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Laws and agreements must be enforced and enforceable. This article states that the Member agrees to face penalties if found to have violated the rules. This prevents someone from escaping responsibility via a claim that they didn't agree to follow the rules or shoulder the consequences of a violation. It also normalizes the community around what penalties we may assess on one another via our systems of collective action.
Each Member agrees that penalties for violations may include, but are not limited to, fines, account freezing, and reversal of transactions.
This clause is a simple one. It states explicitly what was made implicit in earlier articles of this same Constitution, i.e. that the rules can be enforced and that a Member faces -- and agrees to face -- punishment for breaking the group's rules. The method of punishment is set out by the Arbitrator in their particular case at hand.
There should probably be a community document in which "standard" penalties are set forth for typical transgressions. That document should not be part of the Constitution, and will likely evolve as the community does.
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blockchain governance expert - active in the EOSIO ecosystem
US: +1 503.516.3886
(all opinions are my own)