Tron Executes Hostile Takeover of Steem, Exchanges Collude
Justin Sun seems to have ousted the governance body of the Steem blockchain in collusion with major exchanges, consolidating his power following his acquisition of Steemit Inc.
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Justin Sun and several major exchanges executed what seems to be a hostile takeover of the Steem blockchain, say sources.
Major exchanges including Binance, Huobi, and Poloniex participated in the takeover, staking (“powering up”) Steem held in their custody and delegating those votes to what appears to be an account controlled by Justin Sun, based on block explorer data.
Steemit Inc’s Developer Hoard of Steem
Steemit Inc is a private company previously run by Steem’s founder, Ned Scott. The company is the primary entity responsible for developing the Steem blockchain and for maintaining Steemit.com, the largest front-end interface on the platform.
However, Steemit Inc also holds a large percentage of Steem tokens acquired through a pre-mine, called the “ninja-mined stake” by the community. This account held over 40% of the Steem power on the platform in 2017, and could hold as much as 20% of the current supply, say sources.
Historically, the tokens in these accounts did not participate in governance to allow the community to make decisions around the blockchain. Tron’s acquisition changed that.
Crypto Briefing reached out to Ned Scott about the move by Tron. Surprisingly, the former CEO seemed supportive of the action by Justin Sun, saying that “witnesses/portion of the community literally stole its [Steemit Inc’s] coins. Steemit owed them nothing.” He continued, “Steemit owes no one anything and anything else is grasping at straws / bullying to get your way/power… Fact: no pre mine, no investors.”
The Steem community was outraged by Scott’s comments, saying that over Steem’s four-year history that the founder had promised that these coins would be used to “decentralize” and wouldn’t be used in voting.
Witnesses Move to Limit Tron’s Power
Last Sunday, Steem witnesses, the equivalent of EOS block producers or Bitcoin mining pools, moved to softfork the blockchain to temporarily limit the power of these developer accounts formally through Soft Fork 0.22.2.
“The Steemit Inc ninja-mined stake is a special case, as up to this point it has been clearly declared on many occasions as earmarked solely for the development of the Steem ecosystem, and to be non-voting in governance issues,” said a letter co-authored by witnesses and major stakeholders.
The softfork was meant as a reversible code update to give the community additional time to gain clarity and come to consensus on questions around the acquisition. The decision was contentious among witnesses.
Justin Sun Cracks Down on Dissent
Today, Tron issued a statement saying they would use Steemit Inc’s holdings to vote. Not only that, the holdings would be used to actively thwart the softfork meant to limit Tron’s power, claiming that the reversible update was “maliciously structured” and may be deemed “illegal and criminal.”
“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.”
To execute the takeover, it appears that Justin Sun convinced major exchanges, including Binance, Huobi, and Tron-owned Poloniex to stake Steem held in their custody to vote to remove existing witnesses.
However, Changpeng Zhao, the CEO of Binance, later said he’d reverse the vote with user funds after pressure from customers.
Between these major exchanges, Sun was able to gain a majority of the voting power on the blockchain. This power was then used to seemingly oust 20 out of 21 of the witnesses on the Steem blockchain. Witnesses that assumed their positions were all created in the last three days by what appears to be a Tron-controlled account.
Steemit.com and Steemd, a major block explorer, have been experiencing outages throughout the day during the coup d’etat.
Make Steem “Great” Again
On the plus side, Justin Sun announced he is hosting STEEMit 2.0 Town Hall on March 6, inviting the top 50 witnesses to communicate with the community to make sure that Tron is a “positive force in making Steem and Steemit 2.0 great.”
So far, it seems like Tron is off to a poor start.