Tron’s Steemit Acquisition Exposes Delegated-Proof-of-Stake Centralization

The Steemit community is mired in controversy over the recent Tron takeover that managed to change the Steem blockchain’s governance. Steem witnesses attempted to soft fork the blockchain on February 24 to remove the powerful voting power Tron and Steemit hold. However, the soft fork wasn’t able to prevent the Tron takeover and Steemit community members are blaming Tron founder Justin Sun and three popular exchanges for gaming the outcome.

Also Read: Ethereum vs Tron: Comparing Data, Defi and Stablecoins from Both Chains After Viral Tweet

Tron’s Steemit Takeover Becomes Contentious

Steemit has always claimed to be a “decentralized blogging platform” but its decentralization and use of delegated-proof-of-stake (DPoS) have been controversial. Centralization concerns heightened after Steemit was sold to Tron. On February 14, former Steemit CEO Ned Scott tweeted: “Steemitans and Twitterers, after four beautiful years, I have sold Steemit to [Justin Sun].” Following the Steemit sale, a number of Steemitans were very upset with the decision and believed the acquisition would ruin the project.

The controversy prompted members of the Steemit community to invoke a soft fork that would reduce the voting power of the company Steemit Inc. and the Tron Foundation. However, the soft fork did not go as planned and on Monday, March 2, Steemit community members accused Poloniex, Binance, and Huobi of creating a “hostile takeover.” Reports detail that Steemit and Tron reversed the soft fork by leveraging over 42 million steem power (SP).

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

The reversal and the move to utilize 42 million SP caught the attention of the entire cryptocurrency community. Tron founder Justin Sun called the group of people who attempted to soft fork the Steemit chain “hackers.” “[Steemit] has successfully defeated the hackers [and] all funds are super SAFU. Steem Network and [the] Steemit community is now stronger than ever since we united [and] solved the difficulties,” Sun wrote. “On February 22, some malicious hackers froze 65 million steem legally owned by Steemit, the core steem developers,” Sun tweeted. “When we found out, the hackers already hijacked steem [and] threatened to nullify the existing steem. We had a difficult choice.”

Following the reversal and the statements from Justin Sun, Ethereum developer Vitalik Buterin commented on the DPOS incident. “Apparently Steem DPOS got taken over by big exchanges voting with depositors’ funds,” Buterin tweeted. “Seems like the first big instance of a “de facto bribe attack” on coin voting (the bribe being [exchanges] giving [holders] convenience and taking their votes).” The incident has started a debate about the vulnerabilities of the DPoS system and proof-of-stake systems in general. “The exact same thing occurs on EOS,” Youtube show host Colin Talks Crypto responded to Buterin’s tweet. “Just not as an extreme to an extent. This is why governance is important to nail down in DPOS — so a few huge exchanges don’t own your entire blockchain.”

Should an Exchange Use Customer Stakes to Vote on Governance?

Bitcoin Core Developer Jorge Timón also replied to Buterin’s criticism on Twitter and said that “DPOS is plutocracy voting.” “Not your keys, not your coins — This is not an attack, this is simply how [DPOS] works. [POW] is superior to both DPOS and ‘regular’ POS. POS is simply a bad replacement for [proof-of-work] — Eventually, you’ll have to accept this fact,” Timón stressed. Meanwhile, other crypto community members on social media discussed whether it was right to use customer stakes held on an exchange to leverage governance rights with a blockchain voting scheme. “The depositor may have a “balance” at the exchange, but do not have rights on that blockchain,” Bitcoin proponent Bob Loukas wrote on Twitter. Loukas added:

They exchanged that right for a paper guarantee, all for the purpose of speculation. If they had cared about the stake, they would have demanded that within their paper exchange.

“Na man, fork me? No, fork you.” #tron #steemit @justinsuntron pic.twitter.com/PEdPeE82Tj

— John Paul Faour (@olejpf) March 3, 2020

Steem Power Withdrawal Restrictions, Steem Developers Remove Apps, and Leaders Abruptly Resign

Despite the community outrage, what’s done is done and a recent blog post written by “the Tron folks and Steemit Inc. together” notes that the attempted soft fork was “maliciously structured.” “For the next 4-6 weeks, the Steemit team will be using the voting rights to resume the order of the community while having an open channel for meeting community members and Witnesses,” the post explains. The announcement also highlighted that Tron and Steemit wholeheartedly believe the soft fork attempt was “criminal and illegal.” “After the 4-6 weeks period, the Steemit team will give the governance back to the community when it’s back in order and mutual agreement,” the blog post states.

Members of the Steemit community are also upset because powered-up SP cannot be withdrawn for 13 weeks. Tron and Steemit also stressed that a hard fork would be taking place in order to change the power-down waiting period. The blog post notes it wants the “Steem blockchain running in parallel with Tron” and the team plan on providing more “rewards to witnesses.” In addition to this promise, the blog post claimed Steemit could acquire “more users” thanks to Tron’s “thriving ecosystem” and “active 15 million user community.” The post also added that the Steemit community would notice more development and developers from Tron contributing to the Steem network.

Still, the blog post doesn’t seem to be swaying the greater Steemit community and a few software engineers are removing their Steem apps from the ecosystem. Further, well known Steemitans like Andrew Levine have abruptly resigned from their governance duties.

What do you think about the recent incident with the Tron community and Steemit community? Do you think DPoS, or POS in general, can be gamed easily by exchanges? Let us know what you think about this subject in the comments section below.

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Images credits: Shutterstock, Archive.org, Steemit, Twitter, Fair Use, Wiki Commons, Steemit and Tron logos,

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