Why Steemit did not become The DAO 2

 The blockchain social media Steemit was hacked on  14 July. Its cryptocurrency, however, rallies reaching one of its  highest levels just after the attack. CoinFox tries to figure out, why. As the publishing platform is gaining popularity beyond the borders of the crypto community, STEEM, the cryptocurrency it uses, has reached third place after  BTC and ETH in terms of market capitalisation. At the press time, it is  trading at $3.80 on Bittrex, having reached its highest level on 20  July, leaving behind the pre-attack peak of 13 July. Moreover, according  to steemle.com,  the highest number of accounts created in one day was recorded on 13  July with 2790 new signups. The hack led to a rapid decrease in new  registrations, but even so, on 19 July, 1353 new users started  “steeming”. 

 In sum, even though a week ago around 260 accounts were compromised and  nearly $85,000 worth of Steem Dollars and STEEM stolen, today both  STEEM and Steemit are doing great. In what follows, we are trying to  sort out the how's and why's of the most notable July hack.  Back to Steemit 101 In an analysis published earlier in July, CoinFox referred to the ebook Steemit 101: Discover How to Make Money and Haven Fun on the Social Media Site that Pays YOU to post and Vote on Content authored  by four of the most active users of the publishing platform. At that  time, the feature that caught our attention was the strong sense of  community and its utopian pathos:  

“Imagine a social  media site that rewards people and not greedy shareholders. …Steemit is  controlled ONLY by its community members. There is no agenda. Most  certainly, there is no large corporation or government calling the  shots. …We still believe in the free and open market place of ideas. We  believe that when differing opinions are allowed to compete against one  another, everybody learns more about those issues and perspectives.  Everybody has a chance to discuss and debate ideas. May the best idea  win, and may everyone treat each other with respect and understanding.”  

 And indeed, while  Steemit is still running in beta, its community of early adopters is not  only growing bigger, it is also becoming more and more committed to the  cause of making the platform successful and sustainable. However, when  the hack began on 14 July and the Steemit community faced its first  serious challenge, no one really knew how this would play out. Were  people going to sell in a panic, thus facilitating the dumping scenario?  Were they going to quit the platform and just give up? Were they going  to stay and carry on?  Just before being hacked herself, a top Steemian and co-author of Steemit 101 @stellabelle called out in a post the rise of “incidents of hate speech, victim blaming and psychopathy in the comments”. She wrote:  

“Then the hacker came  in draining funds, propelling our fantasy-turned-reality community into  a short-lived doom vortex. Many of us, though proclaimed that we'd  gladly buy any sort of panic-selling Steem, as we are committed to the  dream of Steemit. I for one would buy more Steem if the price started to  drop. The dream of Steem is now a reality that I don't ever want to  lose.” 

After her account was compromised, @stellabelle reflected on the experience of losing control over her profile and funds:  

 

“Well, I got  officially freaked by my account being hacked. I'm not going to lie. I  realize the funds will be returned, but still, it does make one feel  vulnerable.” 

While many users had  to wait until now to regain access, others chose simply to create new  profiles. User @pinkisland, whose initial account @qamarpinkpanda was  hacked, expressed her frustration at the time of the attack: 

“After the attack  that happened by the hacker, I couldn't access my account anymore. Yes, I  felt a little sad and fear possess me, but I already knew that Steemit  team will be able to get back our accounts as they were before. Thanks  for the whole hard work the team is doing. I keep watching since that  day all posts and interactions. When I go ahead to vote; I remind myself  again that I actually can't contribute for now. I really felt isolated a  little bit since I was happy being here every day.” 

 Feelings aside: Focus on security As it was explained a few days after, the DDoS attack on Steemit did not target the Steem blockchain nor its servers:  

“As some of our users  have mentioned, the Steem blockchain was never hacked. Likewise, our  servers were never hacked. Instead, the hacker exploited browser-side  vulnerabilities, a challenge that every Fortune 500 company faces as  well. After patching the problem, we are now at work on a new  multi-factor authentication solution that would prevent similar attacks  from happening again.” 

Thus, users, even  those unable to access their accounts, could see all transactions in the  Steem blockchain through the read-only monitoring tool steemd.com. This also motivated a number of users, like for instance @redexi, to propose “making  the entire source of Steemit.com available on GitHub, to allow for  backup hosting by the community,” – the idea supported by the lead  developer Dan Larimer in an adjacent comment.  

 The hack also pushed Steemit developers to reconsider blockchain security and come up with a novel way of protecting user accounts. In two consecutive posts, Dan Larimer, whose original account @dantheman also suffered from the attack, talked about the problems of cryptographic security and identity proofs. In this context he emphasised that  the private keys used to authenticate transactions on the blockchain  are not the same thing as an identity. “They are mere evidence. Disputes  can still arise when two people both have access to the same private  key.” Larimer has also pointed out the important role of the community in cases of security breach as with The DAO previously and now with Steemit:  

“We have seen with  The DAO, Bitcoin, and Steem hard forks that in the event of a bug,  exploit, or theft that the community can and will take action to get  justice.” “On a social network  we have a new kind of proof, social proof. We know who people are and  generally know when someone was hacked. Unlike money, posts and votes  made by an attacker are often clearly out-of-character for someone. This  makes it very obvious to everyone in the social network that an  injustice has occurred.” 

Moreover, Larimer concluded that “social media is the key to blockchain security,” claiming that:  

 

“Having a social  platform is the best and easiest way to get all of your friends and  family online and available to secure your account. Imagine Facebook  friends on steroids. Your most trusted friends and family become the  source of your identity and their collective word (active key) secures  your identity and account.” 

Not surprisingly, his account recovery solution proposed  on 17 July introduced the element of “the trusted individual” or  “someone who can identify you independently of your key.” In its  essence, the new recovery system re-establishes, in digital form, the  age-old institution of sureties, once a crucial element of communal  life. Togetherness And so it seems that  the key to the success of Steemit and STEEM, even when faced with a  hacker attack, is their philosophy and their community. In the words of  user @senseiteekay, “we’ve been hacked, exploited, left in the dark a  little, and yet no one seems to really care. Why? Because this sites too  good to let die!” Alex Fortin, the author of the Business To Freedom podcast, expressed the same opinion through his YouTube channel. Reporting on the hack, Fortin noted that,  as he was waiting for the price of STEEM to drop due to the attack,  “the exact opposite happened, the price started climbing… What I believe  is that people were just so confident. I think that’s a proof; it’s a  vote of confidence into the platform, into the developer, into the  community… That really makes me believe a lot more into the future  potential and the future growth of the platform.” 

 While Steemians  appear to support the project wholeheartedly, criticism comes from the  competition. On the first day of the hack, 14 July, the founder of the  incentivised blockchain- and bitcoin-based social media platform Yours, Ryan X. Charles, published an article, where he argued that “Steem can’t last.”  

“The burden of  building not just a community and a technical platform, but also a novel  cryptosystem and supporting economy, is extremely high. Security and  scaling problems with their blockchain have a smaller team of experts  incentivized to solve them, so solutions will come slower. Companies and  services such as wallets and exchanges will be fewer in number and less  featureful. When they encounter regulatory issues, they will have fewer  allies.” 

Interestingly, in an  addendum to the article, Charles mentioned his previous post, in which  he explained why Yours is not using ether, but bitcoin. Referring to the  subsequent hack of The DAO, he noted that “the timeliness of my article  was an accident, but it reassures our stance. Like any good scientific  theory, the bitcoin theory has not yet been nor can ever be proven, but  so far has withstood every attack.” One thing is for certain, his  criticism of Steemit and its own cryptocurrency published on the very  day of the Steemit hack was also quite timely. Irrespectively of  Charles’ criticism, however, Steemit is indeed introducing a new element  in the sphere of incentivised publishing platforms, namely a strong  focus on community-building and engagement. This community may seem for  the moment naïve and over-enthusiastic. Nevertheless, we are looking  forward to seeing it mature and surprise us even further.  

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