Steem Community Mobilizes Popular Vote in Battle With Justin Sun

The Steem community is striking back after an attempted end-around by Tron founderJustin Sun.

While CoinDesk has been writing this report, four former Steem blockchain validators (known as "witnesses”) have been voted back onto the council of 20 nodes that keeps Steem running.

Steem validators tell CoinDesk that by hitting four validators it is no longer possible for the Tron Foundation to launch a contentious hard fork to change the economic rules governing STEEM tokens.

On Monday, Sun was able to put a new slate of witnesses in charge after a contentious soft fork limited his voting power.

Sun acquired the popular Steemit app and its large share of STEEM tokens on Feb. 14.  Referring to the tokens that were effectively frozen in a community-led soft fork following the Steemit acquisition, he wrote on Twitter Tuesday:

There's no better way to put this: One man’s "hack" is another’s "legitimate exercise of power by a blockchain's duly elected leaders." 

Sun's tweet got ratio’d pretty hard, with 486 replies to 236 retweets, as of this writing.

Here is what we know. (It's important to note that unlike some blockchains, Steem uses a delegated proof-of-stake [DPoS] consensus mechanism, meaning a limited number of nodes validate transactions on the chain.)

To recap: Early Monday morning the Steem blockchain was taken over by a group of recently created accounts with names like "goodguy24," "nicetry001" and "bostonawesome." These witnesses emerged after the previous set of 20 leaders presided over the aforementioned freezing of Sun’s newly acquired “Steemit Inc ninja-mined stake” of STEEM tokens.

At issue: Whether that pool of tokens – large enough to sway the governance of the entire Steem blockchain – could be used at Sun’s discretion.

Steem has always had angst over Steemit’s cache of STEEM, but former witnesses tell CoinDesk that Steemit had always committed not to vote those coins. The soft fork was executed because witnesses feared that would no longer be the case with Sun.

The exact volume of Steemit's ninja-mined stake has always been unclear; however, Sun referred to it as 65 million STEEM in one of his Tuesday tweets.

In a thread of 10 tweets, Sun defended his company's actions.

He described the soft fork by writing: "Such actions are against every aspect of the core value of humanity & decentralization & sanctity of private property."

He described the influx of a new slate of witnesses by writing: "Misleading comments re us collaborating w/ exchanges on a hostile takeover is false. Our intention was never to take over the network & all parties' votes will be withdrawn." 

Just before CoinDesk's report on Monday came out, Binance CEO “CZ” Changpeng Zhao indicated his company was likely to unstake its Steem from the deciding vote. 

Overnight, Huobi issued a statement, also committing to canceling the vote. "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 wrote. “However, this action is not final.”

Meanwhile, on a Discord server managed by one of the newly re-annointed Steem witnesses, token holders have been organizing. A member of the community who goes by @Aggroed and runs the server told CoinDesk via email:

"That's a community gathering place where we host town hall discussions that anyone in the Steem community is welcome to attend. We hosted seven hours of open forum yesterday. We're currently in hour 3 today."

He said longtime witnesses have been stumping in various private and public forums. It’s activating a new level of voter participation on the chain. 

Steemit and Tron have yet to reply to requests for comment from CoinDesk. 

Steemit has become a small company – and it's rapidly getting smaller.

In the last 24 hours, four employees have quit: Andrew Levine, head of communications; Steve Gerbino, a developer; Tim @roadscape, a developer who works pseudonymously; and developer Michael Vandeberg.

Similarly, when the Tron Foundation acquired BitTorrent, that company also saw a rash of employee exits and a subsequent lawsuit.

Steemit initiated a restructuring in November 2018, after announcing on YouTube it would lay off 70 percent of its employees. Last year Steemit published an update on the restructuring, listing six staff members who represented its leadership. The list included Levine and Vandeberg. 

It's not clear how many people worked at Steemit at the time of Sun’s acquisition, but one source with knowledge of the community indicated it only had seven employees. 

As the backing for Tron's witnesses recedes, the backing for the old witnesses is growing. 

The first two witnesses who returned to top slots today were part of the group that enacted the soft fork. As of this writing, @Yabapmat has over 10,000 voters (or, more accurately, wallets) supporting his role and @roelandp has more than 12,000 voters. Meanwhile, the top witness from the group voted in by Tron, Binance and Huobi is only backed by 51 voters. 

Additionally, the gap in votes between the new witnesses supported by the Tron Foundation and those supported by the community has shrunk dramatically. The Tron-backed witnesses are losing votes (likely from exchanges unstaking STEEM as they announced they would) and the old slate of witnesses is gaining. It's gone from a big difference to a tiny one.  

The broader crypto community has generally been supportive of the Steem community. For example, 1confirmation's Nick Tomaino tweeted, "The Steem situation also shows you can’t buy a community, you have to earn it." 

Still, some remain skeptical of its underlying structure. Dovey Wan of Primitive Ventures tweeted, "The hostile take over of $STEEM only tells you how hypocritical SUN is and why DPOS as a consensus layer is non-resilient." 

But STEEM holders haven't given up on their blockchain. Matt Rosen, a co-founder of the Steem-based game Splinterlands, runs a witness (with @Aggroed) that served for a long time in the top 20. That witness was the first to break through to the top 20 again following yesterday's events. He told CoinDesk in an email: