Steem Justin Sun under the bus
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Huobi, Binance throw Justin Sun under the bus

The two exchanges have essentially repudiated their support of the mega-marketing Tron CEO’s hostile takeover of the Steem blockchain

Facing widespread anger from the Steem community, two leading cryptocurrency exchanges have thrown Tron Foundation CEO Justin Sun under the bus after initially supporting his hostile takeover of the Steem blockchain.

The fight’s roots date back to February, shortly after Sun bought Steemit, the company that is the core developer of the Steem blockchain. Mega-marketer Sun announced his intention to migrate Steem onto the Tron blockchain. 

Justin Sun thrown under bus Steemit
Justin Sun is steemed. (Photo: Tron)

However, the sale left the broader Steem community of token holders worried that Sun would not honor earlier promises not to vote the 65 million steem tokens held by Steemit—approximately 20% of the outstanding total. 

Because the delegated proof of stake (DPoS) blockchain is governed by a small group of elected “witnesses”—20 in this case—who validate transactions, the 65 million tokens would effectively give Sun too much control of Steem, a community blogging platform not too different from Reddit. Steem supports DApps and allows creators to earn tokens for posting content. In this it is similar to streaming video platform DLive, which Tron bought in December.

So, on Feb. 23, the Steem Consensus Witnesses announced a reversable soft fork of the blockchain that would prevent Sun from voting those tokens. In a joint Medium post they described it as a short-term measure that was “simply the due diligence required by consensus witnesses in regards to centralization that could have an impact on the integrity of the Steem blockchain.”

Needless to say, that did not sit well with Sun. 

Sun seizes control

Calling the soft fork a “criminal” action by “malicious hackers” on Twitter, Sun reached out to the major cryptocurrency exchanges Huobi and Binance for help overturning the soft fork.  On March 2, they acted. 

Along with Tron-owned Poloniex, the three used the collective voting power of the steem tokens deposited by customers to vote for a hard fork that reversed the voting ban on Sun’s 65 million steem tokens and replaced all 20 witnesses.

This effectively centralized control of the supposedly delegated blockchain under Sun—exactly what the soft fork sought to prevent. 

Throwing Justin Sun under the bus

A huge community backlash ensued, with three Steem developers and the head of communications resigning over what was widely called a “hostile takeover” of Steem

On March 3, Huobi and Binance both announced that they were withdrawing their votes, and at least suggested that they were misled by Sun. 

In a community update, Huobi said it had been “were informed that the Steem network was at immediate risk of an attack, an issue that directly impacts our users’ assets.”

Working quickly under the assumption that a hack was underway, Huobi voted its users’ steem in support of Tron and Steemit, the message explained.

“Based on the information provided to us and out of an abundance of caution, we decided that helping Steemit and Tron was in the best interest of our users — and the network at large,” Huobi said.

As is often the case, Binance’s response came from CEO Changpeng “CZ” Zhao on his @cz_binance Twitter account late on March 2.

Announcing Binance’s “unvote,” Zhao blamed “miscommunication/upgrade rubber stamp” and his own poor oversight. 

He added, “@binance have no interest in chain governance. We stay neutral.”

Sun’s best defense is offense

Sun, who is known for his grandiose rhetoric, said in a tweet that the original witnesses’ decision to nullify his 65 million steem tokens were “against every aspect of the core value of humanity & decentralization & sanctity of private property.” 

He added, “[w]e needed to act immediately to safeguard the #STEEM blockchain & ecosystem when we still had the chance.”

Addressing what he called “misleading comments,” Sun said accusations that Tron and Steemit had executed a “hostile takeover is false.”

Claiming that he never intended to take over the network, Sun said the goal was only “to protect the sanctity of private property & the interests of all from malicious hackers.”

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.