It was a pretty ordinary Monday until I turned my attention to what was going on at Steem. News was just starting to break about a hostile takeover of the Steem chain by Justin Sun of the @tronfoundation and the new owner of Steemit Inc. and steemit.com.
It was a stunning counter-attack in response to a defensive step the chain’s governance had taken a week earlier.
What set all this in motion?
Getting Through the Cryptowinter
In the midst of a lengthy cryptowinter, Steemit Inc had been forced to lay off 70% of their development team in November 2018. The move caused considerable concern on Steem as Steemit Inc was the primary block development firm.
Out of the uncertainty came a greater awareness that while Steemit Inc was an integral part of the platform, the level and pace of development happening with the various dapps would mean the chain would continue even if Steemit Inc didn’t. Confidence as a community grew.
Steemit Inc didn’t go away though.
Under the leadership of then newly appointed Managing Director Eli Powell, the small remaining team pulled together. They focused first on cost reduction and improving operational efficiency. Then on further development and growth.
The team worked together to build bridges and improve communications with the community. Lack of communication had been a bone of contention between Ned Scott and the community. Powell and other members of the Steemit Team appeared regularly on podcasts held on Discord, interacting with the hosts and the community.
Coming into 2020 things were looking pretty good.
Communities were in beta and almost ready for release. Smart Media Tokens (SMTs), first announced by Scott in 2017, had been developed and were on a testnet. Steemit encouraged the community to participate on the testnet. The testing had been going on for months and the team felt confident SMTs would be released in a matter of weeks.
The Steem community is small but passionate about their platform. We dare to dream and work toward a more tokenized web where people can earn for what they do for free on other social media. We were the first blockchain based social media and are still the most active.
While a lot was happening on the chain, the lack of funds for a cohesive marketing of the chain was a point of frustration for many in the community.
The Sale of Steemit Inc & Steemit.com
On February 14th Steemians checked into their favourite platform to learn the rumours making the rounds late in 2019 had been confirmed. Steemit Inc and Steemit.com had been sold by Ned Scott to Justin Sun of the @tronfoundation.
Part of the sale included the transfer of about 73million Steem to Sun’s control. These funds have been a source of controversy throughout Steem’s existence. They were mined at the very beginning of the chain and at one point was 41% of the supply in 2017. It’s currently about 20% of total Steem.
Members of the community vote for up to thirty witnesses with their votes influence based on the amount of stake they hold. The top 20 witnesses vote on matters like hardforks with a super majority of 17 needed for the vote to pass.
The Witnesses are developers, dapp owners or community leaders. Their contributions to the chain and the community are usually a deciding factor when Steemians vote.
Information and Misinformation
The press release issued by Justin Sun talked of the Tron Foundation investing funds into Steemit which would be welcomed by the community. The release originally published here on Medium seems to have been deleted from the @tronfoundation account
What raised eyebrows and blood pressures quickly was statements referring to Steem dapps being migrated to Tron and token swaps. The claim of a community of over 20 million users on Steem was eye-popping since there is just over 1million accounts.
It became apparent Sun thought he now owned the blockchain and dapps attached to it. That was news to the actual owners of the dapps and the community.
The Steemit Inc team was silent. We learned later, they had known some deal was in play but they learned the details like the rest of the community. They didn’t have a conversation with the Tron team until after the announcement was made.
An AMA (ask me anything) was scheduled for the following day. The community hoped to get answers to many questions. The Steemit team was finally able to post a communication.
Ninjamined Stake a Major Point of Concern
Scott had made a commitment to the community to use the ‘ninjamined’ stake (locked in Steem) for the betterment of the community and to not vote on Witnesses (also known as block producers) which form the chain’s governance.
An earlier hardfork had the code to enforce those commitments by setting the Steemit accounts to non-voting. As long as Scott kept his word, that code was not turned on.
The unexpected had happened. Scott sold the stake. This now meant that another investor held those funds and the community didn’t have a clear picture of his intentions. It was one of many questions to be asked at the AMA.
The AMA Didn’t Help
The heavily attended event left most disappointed. We came away with very little solid information. Sun had sort of committed to no token swap and not using the stake for Witness voting — “for now”. Immediately following the AMA over 250 Steemians gathered in a voice channel on the PALnet discord server for a Witness forum.
The Witnesses talked about their impressions and possible outcomes. Members of the community joined them on voice and the text chat was flying by. It would be the first of many similar discussions taking place in various discord servers where the community gathers.
Witnesses and Stakeholders Come Together
Over the next several days the messages shared at the AMA failed to match up to what was going out on Twitter and Medium from the Tron team. The Steemit team was reporting the information they had was the two chains working together more in parallel.
There were still a lot of unanswered questions.
In the background a group of about sixty witnesses and stakeholders came together to discuss the situation. While I am not part of the group, word has filtered out there was considerable discussion and debate on possible scenarios and responses.
What Sun might do with the stake was a major security concern. Efforts were made to contact him by email, on Twitter and through the Steemit team to ask for a conversation with him. The efforts were met with silence.
The group may have remained in an uneasy holding pattern if not for Sun’s actions on Tron. On February 19th Justin Sun used his stake on Tron to vote on two Super Representatives which are similar to Witnesses. He had previously insisted that neither he nor the Tron Foundation were involved in community voting.
Sun’s Actions On Tron Triggers Response on Steem
The group moved into even more serious discussion on how to secure the chain. Many were reluctant to deny any stakeholder access to their funds but in light of Sun’s actions on his own chain, a super majority was reached.
Steemit’s known stake would be frozen until communication could be established with Justin Sun and his team. A working agreement was going to be needed going forward. The group announced Softfork 22.2 on Sunday February 23rd.
A softfork was preferred by the group as it was reversible and didn’t require involving the exchanges to upgrade. The code froze the accounts known to be held by Steemit Inc from doing anything except delegating and undelegating Steem Power.
Justin Sun responded within hours with an open letter to the Steem community. He proposed a townhall with the top 50 witnesses to take place on March 6th. Many found the prompt response an encouraging sign.
The Softfork Was Not Without Controversy
The reaction in the community was not universal support. Some were passionate in their opposition. Witness votes were removed and added by some depending on their stance.
Immediately following the softfork announcement a heavily attended townhall took place in the PALnet discord. It lasted about two hours. A few days later ArtemisNorth and I hosted another discussion on our regular show in The Ramble discord server.
Discussion at both events was spirited but respectful.
Everyone was awaiting the Townhall with Justin Sun to see how things were going to work out.
Hostile TakeOver Strikes
In the early hours (for me) of March 2nd Sun and the Tron Foundation made their move. They had managed to get access to enough stake proxied to one account to vote in what appeared to be 20 sock puppet accounts into the top Witness spots.
They issued an open letter to the community announcing their actions and justifications. The letter was written and signed as if coming from the Steemit team we have known and worked with for so long. Few if any believed it was written by them or by anyone but Justin Sun or at his direction.
They also announced the rather curious step of wanting to change the power down (unlocking) time for Steem power to 24 hours. This was to take place during a future hardfork being worked on.
Steem uses a seven day voting window on content posted on the platform. Allowing a power down shorter than seven days would have serious consequences for chain security and open the door for voting fraud. The current power down period is thirteen weeks. Changing to a four week power down had been under discussion.
They then installed another softfork which freed up the Steemit stake. Delegations to dapps on the chain were withdrawn and some substantial transfers were made to crypto exchanges. Justin Sun didn’t buy the Steem blockchain, he stole control of it.
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It was a pretty ordinary Monday until I turned my attention to what was going on at Steem. News was just starting to break about a hostile takeover of the Steem chain by Justin Sun of the…
Source: https://medium.com
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They 'bought' control ;)
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