decrypt.co
Have centralized exchanges used customer funds to help Tron CEO Justin Sun regain control over the Steem blockchain network?
That appears to be the case, according to crypto industry observers, Vitalik Buterin, the founder of Ethereum, and the CEO of one of biggest exchanges on the planet, Binance—who confirmed his exchange’s involvement in a tweet.
The Steem blockchain runs on a delegated proof-of-stake system, where block-creating users, or “witnesses,” are collectively approved by Steem stakeholders. Someone’s vote strength is determined by how many tokens they hold.
Since customers hold large amounts of funds in exchanges, exchanges are some of the largest token holders, and accounts allegedly run by Huobi, Binance, and Poloniex today voted to give Justin Sun control over the entire Steem blockchain.
Specifically, they delegated their voting power to one user, @dev365, allegedly owned by Justin Sun, CEO of Tron.
Sun had recently bought Steemit.com, essentially a decentralized Reddit that runs on the Steem blockchain, which contained a large amount of pre-mined Steem. Eight days ago, witnesses voted in favor of a soft-fork that would prevent Sun from accessing these tokens until he provided more detail about his plans for Steemit.
“So Justin reacts by getting more Steem from his friends to regain control over the platform he just purchased,” a developer who’s worked on apps on Steemit, Jason Stallings of BlockArcade, told Decrypt. “We're at the start of the Steem/Tron war of 2020,” he said.
“They tried to wrestle control from Justin and he out played them by utilizing his influence just the same as he will for the platform going forward,” Alexander Klein, a blockchain developer and Steemit contributor, told Decrypt.
Binance’s CEO, Changpeng Zhao, has confirmed his part in the process:
Re: Steem, read my “tweets and comments” about our position and thoughts on the issue. We will likely remove the vote, based on your feedback. The op requires people in several different geographic locations to coordinate, may take a little time.
— CZ Binance 🔶🔶🔶 (@cz_binance) March 2, 2020
Zhao added that he “thought it was a regular upgrade/hard fork.” However, Binance’s CEO then indicated that the exchange will likely remove its vote based on feedback he’s received. “[This] requires people in several different geographic locations to coordinate, [so] may take a little time,” he tweeted.
Binance told Decrypt it has no further comments on the matter. Decrypt has reached out to Huobi and TRON, and will update this story accordingly.
For the moment, however, it appears that Sun has made manifest the fears of centralized exchanges’ unparalleled power in decentralized networks.
Erik Voorhees, founder of non-custodial crypto exchange ShapeShift, says he isn’t surprised. He told Decrypt, “If people leave their money at custodial exchanges, then they shouldn't be shocked when things like this happen.”