Critiques of ECAF and the Growing Risk to Block Producers

Photo by Jens Lelie on Unsplash

As we approach the official launch of EOS Referendum voting, the pressing topics of the day are starting to bubble with passion and excitement. One of the most heated debates currently is ECAF and base layer vs second layer governance.

Some favor a lean “intent of code” model for the base layer and push all other “user account protections” to the “dApp layer”. Others favor a wider net for base layer arbitration where individually compromised user accounts are also handled.

It should be said that BOTH perspectives believe they are adding value and safety to the EOS community.

I’ve been vocally critical and skeptical of ECAF since literally the beginning and I wanted to share a few concerns that have added to my hesitation.

Issue #1: A lack of free public money is why ECAF can’t scale

“To be honest the main thing that has held ECAF back to date is lack of funding. It was a huge oversight to have a whole arm of government not funded through inflation to be able to function adequately.” — Ben Gates (ECAF Arbiter)

Coming from an Anarcho-Capitalist mindset, I’m skeptical of any self-proclaimed for profit business looking to bootstrap themselves with public funds. The statement above makes it seem that some members of ECAF see themself as a ruling governmental body rather than a single enterprise attempting to offer a quality service that the community opts in to and pays to use. Personally, this is too similar to the all to common socialist arguments for healthcare, education, police, etc.

If ECAF produces a service that people want and the marketplace needs, then they should have no problem finding funding (especially in the current environment where there’s literally no competition). Asking for free money shows a lack of solid entrepreneurial strategy and would reduce the market’s feedback loop of profit generation to guide the business model. Also, new startup competition may not have this advantage which, again, is eerily similar to crony capitalism that plagues the entire world.

Ashe’s Advice: Retract your plans to use inflationary public funding and build an honest business while benefiting from the ever closing first mover advantage.

Issue #2: ECAF sees itself as a Governmental Body

Competition makes everything better, including private law and property rights enforcement. If you have some free time, I highly recommend watching Mises Scholar, Dr. Robert P Murphy’s presentation on “The Market for Security” (~55min) or the shorter version “Law Enforcement in a Free Society (~8min).

I’ll assume that everyone reading this agrees to some extent that Free Market forces create better products and in the absence of competition we get terrible services and customer experiences similar to government offerings (post office, DMV, courts, schools, etc). Over time we should expect to see hundreds of ECAF-esque arbitration forums all competing to best protect our property. Historically, insurance companies played this role until government force bastardized the entire insurance market.

The fact that some in ECAF believe they are less similar to a private business and more similar to an arm of the government doesn’t help me feel that they aren’t attempting a power grab and will be hard to convince libertarians and ancaps otherwise.

Ashe’s Advice: Enjoy your first mover advantage in the “private protection of EOS property” and expect competition soon. You have a headstart, but competition is already thinking about your weaknesses.

Issue #3: As the EOS community grows so does obligation, risk and attack vectors for Block Producers

The year 2022 and there are >10M active daily EOS users. There are thousands of arbitration forums making hundreds of rulings every day. Since these rulings use the base layer of EOS, Block Producers are responsible for executing each reversed transaction and are being held accountable to voters all token holders. BPs are turning from technical experts into legal teams who spend their time double checking each arbitration orders. Rather than securing the network, they need to ensure each order is legitimate and from credible source rather than someone trying their hand at social engineering.

Keeping up with who is an “accredited arbitrator” proves very difficult and every BPs receive falsified orders every day. Sure, accreditation companies pop up to help, but it’s difficult to know who to trust, especially when time is of the essence and stolen funds are on the move. Unlike Bitcoin (which currently has a transaction wait time measured in weeks), EOS is fast and hackers can move tokens to an exchange in a matter of minutes. Remember the old libertarian saying…when seconds matter, the police are minutes away? Even if ECAF acts quickly (doubtful), each BP now requires a ~48 hour evaluation period to cover their own asses. The hackers have escaped with the loot.

Either we must require BPs to blindly execute all such arbitration orders (huge attack vector) or we afford them a review period (slow and not scalable). With a small EOS community, the attack vector is small, but we are using a blockchain that can scale to millions of tx/sec and we must figure out a way for our governance to scale too. Personally, I want Block Producers to specialize in technical security, not legal and social protections.

Ashe’s Advice: Create a “smart contract as a service” business similar to Team Chestnut that gives users more control over their accounts which deters hackers and scammers. Also, develop strategic partnership with teams like EOShield who are building a reputation system to alert users of shaddy or dangerous contracts.

Moving Forward.

Now, I realize it could be quite some time in the future before solutions like Chestnut or other “smart accounts” become available. As with any new technology, early adopters have an opportunity to benefit financially, but this also comes with additional responsibility. As much as I have compassion for those who fall victim of scams in these early days (as I did with 5 BTC in the Summer 2016), setting a precedent to use base layer arbitration for petty theft is not only becoming more risky, but it simply won’t scale. We should not submit Block Producers to the additional legal obligation and legal/social risk that is currently being forced in the ECAF business model.

Also, ECAF should see itself as a competitive, free market based business which offers a legal and security service that will become more and more in high demand as the community grows. Having first mover advantage should give them opportunities that future competition simply won’t have. Being a “for profit” business, yet asking for public money makes ECAF look weak and with little business experience. Also, positioning themselves as a government body reeks of a judicial power grab.

So here’s to the Free Market and the constant feedback loop of solving problems and creating value in society. Thanks for reading and joining me today.

Using Free Market principles to build personal freedom,
-Ashe Oro