” being relied on to produce agreement among developers.

“What I’m trying to avoid is the situation where the process looks something like: do X, do Y, ritual magic or tribal knowledge, do Z,” Zoltu said.

Such discussion echoed the Magicians meetup in Berlin, where talk centered on how, to reduce political gridlock, core developers should evaluate proposals purely based on technical merit – a sentiment that informed Schoedon’s decision to submit a pull request to move EIP-999 to “accepted.”

According to attendees, if the EIP review and acceptance process is heralded as purely technical, it can relieve core developers from the role of social adjudicators.

Still, when it comes to proposals like EIP 999, the boundaries between such things are more opaque. As one attendee of the Magicians meetup noted:

“It is a very clear technical proposal with also profound social implications.”

Initiated as a way to allow a wider group of stakeholders to coordinate on technical changes, the Magicians group has a wider scope than the fund recovery question.

However, because it provides an outlet for more complex discussions, the question of fund recovery has long been associated with the group – which was created in part to address the governance concerns that the recovery debate had revealed.

In the days prior to the meeting, Ryan Zurrer, principle and venture partner at Polychain Capital, published a blog post urging the Magicians specifically to a produce a roadmap for recovery, stating that ethereum’s ability to remain adaptive was at stake.

The post led to bickering on social media, with researcher Dean Eigenmann going so far as to warn that the Magicians group was being “hijacked” to serve the needs of those who lost funds.

“You thought we were all done with EIP 999,” Eigenmann tweeted, “It will lead nowhere.”

With much at stake, and many affected parties present at the meeting, the question of recovery haunted the event – so much so that Peter Mauric, head of public affairs at Parity Technologies, called it the “8,000-pound elephant in the room.”

EIP 867

A roadmap for recovery was discussed, but not without recognition of the fact that the Magicians group is an informal body only.

“There is no finality in the room here,” Boris Mann, co-organizer of the event, reminded everyone. “We know that humans meeting face-to-face is a good way to get a job done, but finality in any decisions will be made in a much more open and accessible forum than this discussion.”

As such, Mann posited that rather, the Magicians should be used as a forum to discuss the development of EIPs that are then handed over to the core developer team for review.

In order to assist this process, the Magicians members vowed to coordinate in smaller working groups, or “rings.” These rings, and the EIPs they produce, will be supported by a signalling website led by Griff Green, that measures a wide group of ethereum stakeholders in an attempt to add legitimacy to changes to the protocol.

Rather than just measuring ether holdings – as is the case with the current signaling tool, Carbon Vote – the new signaling system would try to measure responses from miners, developers and even non-technical stakeholders as well.

“This is a really, really important topic and, I think, the foundational layer for us to make decisions on ethereum,” Green said.

In order to simplify the review process for core developers – the body of developers that are tasked with maintaining the ethereum core base – fund recovery proposals would require a process like ethereum improvement proposal EIP 867, that offers a generic framework for recovery proposals.

While fiercely debated at its inception, such a framework would allow anyone who has lost funds on ethereum, not just from the Parity multisig, to apply for fund recovery.

Mann told CoinDesk:

“I think that people feel unstuck in the sense of, ‘Hey, EIP 867 needs to get turned into an actual process.'”

Risks of inaction

That’s not to say that progress at the in-person event couldn’t help mitigate future issues with controversial code proposals.

Speaking on a forum subsequently, Mann summarized the situation, saying that, once EIP 867 is improved, it could be submitted as an EIP alongside a “request for signaling.”

“Signaling gets done, signaling results inform core dev decision, core devs decide whether to schedule into next planned [hard fork],” Mann continued.

Speaking at the Magicians meeting, other pro-recovery participants suggested that such proposals could conform to a process suggested by Vitalik Buterin in a recent interview, in which the network’s founder hinted that developers could initiate a one-time “clean up” recovery fork.

“That said, I do not think it is my place to make that decision or even heavily influence it,” Buterin said in June.

According to attendees at the meeting, no matter which direction is taken, the decision would need to come with a strict social contract that defines ethereum’s attitude to fund recovery far into the future – such that the debate doesn’t impinge on ethereum indefinitely.

Still, the question of governance is still far from being solved and remain an issue that is frustrating users on both sides of the debate.

“I get emails and phone calls on a very regular basis,” Mauric from Parity told CoinDesk, “The reality is these are good projects that have committed to building distributed tech. These are builders funds, and its difficult to come back to the people behind these projects and say ‘Right, we understand, but we need to figure out governance first.'”

As a result of the stasis, some ethereum developers even urged the Ethereum Foundation to take a stronger leadership position when it comes to the debate.

Zoltu concluded:

“Choosing to not implement EIP-999 is making a decision. So is choosing to completely ignore it. I’m generally against [the Ethereum Foundation]/Core Devs using the ‘bury head in sand’ approach to governance. I don’t think it is healthy at all. It favors stagnation over moving forward, and eventually leads to calcification.”

Rain on glass via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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It's Too Soon for On-Chain Governance

Michael J. Casey is the chairman of CoinDesk’s advisory board and a senior advisor for blockchain research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.


Blockchain governance is hard.

That’s the only reliable conclusion to draw from the chaotic, contentious rollout of EOS, the $4 billion project whose consensus model was touted as a way to enable smoother governance and scalability in a blockchain industry beset with conflicts and decision-making gridlock.

First, it took longer than expected for the EOS community to elect the network’s 21 block producers, which are paid $10,000 a day to validate transactions. Then, the EOS Core Arbitration Forum, a body set up to resolve disputes, sent out a memo ordering those block producers to freeze 27 supposedly sketchy-looking accounts.

Concerns immediately arose that the ECAF was arbitrarily censoring participants, inevitably raising accusations of centralized control and putting chain immutability into question right at the outset. As an ECAF representative threatened lawsuits against one block producer, and as a separate fake document purporting to be from the arbitration body appeared, one New York block producer threw up its hands and refused to participate.

Now, after Dan Larimer, CTO of founding company Block.one, called the ECAF’s order a mistake and argued that its handling of the problem did more harm to confidence in EOS than any lost funds that the suspect accounts might have stolen, his company wants to rewrite the entire EOS Constitution.

Just three weeks into the launch, the spat has provided a popcorn-worthy spectacle for commentators on Crypto Twitter. But, in reality, as a way to assess on-chain governance mechanisms such as EOS’s delegated proof-of-stake (DPOS) consensus mechanism, there’s a lot more at stake (excuse the pun) than entertainment.

Along with saga at Tezos, another very well-funded on-chain governance project, which was rocked by disputes between the founders and the first director of the foundation overseeing its $243 million war chest, the EOS disaster offers a strong reminder of how entrenched human mistrust can be difficult to overcome.

To offset the mistrust there must be a sufficient store of shared community trust in whatever mechanism or institution is in place to resolve those problems. That’s the case whether the overall system is described as “decentralized” or “centralized.”

The problem is that when large amounts of money are involved, forging that common store of trust in the dispute resolution mechanism is especially difficult.

The best laid plans…

I’m actually sympathetic to the creative efforts of the Tezos and EOS founders – as well as those of a host others, including Decred, NEO and Cardano. In exploring protocol-level solutions such as voting and staking to enable some level of internal, functional democracy, they are trying to help blockchain communities make orderly decisions on important changes and upgrades and to avoid the contentious disputes and chain splits that have rocked bitcoin, ethereum and others.

I’m not willing to say that on-chain governance won’t ever work – or that our only choice is to either live with disorder, acrimony and gridlock or turn to external legal solutions that expose user identities and require a dependence on external government bodies. But I think we are getting a very clear demonstration that it’s very difficult to design the right algorithm to overcome the toxic mix that money and mistrust create.

We should note that the ECAF, which was formed in the midst of forum discussions among EOS community members before the launch, was conceived as a solution to these problems. Its existence reflects a recognition that disputes would arise and that an off-chain mechanism was needed. But it was very poorly put together, with unclear rules and processes for arbitration.

The question is: Would it have been better designed, more capable of earning the trust of all participants, if the community wasn’t founded on a kind of utopian-like blind faith in the DPOS mechanism?

In other words, the root of the problem may be the unreasonable claims being made by on-chain governance proponents.

As it is, the reliability of the DPOS mechanism was tested by the size of the EOS money pot. The giant fundraise fueled expectations of high valuations, which in turn stoked greed and mistrust. It fed the perception, right or wrong, that those who obtain power and influence inside the EOS network might be able to game the system.

Larimer, others from Block.one and many EOS fans swear by the various checks and balances intended to protect users from overly powerful block producers: that it requires agreement among 15 of the 21 block producers to reverse transactions; that ongoing voting holds them to account; and that there’s always the option (or threat) of a fork.

And yet, despite all that, the system has clearly generated mistrust and, ultimately, dysfunction.

And that’s not for nothing. While he may have been biased against EOS, there was sound logic to ethereum founder Vitalik Buterin’s warnings in a blog post three months ago of the risk of bribes and collusion among block producers operating across different jurisdictions. Money and power breed corruption. Always.

Buterin’s main point, one that he made in support of his Ethereum developer colleague Vlad Zamfir’s critique of Coinbase co-founder Fred Ehrsham’s impassioned plea for protocol-based solutions to bitcoin’s and ethereum’s problems, was that on-chain governance won’t work.

In terms of where the technology currently stands, I think that’s true. The wellspring of trust in these mechanisms isn’t yet strong enough to overcome the problem of cross-user mistrust.

The solution, for now

So, what to do? Bitcoin’s drawn-out block-size debate and the contentious hard fork that resulted from it presented an image of dysfunction that undermined mainstream confidence in the technology.

And in ethereum, where there has a long been a clearer sense of identifiable leadership, Buterin is himself often accused of having too much CEO-like power. (The slide in ether’s price when he was rumored to have died in a car crash illustrated the problems of perceived centralization that have persisted around ethereum ever since Buterin and others supported the hard fork to rescue funds lost in The DAO attack of 2016.)

Well, for now – and this will be anathema to crypto-anarchists and some blockchain libertarians – the solution likely lies in recognizing the limits of the algorithms and  relying instead on human-led, legally defined institutions for dispute resolution and off-chain governance.

While I have been a constant critic of permissioned blockchains, especially of the risk that the consortia that run them can act as colluding gatekeepers to curtail innovation and hold users hostage, they are popular among companies precisely because they operate within a recognized legal structure that they’re comfortable with.  Legal certainty is valuable.

The failure of The DAO taught us that code is not law. By defining it as a system in which the software superseded all other legal recourse, that project’s founders created a model that allowed the thief who destroyed it to argue, quite reasonably, that he or she was not acting illegally. Yet those who lost money wanted recourse, which is how ethereum ended up with its hard fork.

The solution, for now, lies in forming well-designed, trusted mechanisms that reside within a predictable legal framework and which can resolve disputes through fluid, lightweight arbitration rather than being bogged down in courts. They carry the weight of law, but try to avoid the process of it.

Key here are the words  “well-designed, trusted.” Lightweight, off-chain arbitration might have been the intent of those who created the ECAF, but it was not well-designed and clearly hasn’t earned the trust of all actors. It’s not at clear how social consensus was formed in support of it.

Here, the internet’s governance offers a model, as father-and-son team Don and Alex Tapscott laid out in a useful assessment of the outlook for blockchain governance for The World Economic Forum.

The Internet Corporation for Assigned Names and Numbers (ICANN), the Internet Engineering Taskforce (IETF) and the Worldwide Web Consortium (W3C) have worked fairly well as trusted avenues for governance and dispute resolution. Understandably, the United States’ historical influence over ICANN has been a bone of contention. Yet, even so, the multi-stakeholder structure of these organizations has mostly assuaged concerns that any one party, government or otherwise, has excessive power of the rules by which internet real estate is managed.

Blockhains, with anti-corporatist, decentralized principles at their heart, can’t and shouldn’t try to emulate the process by which these internet bodies were formed, which relied upon the bargaining positions of different governments in international forums like the United Nations. But there’s still much that can be done by standards bodies and NGOs to forge consensus among a variety of stakeholders in this industry. (The W3C and other standards bodies are already seeking to establish authority here.)

Does this mean immutability and censorship-resistance are impossible? Yes, perhaps, if you think in absolute terms. But these were also aspirational objectives, not absolutes.

What matters is a system that works in the service of the widest possible array of users. And, as of now, on-chain governance models like that of EOS clearly don’t.

Cracked window image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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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.”

But the idea that uncensorable transactions are the ultimate goal of cryptocurrencies – settled doctrine in many circles – is met with skepticism or outright rejection in debates among EOS block producers. Instead, EOS supporters want a blockchain that’s fast and cheap, but also has the governance structure in place to make decisions that are in the best interest of the user.

That’s why EOS was built on delegated proof-of-stake (dPOS), which allows for a certain number of organizations to validate the blockchain, instead of incorporating a proof-of-work mining system (like bitcoin has, for instance).

Whereas anyone (with the correct hardware) can be a miner on proof-of-work blockchains, EOS’ 21 block producers are being constantly voted into and out of those roles by users of the network staking tokens – a vote is held every two minutes.

At the time of writing, there were 370 block producer candidates vying for the 21 slots.

Rather than centralization, EOS New York – consistently one of these top 21 block producers – said it has chosen to disregard ECAF decisions because the way they are issued is “haphazard, opaque, and without a process.”

“The world is watching,” Rose told CoinDesk.

As for ECAF’s belated explanation for why it ordered 27 accounts to be frozen, Rose found it satisfactory. These were, he said, verifiable owners freezing their own accounts because they feared “imminent property theft” due to phishing, hacking and scams.

Improving the process

Still, it appears the conversation around how to clean up the messy arbitration process is now moving in a productive direction.

Sam Sapoznick, who signed the ECAF order sent out on June 22, said he does not speak officially for ECAF, but wrote on Telegram that the arbitrator “is working on a sensible draft proposal to address the outstanding issues.”

And in a post on June 24, EOS New York outlined specific proposals for on-chain communication by arbitrators, governed by smart contracts.

Plus, EOS Argentina (ranked 22nd at the time of writing) recently rolled out an EOS-based application for signing and time-stamping documents on the blockchain, pointedly inviting ECAF to use it. Other block producers are deciding that from now on ECAF requests must be published through a “trusted source” and not just on social media.

EOS Authority’s position, for instance, Abraham told CoinDesk, is that all orders “must be published through a trusted source such as the EOS blockchain or electronically signed by ECAF.” Plus, he added, “All evidence and reasoning should also be published with all cases.”

But until any particular technical fix is adopted, Rose expressed worry that the community would continue to flail until it corrected “rampant confusion” about the roles of various stakeholders and the role of arbitration more generally.

First of all, he said, “ECAF isn’t making these decisions; the arbitrator with his or her name on the paper is making the decisions.” For the time being, he, added, these arbitrators are simply volunteers.

And even though ECAF does not (or should not) have any power outside of its role as a forum for qualified arbitrators, Rose said, it should also face competition in a system of “free-market justice.”

He explained, “If you are an arbitrator and you’d like to arbitrate disputes on chain for EOS, you can do that. You as a private person – two people just need to consent to you as the arbitrator.”

It’s difficult to say whether this system is a description of arbitration in EOS as it is today, or rather as Rose would like it to be. For now, it seems, the entire process is up in the air.

The most up-to-date documentation on the rules governing EOS arbitration is buried in a forum. And even that, for now, is just a proposal, whereby it’s unclear what rules are actually in effect.

For these rules, or anything having to with EOS’ constitution, to be finalized, there needs to be a system for conducting token holder referendums, and that process is also still in progress.

The governance-focused EOS network was born without a governance process, and as Rose put it:

“That’s like your arms not being there when you’re born.”

Destroyed tire image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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The Downside of Democracy (and What it Means for Blockchain Governance)

Taylor Pearson is the author of “The End of Jobs” and writes about entrepreneurship and blockchain technologies at TaylorPearson.me.


Following acrimonious debates within the bitcoin and ethereum communities over the past few years regarding governance decisions that ended in forks, there has been a wave of projects offering on-chain governance.

This is a system for deciding on changes to public blockchain protocols using formalized governance mechanisms encoded in the blockchain, rather than informal discussions offline. Prominent examples of protocols with on-chain governance include Tezos, EOS and Decred.

While these projects may have some value, I believe the push for on-chain governance is, in large part, the result of an intuition carried over from environments like nation-states and private companies, both of which are very different from crypto networks

Implicitly, their belief is that we are seeing too much exit and not enough voice and we need to build better mechanisms for voice via formal on-chain governance.

Let’s step back a bit. What do I mean by voice and exit?

Members of an organization, be it a nation, a business or a crypto network, have two possible responses when they’re unhappy with its governance.

They can exit – leave the relationship – or they can use their “voice” to try to improve the relationship through communication.

Citizens of a country can respond to political repression by emigrating (exit) or protesting (voice). Employees can choose to quit their unpleasant job (exit), or talk to management to try and improve the situation (voice). Unsatisfied customers can opt to shop elsewhere (exit), or they can ask for the manager (voice).

In crypto networks, users can try to change the way that the protocol operates through governance (voice) or they can choose to exit by either leaving the network or forking.

Spectrum of governance

The relative merits and drawbacks of voice and exit depend on the cost of exit.

For example, it’s important that countries are democratic and have (on-chain) voting that allows citizens to formally express their opinions because the costs of switching your citizenship (exit cost) are very high.

The tradeoff of prioritizing voice over exit is that democracies tend to be very inefficient compared to more technocratic forms of governance. This is epitomized in moments such as Alaska senator Ted Stevens describing the internet as “not a big truck, but a series of tubes.” Despite being the head of the committee ruling on net neutrality, Stevens displayed a very low level of understanding about how the internet actually worked.

Democracy fundamentally operates at the median of society, not the edge. It does that in order to maintain peace and allow for economic prosperity. On the whole, this has worked better than any previous governance system.

Private companies are more technocratic than nation-states. A relatively small group composed of top management and large activist shareholders effectively control the institution. This allows them to be more efficient but also makes them more prone to disgruntled stakeholders – be it shareholders, employees or customers.

This is less of an issue because, compared to changing your citizenship, it’s much easier to change your job or sell your stock. That is, the cost to exit is lower so you’re less likely to “revolt.” If you don’t like how Apple’s key decision makers are behaving, you have the option to quit your job or sell your stock.

At the far end of this spectrum is open-source software. The governance of open-source software is captured in the phrase “rough consensus and running code.”

Open-source software governance tends to be technocratic with a relatively small group of stakeholders controlling the project. The broader stakeholder community has very little voice. Even fairly large bitcoin holders and miners have almost no say over bitcoin core’s development roadmap.

However, if the technocratic rulers go in a direction you don’t like, you can much more easily “revolt” by forking the network. Facebook’s employees and shareholders can leave but they can’t take the database with them. In open source software and blockchains, you can.

It is the opposite of democratic nation-states in this sense. You have very low exit costs and so you can get the efficiencies of a technocratic system without the threat of revolution. The revolutionaries can just start their own competitor.

From a top-down perspective, this technocratic, fork-prone governance is uncertain and hard to predict, which is often perceived as an inefficiency. To the contrary, this uncertainty is a necessary pre-condition, a fertilizer, for opportunity.

Bloodless revolutions

Open-source source software (and software more broadly) is the source of so much innovation because it so uncertain and loosely governed.

It is prone to frequent “revolutions” but those revolutions do not end the same way as real-world revolutions because information is a non-rivalrous good. The revolutionaries can walk out the door and build the future they believe should exist.

Physicist Max Planck is frequently paraphrased as saying that “Science advances one funeral at a time.” Democracies tend to be no different and organizations often advance one retirement at a time.

By contrast, open-source software advances one fork at a time. It is not bounded by biology or geography but only by non-rival, infinitely replicable information.

These forks may ultimately be proven as worthless by the market, but the dissatisfied faction need not wait to try out the approach they perceive as better.

Returning, then, to blockchains, introducing on-chain governance to crypto networks is likely to make them more like nation-states with the inefficiencies that entails. Is that the right tradeoff?

There are certainly some exit costs associated with crypto networks. Forking a blockchain is easier than forking a nation state, but still requires sufficient scale in terms of users, miners, and broader tooling (wallets, exchanges, etc.).

Network effects related to brand and real-world integration points are other important sources of friction that discourage forking. I suspect for specific circumstances, that some form of on-chain governance proves more efficient.

But for a technology with comparatively low exit costs, forking is more feature than bug. Many projects with strong technocratic leaders practicing loose consensus and running code form a robust and competitive ecosystem. While many individual projects will fail, it’s more likely that more optimal approaches are found by one of many forks.

Off-chain governance may seem more unpredictable, but may prove more fertile ground for innovation for just that reason.

U.S. Constitution image via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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EOS Locked 7 Accounts and It Has Implications for Everyone in Crypto

In an effort to stop several thefts, seven accounts of the EOS blockchain were frozen on June 16.

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 centralized decision will have far-reaching implications in the future – 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 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.

The claims

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.

The decision

As such, even EOS BPs aren’t necessarily in agreement with the steps taken.

While the decision was unanimous, EOS New York, one of the top BPs explained that it supported the temporary freeze reluctantly.

The group called on the EOSIO Core Arbitration Forum (ECAF), a group put in charge of handling disputes on the blockchain once the constitution is ratified, to make a full ruling by June 19 or they would reneg their support of the freeze, releasing the tokens to be withdrawn. Late on June 18, ECAF issued a statement affirming the emergency ruling, so EOS New York continues to support the freeze.

Still, in a statement from EOS New York, the group said it would not support such an extraordinary action again short of a threat to the full protocol.

It concluded:

“We are encountering these problems on a daily basis and we do not have the tools in place to properly address them.”

Most BPs have remained publicly silent of the decision, however.

While the group that will arbitrate disputes, ECAF, already exists, according to interim ECAF administrator Moti Tabulo, the arbitrators had no jurisdiction, explaining that “this was due to a lack of mechanisms on the blockchain that ensure that EOS users agree to the EOS Constitution and binding arbitration.”

Still, EOS Tribe, a standby BP (not one of the 21 validating BPs but a party that could eventually, and wants to be, one of those) voiced its support for the freeze on Medium.

“Some were hesitant to take any actions to avoid any risks or liabilities to themselves,” Steve Floyd wrote on behalf of the group. “… If we were elected we would not hesitate to take right actions to protect token holders’ accounts and go through great lengths to convince other BPs.”

EOS Amsterdam, another standby block producer, voiced similar support.

Not everyone agreed though. Going by the name of Kev, one of the co-founders of EOS Go, the group that has been sharing information about the protocol, wrote a reply to EOS Amsterdam’s statement on his organization’s forum:

“What stands out about this case, is it’s the first time we’ve had a group with the power to act unilaterally, which they went ahead and did. ECAF said ‘we don’t have the power to act’ and BPs said ‘well we do, so we’re going to.'”

And this signals perhaps an important aspect of the EOS system – that ECAF will have power when and if the community grants it power, but the BPs will have power as long as EOS exists, whether there are rules or not.

The downward spiral

For many crypto enthusiasts this control could be off-putting since the centralized power structures are generally shunned, but Emin Gun Sirer, a professor at Cornell and himself a consensus protocol designer, said that might be the least of everyone’s worries.

He told CoinDesk, “The fact that EOS transactions are subject to ‘arbitration’ based on an unclear document of zero legal force means that EOS transactions lack finality.”

Continuing, Sirer said, if BPs can roll back misbegotten tokens to their original holders then that creates a dangerous situation for everyone in crypto.

Imagine an attacker manages to steal one EOS from a legitimate user, and that attacker immediately moves it onto an exchange and trades it for some bitcoin. Then the attacker withdraws that bitcoin from the exchange. Later, EOS discovers the theft, the aggrieved holder proves their case and EOS rolls back the trade. Now the exchange is out both one EOS and part of a bitcoin.

So either the exchange eats that loss or it imposes it on the innocent user who had previously owned the partial bitcoin because the attacker is gone.

Now imagine the attacker stole not one EOS token but thousands, and imagine that after the attacker traded many more times, EOS BPs rolled back the transaction. The exchange, or whoever was deemed liable, would then be out significant amounts of money.

This is why it’s apt for Sirer to describe the mechanism as a potential “contagion,” as he did in a recent tweet thread.

Expanding upon that statement, Sirer told CoinDesk:

“The root cause of the problem is that all cryptocurrencies except EOS are bearer instruments with degree settlement periods, and EOS looks like a cryptocurrency. But it is not a bearer instrument, and it has infinite settlement time.

In this recent instance, there’s no such danger because ill-gotten EOS never left the genesis block wallets, but in the future EOS enthusiasts envision, where millions of transactions are running across EOS every hour, the token holders and/or the BPs might not catch these thefts so quickly. Or even beyond that, arbitration might take much too long.

As such, Sirer concluded, “Exchanges have been taken in by EOS’s crypto-API and treat it as equivalent to others. They will get a wake-up call when the governance model kicks in and reverts transactions.”

Broken padlock photo via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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EOS Is Launched But Not Yet Live – Why?

Visit any EOS Telegram channel and some version of this question will pop up again and again: Is the mainnet live yet?

While the EOS blockchain technically launched on June 10 at 13:00 UTC, the answer to that question is effectively no. That’s because the crypto tokens created by Block.one’s $4 billion EOS initial coin offering (ICO) are locked up until the network elects 21 “block producers” (the equivalent of miners for the new network), and as that still hasn’t happened, currently no one can start using EOS just yet.

As it stands, the blockchain will go live if 15 percent of all tokens – an equivalent of 150 million – are “staked” in a vote on block producer candidates. Staking tokens allows EOS holders to vote for up to 30 block producers – the groups in charge of verifying transactions – and votes are weighted by how many tokens are staked.

And while this process is currently underway, what we’ve seemingly learned about blockchain self-governance from the EOS launch is: If people are given time, they will take it.

That magic 150 million tokens could be hit at any time, but so far votes have stacked up slowly, frustrating many Telegram inquirers, and probably plenty of others. Although, there is some evidence that staking is heating up. At the end of June 10, only about 10 million tokens had been staked, but as of this writing on June 11, just over 30 million tokens have been staked.

Still, the platform needs five times as many for the voting process to start.

Kevin Rose, community lead for one of the leading block producer candidates, EOS New York, told CoinDesk that he believes the slow start had something to do with the launch happening late at night in Asia, a continent where several countries have significant numbers of cryptocurrency users.

There seems to be some truth to that, since the next day after the launch (after Asian crypto enthusiasts would have been waking up), the number of staked tokens tripled.

Others, like Vahid Toosi of EOS SW/Eden said he believes there’s a psychological barrier – he predicts at 40 million tokens – that needs to be crossed before tokens start flooding in.

But ultimately, many members of the EOS community speculate it’s a handful of different precautions investors are taking before staking their EOS tokens – hesitation by holders that have a large quantity of EOS (or whales), the lack user-friendly tools, security concerns and general prudence.

Speaking to that, Kyle Samani of Multicoin Capital, a fund that’s bullish on EOS, told CoinDesk:

“I think voting is rightfully slow. Exchanges are figuring out operations, and whales and funds are going to bend toward being conservative.”

Block.one did not respond to a request for comment.

Whales in waiting

Sure enough, others think those with big money investments in EOS are watching and waiting.

“I think the whales want to see how the other whales vote so they can swing it their way,” Toosi said.

Steve Floyd of EOS Tribe, an EOS block producer candidate, believes some of the whales are already trying to swing it their way.

“Some of these [block producer] candidates in the top 10 came out of nowhere. How they got in the position they are in is pretty obvious – they had a lot of tokens (or access to them) and voted themselves in,” he said. “It’s a whales’ election.”

EOS New York’s Rose agrees that there are some new whales picking favorites, but he’s also more optimistic about their role, stating that anyone with significant holdings can move the needle, and those that do are looking at taking some cues from the “wisdom of the crowd” concept.

Because he told CoinDesk:

“If they were to make the wrong decision, then people lose faith in EOS and the value goes down.”

Many critics have pointed to the number of large addresses as a sign that EOS is centralized, but these estimates have been somewhat exaggerated.

First, Block.one has a significant portion of EOS tokens but has committed to not staking its tokens and voting on block producer candidates at the start. Plus, some of the biggest EOS wallets are cryptocurrency exchanges that are holding EOS tokens for their users.

Still, it’s fair to say large holders dominate the EOS landscape, and as such, many wonder what’s keeping those players from staking right away.

Hot and cold

According to some, the lack of sophisticated mechanisms for voting is keeping some investors on the sidelines.

“The majority of people are waiting for tools to be vetted and confirmed to be safe before jumping onto voting,” Syed Jafri of EOS Cafe Calgary, a block producer candidate, told CoinDesk.

Indeed, Samani of Multicoin Capital echoed this, saying the venture fund has a policy that its investors always store their private keys – a cryptocurrency equivalent of a password – in cold storage (meaning offline).

“Right now, the only tool available for voting is in a hot wallet. We will not vote until we vote from a cold wallet,” Samani said. “I’m sure many other large holders feel the same way.”

According to Jafri, it’s not just about hot or cold wallets. Part of the reason some people are waiting to vote is because, during the blockchain’s testing phase, several “epic” vulnerabilities were found.

As such, he continued:

“They want to ensure the chain is safe due to some of the recent vulnerabilities discovered. Trust builds slowly.”

Tough tooling

Beyond just the need for cold storage staking, the messaging around how to stake and vote has been mixed and confusing at best.

As CoinDesk reported, not long before the vote, there were hardly any options for voting without using the command line, something that will be difficult for non-technical users.

Some more user-friendly tools started to pop up closer to launch, with broad support among insiders forming around a voting tool made by Scatter, but then just as the blockchain went live, a coalition of validator candidates recommended only using command line tool “CLEOS.”

One group of EOS holders that couldn’t use the command line tool if they wanted to are those holding their tokens on exchanges, since they’re locked up in the exchange’s wallet. Some exchanges have committed to building tools for their users to vote with, but CoinDesk was not able to determine at press time whether or not votes from exchanges were hitting EOS yet.

Many observers might think this one application – for easily staking and voting tokens – would have been good for Block.One to build over the last year, but Rose said Block.one has always said it would take a hands-off approach to the launch, including not building a voting tool.

Looking to sell?

Still, what could be keeping others from voting is a sell strategy.

Right now, EOS tokens are mostly frozen until the mainnet launch because most tokens are sitting in EOS wallets. But EOS tokens on exchanges continue to be able to be bought and sold.

Those eager to sell (including those that might be waiting for the mainnet launch and a possible price pump, or those that want the ability to sell should there be a massive sell-off after the launch) might be keeping tokens on exchanges and not staking them to get around the lock up.

Yet, those token holders might as well vote, since a large-scale sell-off can’t happen immediately after the protocol goes live.

That’s because once the first slate of block producers are elected, each account will go live on EOS with all but 10 of their tokens staked. While users can move to unstake the rest immediately, the command won’t go through for 72 hours.

Since all holdings will initially be staked as if each user had staked and voted, there doesn’t seem to be any reason to wait right now.

And once the chain goes live, voting will be continuous, with EOS checking staked votes for the most supported block producers roughly every two minutes. As such, the first block producers elected might not keep their position for very long.

Although it seems these issues are starting to get resolved since stakes seem to be coming in much faster now than before.

“I think in the coming days the rate at which votes are tallied will be increasing fast,” Rose said, also pointing to the deeper meaning behind this user-launched blockchain by adding:

“We’re watching a free market machine operate with no leader.”

Yellow light via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Experimental Voting Effort Aims to Break Ethereum Governance Gridlock

When people think of ethereum, they generally think also of the protocol’s developer Vitalik Buterin, now – off his creation – a multi-millionaire.

No doubt, Buterin is a leader of sorts for the community, even if decision-making is somewhat decentralized. And above that, ethereum’s most active developers have a significant amount of say in the direction of the technology.

Recently, however, the protocol’s decision-making has been called into question as a series of controversial proposals have arisen – be it the development of new forms of mining hardware or the recovery of lost funds due to various vulnerabilities.

As the community debates the various pros and cons of such proposals, Buterin has begun working with economics researcher Dr. Glen Weyl to experiment with the idea of enabling a new kind of voting for the ethereum users. In a blog post announcing the collaboration on May 21, Buterin described how ideas from Weyl’s recent book, “Radical Markets,” could help address these governance challenges and coordinate solutions for contentious issues.

Speaking to CoinDesk, Weyl, who received a Ph.D. in economics at Princeton University and is now a researcher at Microsoft, explained that quadratic voting aims to focus voters on issues they are passionate about and educated on. Rather than votes being distributed equally across participants, users can purchase extra votes to have a greater say in certain issues.

“The idea is it allows people to express how important things are to them, and not just which direction they feel about it,” Weyl said.

The collaboration comes at a time when other ethereum researchers have banded together in an effort to come up with ways to better measure community sentiment.

And although Buterin wasn’t directly involved in those meetings, in the blog post, he noted his belief that existing proposals for decentralized decision-making either put too much authority into the hands of those who own ether or, in trying to reach a larger pool of stakeholders, are vulnerable to attack by fake accounts and malicious actors trying to sway the vote.

As such, Buterin and Weyl write, the quadratic voting proposal is a more “moderate alternative” to other forms of decentralized governance.

Weyl told CoinDesk:

“[Quadratic voting] allows for decisions to be made for the greatest number of people.”

Connecting communities

The duo’s post on the matter seems aligned with an announcement made earlier this month by Virgil Griffith from the Ethereum Foundation, the not-for-profit that funds ethereum-related research, that it was seeking applications for projects wanting to test experiments based on Weyl’s theories.

Prior to fully fledged announcements, however, Buterin and Weyl’s blog post hints at ways the method could occur.

“Citizens can use a (possibly artificial) currency to buy votes at the cost of the square of the votes bought on the issues that are most important to them,” the blog post states.

Weyl echoed this in conversation to CoinDesk, saying, “We would like to make a voting system where people make trades, so I give up the things that are less important to me and you give up the things that are less important to you, we all are happier.”

In an effort to block a small number of the financially elite to buy up a large portion of votes and in turn disproportionately affect outcomes, the system would make the price per 1,000 votes, 1,00,000 credits, which should prevent that from happening.

Elaborating on the concept, Weyl explained that it’s part of an overall attempt to implement economic theory into technological systems.

He told CoinDesk:

“Even if exact solutions don’t turn out the way we want, the mechanism design community has such a natural synergy with the blockchain community [that] we can build a real collaboration between those.”

While Weyl won’t be involved in the technicalities of building the model for ethereum, he does believe this is the first step towards a deeper collaboration between his and Buterin’s respective communities.

‘A perfect balance’

It’s maybe surprising that these two communities haven’t directly overlapped previously since both emphasize cooperation, equality and decentralization in their visions for the future.

“Our ultimate goal is to shape a society that would work differently,” Weyl said.

However, Weyl said that blockchain projects current governance structures aren’t living up to their values.

Lacking a more formal governance method, the ethereum community specifically has struggled to reach consensus on key topics throughout the years – one such debate over The DAO hack even leading a dissenting minority to split off the main chain and create ethereum classic. While on-chain governance exists to some extent – and other methods are being tested on other protocols, such as Gavin Wo0d’s Polkadot – some believe that these methods lack the fairness necessary for public blockchains.

But the communities are stuck at a crossroads. For one, more traditional voting structures whereby every person gets a single vote don’t take into account that some people have a bigger stake in the system.

But on the other hand, if the system were to reward one vote per coin a user holds, many worry the same issues seen today in the broader world – whereby the rich have significantly more power than the poor – would be recreated.

“What quadratic voting allows you to do is to strike a perfect balance between the two ideas,” Weyl said, adding:

“It matches pretty perfectly to the desires of the system to on the one hand to have an egalitarian flavor but also to acknowledge that people are committed to different degrees.”

Identity is key

That said, there are technical issues that would need to be resolved before such a system could be viable.

For instance, Weyl said that quadratic voting can only work if voters are pegged to identities, otherwise, it is as liable to manipulation. Indeed, if one user was able to sell their votes through separate accounts, they could exploit the system.

“I am hopeful that blockchain will not be an identity-free zone because if it is, it will be a plutocratic zone, and that does not accord with ideas people of the space have,” Weyl said.

But Weyl isn’t particularly worried about this since restructuring identity online has been a hot topic both inside and outside the blockchain space for some time.

Overall, though, in spite of whether a quadratic voting system gets instituted into ethereum, Weyl hopes that going forward, the blockchain will provide a “critical testing ground” in order to scrutinize the effectivity of quadratic voting, potentially to scale it up to bigger political systems.

Weyl concluded:

“We’re really trying to create a bridge between radical mechanism design and community on the one hand and the ethereum community on the other.”

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