On March 3, Binance CEO Changpeng Zhao announced that the exchange had removed its votes that contributed to a sudden shift of control over the Steem blockchain.
Earlier today, leading exchanges Binance, Huobi, and Poloniex came under fire for allegedly mobilizing customer deposits to vote in what has been described as a hostile takeover of popular crypto blogging platform Steemit.
Steemit’s native blockchain Steem uses a proof-of-stake protocol — where a small number of “witnesses” are voted on to secure its network. Votes are allocated according to the number of tokens that an individual holds in their wallet. Steem’s witnesses were ousted in favor of a single user, @dev365 — an account allegedly owned by Justin Sun, the founder of Tron.
Zhao claimed that he had been made aware of a forthcoming “upgrade/hardfork" which he had approved support for, adding: “Projects do this all the time, and we are usually just in a supportive position.”
Justin Sun pledges to withdraw vote
In response to the social media furor, Justin Sun has also claimed that his votes will be withdrawn.
Justin Sun took to Twitter to reject “misleading comments” regarding the takeover, stating that “all parties votes will be withdrawn.”
“Our intention was never to take over the network [...] We wanted to protect the sanctity of private property & the interests of all from malicious hackers.”
Binance, Huobi, and Poloniex mobilize customer deposits to oust Steem witnesses
The apparent coup was facilitated by Binance, Huobi, and Poloniex, who staked enormous numbers of STEEM tokens to vote in support of removing the previous witnesses.
The top five voters commanded 208,414 votes and represented 4 or 5 voters each. The three next largest voters command between 88,000 and 90,000 votes, however, they represent between 9,700 and 14,000 voters.
The attempted takeover appeared to have been powered using the deposits of the exchanges’ customers, with numerous anecdotal reports of delayed withdrawal times for large Tron (TRX) withdrawals on Binance circulating across crypto-Twitter.
Ethereum co-founder Vitalik Buterin reacted to the situation, tweeting:
“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 exch[ange]s giving hodlers convenience and taking their votes)”
Steemit’s head of communications Andrew Levine has resigned from the project out of protest.
Justin Sun purchases Steemit
On Feb. 14, it was announced that Steemit would migrate from the Steem blockchain to the Tron network, following the company’s sale to Tron founder Justin Sun.
Through purchasing the company, Sun took ownership of a large stash of tokens comprising approximately 20% of today’s Steem supply. The tokens had long been a source of contention within the Steemit community — often characterizing the stockpile as a “ninja mine.”
The purchase prompted Steem’s now-former witnesses to initiate a reversible soft fork to temporarily freeze Sun’s tokens to prevent their use in voting.
On March 2, the new Steemit team announced that they would mobilize the tokens for voting to “resume the order of the community,” describing the fork as “maliciously structured” and potentially illegal behavior “led by a small group of people.”