- Binance, Huobi, and Justin Sun’s Poloniex – three centralized exchanges – are in the crossfire from the crypto community for allegedly enabling Tron CEO - Justin Sun - to take over the STEEM blockchain.
- Is this a case of a hostile takeover or is it a case of preventing hackers as Sun's official reports claim?
If you haven't been following the ongoing TRON-STEEM partnership, here's a concise break down; Justin Sun’s TRON Foundation purchased the Steemit DApp in February causing the STEEM community to launch a soft fork to limit Justin’s voting power on the blockchain.
A hostile takeover?
According to reports from the STEEM top developers and other observers in the crypto community including Ethereum’s Founder, Vitalik Buterin; the decentralized exchange, Block DX; and a confirmation tweet from Binance CEO, CZ Binance, three centralized exchanges were in the mix to give Justin back control over the blockchain – a move that has angered the crypto community.
Your stake in Steem on centralized exchanges was just used to take over the Steem Blockchain https://t.co/AFn0LvEkUC
— Luke Stokes (@lukestokes) March 2, 2020
According to claims, which have now been confirmed true, STEEM’s delegated proof of stake (DPoS) underwent a hostile takeover aided by users’ funds held in three centralized exchanges – Binance, Poloniex, and Huobi.
This unprecedented attack is a collaboration which saw these three exchanges use customer funds to delegate their power to one ‘witness’ account: @dev365, which is probably owned by Justin Sun directly. So, why is this a problem?
3. ~84 Million of customers’ $STEEM controlled by @binance, @HuobiGlobal and @Poloniex was used today to vote via delegated POS to fork the the $STEEM chain and replace all of the community elected consensus witness, with those controlled by @Binance and @justinsuntron
— Block DX (@BlockDXExchange) March 2, 2020
For a “decentralized” network, such power over a blockchain can cause unlimited governance issues, starting with the most fundamental of them – centralization.
Sun's acquisition of Steemit.com, a social media platform on STEEM blockchain, and along with the purchase acquired a vast amount of pre-mined STEEM tokens.
The Soft fork Drama
The community plans to carry out a soft fork in order to prevent Justin from using these pre-mined tokens for governance purposes until the TRON chief offers a clear plan for the blockchain.
However, Justin blocked the planned fork, using the control gained from the centralized exchanges to halt the process. He explained that the blockchain was under attack from hackers targeting close to $10 million USD from the platform.
Justin explains the Soft Fork Drama
According to Justin Sun, in a nine-tweet thread, the confusion around the STEEM blockchain arose after a number of hackers froze approximately 65 million STEEM tokens ($10 million USD) on Feb.22. He opened the thread ensuring users their funds are safe. He tweeted:
“#STEEM has successfully defeated the hackers & all funds are super #SAFU. @SteemNetwork and @steemit community is now stronger than ever since we united & solved the difficulties!”
In a bid to stop the hackers, Sun explained that the transfer of votes was a precautionary measure to safeguard users’ funds.
“We needed to act immediately to safeguard the #STEEM blockchain & ecosystem when we still had the chance.”
He further explained that they [presumably TRON] will be withdrawing the votes once they are able to ensure the network is safe from the attackers.
(5/9) We will commit to withdrawing the votes ASAP once we're sure malicious hackers can’t sabotage #STEEM anymore & will give the voting rights back to the community. All exchanges’ votes will be withdrawn soon. Shoutout to all the exchanges & parties who helped us save STEEM!
— Justin Sun (@justinsuntron) March 3, 2020
We will follow up on the TRON-STEEM saga as it unfolds.