A Hostile Takeover ! - Can a Blockchain be Bought?

By CryptoUser | CryptoPublisher | 6 Jun 2020

Quick history: What is Steem, Steemit, and STEEM?

To comprehend what’s going on with Steem, you first need to understand its history and the convoluted relationship between Steem and Steemit.

In 2016, the Steem blockchain was developed by Ned Scott and Dan Larimer. Together, the pair also launched the first major decentralized application built on Steem: Steemit. Steemit is a blogging platform that rewards users in STEEM tokens for creating content.
Both the blogging platform and the STEEM token are powered by the Steem blockchain. However, while the blockchain is decentralized, Steemit is a privately-owned company. Although Steem and Steemit shared much of the same team in the early days, they are not one and the same, and the Steemit company’s ownership changed entirely in 2020.
Before the blockchain became popular, the Steemit company “ninja-mined” a large number of STEEM tokens.
Steem runs on a delegated proof-of-stake consensus mechanism (DPoS). The consensus rules stipulate that in order for the Steem blockchain to fork, a hardfork must be voted on by 17 of the top 20 block producers (called witnesses).

The drama began in February 2020

In February 2020, TRON founder Justin Sun bought the Steemit company and took control of its large stake of STEEM tokens, which provided a great deal of power in Steem’s governance model.

Shortly after the acquisition, witnesses of the Steem blockchain executed a temporary softfork that nullified Justin Sun’s voting power. In response, Binance, Huobi, and Poloniex (which is partially owned by Sun) aligned with Sun and used their customers’ STEEM tokens to overthrow the community-elected witnesses and vote to reverse the softfork.

The move was seen as a “hostile takeover” by the community. Key employees of Steemit quit in protest, while Binance and Huobi retracted their votes amid heavy backlash. The community’s anger was compouned when Binance users found they were unable to withdraw their STEEM tokens because they were temporary locked for the voting process. However, it was too late, because Sun had already restored access to his funds.

In March 2020, disillusioned members of the Steemit community created Hive, a hardfork of the Steem blockchain. Hive distributed HIVE tokens to all STEEM holders except for Sun and supporters of the corporate takeover of the Steem blockchain.

Steemit began to censor posts about Hive from the website and API, resulting in more outrage. The active censorship accelerated the community exodus to Hive, with many Steem users unstaking and selling their STEEM tokens.

On May 20, Justin Sun put forth a new hardfork named “New Steem”, unprecedentedly seizing over $6 million worth of STEEM from users who opposed Sun’s takeover. Both sides have threatened legal action.

Binance first criticized the hardfork, but on May 24 its CEO announced that Binance has synced with the New Steem network, citing that other exchanges did the same and because their users otherwise wouldn’t be able to withdraw STEEM tokens.

As of writing, HIVE is currently ranked higher than STEEM by market cap.

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