On February 14 Steemit Co-Founder Ned Scott announced that he had sold Steemit Inc. to Justin Sun and the Tron Foundation for an undisclosed sum of money. Since then the Steemit community has been mired in controversy and outrage, and a soft fork has just taken place to prevent the Tron Foundation from having access to Steemit Inc’s blockchain voting rights, as will be deep dived in this article.
Right off the bat, the Tron Foundation announced that they are planning to migrate Steemit’s products and users onto the Tron (TRX) network, and will eventually swap out Steem’s cryptocurrency for a Tron (TRX) based Steem token.
This announcement drew the ire of the Steemit community, with one Steemit user saying “I am here for Steem, not Tron. I have zero interest in anything Tron offers, and moving Steem to Tron’s network is something that’ll happen without me as a result.”
One big problem that immediately arose is that Steemit Inc. ‘ninja mined’, i.e. pre-mined, approximately 20% of all Steem. These coins are used to fund Steemit development and to keep Steemit Inc. running, and a gentleman’s agreement was in place that Steemit Inc. would never use these coins to vote on the blockchain.
Essentially, changes to the Steem blockchain are decided via blockchain voting, and Steemit Inc. has such a big stash of Steem that they would centralize the voting process. In other words, whatever Steemit Inc. votes for would be implemented on the Steem blockchain, but up to now, Steemit Inc. has never used their coins to vote.
However, following the acquisition of Steemit Inc. by Justin Sun and the Tron Foundation, it was unclear as to whether the gentleman’s agreement of not using the Steemit Inc. pre-mine to vote would still be honored. This is a problem since theoretically the Tron Foundation could make whatever changes they want to the Steem blockchain if they used Steemit Inc’s pre-mined coins for voting.
In order to remove this centralizatized threat, the top 20 Steem consensus witnesses decided to conduct a soft fork which removed the blockchain voting rights of Steemit Inc’s pre-mined coins. Essentially, Steemit Inc. and the Tron Foundation still own the coins but they cannot vote with them.
This is actually quite ingenious, since now the Steem blockchain cannot be changed without the consent of the community, and therefore Steem cannot be forced to go onto the Tron (TRX) network if the community does not agree with such a move. Further, the Steemit Inc. pre-mine was meant to be used for Steemit development, and this soft fork prevents the coins from being used for other purposes.
All that being said, plenty of Steemit users are against the soft fork, since it is a centralized action which forcibly takes the Tron Foundation’s newly purchased stake away. In other words, this move violates decentralization. Also, some Steemit users think this is equivalent to a power grab by the top 20 Steem consensus witnesses.
Indeed, more than a few Steemit users are calling for the top 20 Steem consensus witnesses to step down.
Overall, the acquisition of Steemit Inc. by the Tron Foundation and the subsequent controversy and soft fork has negatively impacted the Steem market, with the price of Steem declining from $0.29 to $0.19, corresponding to a drop in the market cap from $102 million to $67 million.
Ultimately, this entire saga is an excellent example of how centralization can negatively impact the price of a crypto asset. Essentially, Steem and Steemit are intimately tied with the centralized corporation Steemit Inc., and therefore the decisions of Steemit Inc. impact the value of Steem as well as the popularity and usability of the Steemit platform.
Thus, it would be best if Steemit could find a way to be truly centralized, rather than dependent on Steemit Inc.