- After the Steem blockchain witnesses activated a soft fork to deprive the TRON Foundation of a large amount of STEEM Tokens, the Foundation disempowered the witnesses with the help of major exchanges.
- The action has been harshly criticized in the crypto community because centralized exchanges undermine the power of the community.
The crypto scene could be in the throes of a scandal right now. As became public yesterday, TRON‘s CEO, Justin Sun, has presumably used his power to get crypto exchanges to vote for Sun controlled accounts to become the so-called witnesses within Steem‘s Delegated Proof of Stake governance model.
About two weeks ago, Sun announced the acquisition of Steemit Inc. and promised a strategic partnership between the two blockchains. However, after there was discontent within the Steem community and a soft fork was threatened by the witnesses, Sun now seems to have taken a hard line.
Yesterday, the majority of Steem’s witnesses were ousted by accounts presumably linked to Tron. Currently, it appears that major crypto exchanges, such as Binance, Huobi, and Poloniex have used their high voting power through the large number of tokens and delegated their votes to Sun’s accounts.
Steem uses a Delegated Proof-of-Stake (DPoS), in which 21 delegates, who are also witnesses, are elected in a democratic vote. Steem Power holders can vote for witnesses according to their quantity, who validate the transactions and create and write the blocks in the blockchain.
TRON’s Sun takes over the Steem blockchain by force
The purchase also gave TRON access to a large quantity of STEEM produced in a pre-mining operation known as the “ninja-mined stake”. More than a week ago, witnesses voted in favor of a soft fork to deny Sun access to these tokens. The goal of the soft fork was initially to prevent Sun from using the tokens to participate in Steem’s governance. The former founder of Steem, Ned Scott had always promised that these tokens would not be used for voting. With the acquisition of Tron, that has changed.
The Tron Foundation issued a statement yesterday commenting on what had happened and stated that Steem Witnesses Soft Fork 22.2 was introduced with the sole intention of freezing the original shares of Steemit, Inc. Like the core development team behind the Steem blockchain, TRON wanted to use the token to further develop the Steem blockchain. This was thwarted by the soft fork, so TRON had to react.
Unfortunately, the Witnesses’ decision created a need to reclaim the stake and vote in new witnesses to usher in new policies for a healthier ecosystem and community. Soft Fork 22.2 was maliciously structured, intending to freeze a handful of very targeted accounts and taking away their rights and possession to their owned asset, and may be deemed illegal and criminal.
The group behind this could essentially do this kind of attack to any Steem community member, on any terms they want. They even threatened to hard fork, and nullify all existing STEEM token, putting every good STEEM holder, developer and community interest at danger. This is very much against every aspect of the original purpose of decentralization and the core value of the Steem blockchain and community. We can’t let it happen.
Justin Sun responded to the crypto community’s criticism and added via Twitter:
We knew it would be a complicated process since we needed to control the network for a short period of time, but we had no choice. Our sole intent was to secure@steemit ’s stake & #STEEM holders’ interest. Our intention was not to control the STEEM network.
Harsh criticism from the crypto-community
In order to carry out the takeover, Justin Sun apparently convinced major exchanges such as Binance, Huobi and Poloniex to vote for the removal of the existing witnesses. The CEO of Binance, Changpeng Zhao, has confirmed his role in the process via Twitter. However, Zhao added that he “thought it was a regular upgrade/hard fork”. Zhao thus does not seem to be (any longer) behind the action. He explained that based on the feedback received, the exchange will probably withdraw his vote.
Re: Steem, read my “tweets and comments” about our position and thoughts on the issue. We will likely remove the vote, based on your feedback. The op requires people in several different geographic locations to coordinate, may take a little time.
— CZ Binance 🔶🔶🔶 (@cz_binance) March 2, 2020
Vitalik Buterin, the co-founder of Ethereum, commented on the event in a tweet, noting that this could be the first clear case of a “de facto bribe attack on the coin voting”.
Apparently Steem DPOS got taken over by big exchanges voting with depositors' funds. Can anyone confirm and/or provide details?
Seems like the first big instance of a "de facto bribe attack" on coin voting (the bribe being exchs giving hodlers convenience and taking their votes) https://t.co/cEX7PLnbUW
— vitalik.eth (@VitalikButerin) March 2, 2020