The cryptocurrency community has been rocked by an unprecedented hack as Justin Sun’s Poloniex, Binance and Huobi have been caught up in a hostile takeover saga of STEEM blockchain. While the crypto community is enraged on the possible events that have transpired on Monday, Huobi and Justin Sun have come forward to straighten out the “possible takeover”, stating the blockchain was on a verge of a hack.
If you are yet to follow the story, here is a short breakdown. Justin Sun purchased the Steemit.com, a decentralized Reddit-like platform, earlier in the year receiving a huge amount of pre-mined STEEM tokens along the way.
The delegated Proof of Stake (DPoS) takeover
STEEM blockchain depends on a delegated proof-of-stake (DPoS) consensus system whereby users stake tokens with “Witnesses” for governance protocols. The higher stake of tokens the “Witness” holds, the higher amount of control they hold over the decisions made on the blockchain.
Once Justin bought off Steemit, the community were afraid given the huge stash of tokens he now held and in a bid to limit his power, community decided to hold a soft fork.
Here is where the issues started.
According to top crypto influencers and other enthusiasts, Binance, Huobi and Poloniex used over 84 million STEEM tokens to vote for an account presumably linked to Justin Sun, @dev365, giving him power over the blockchain.
Your stake in Steem on centralized exchanges was just used to take over the Steem Blockchain https://t.co/AFn0LvEkUC
— Luke Stokes (@lukestokes) March 2, 2020
Now, both Justin Sun and Huobi have come forward to defend the actions of the centralized exchanges, claiming it was for the safety of the STEEM blockchain.
Justin and Huobi responds: “Preventing a hack”
According to reports from Justin’s tweet, hackers froze over 65 million STEEM tokens on Feb. 22, leading to a “difficult choice” by the developers. He further said,
“We double confirmed w/ lawyers & were told this was definitely a criminal activity from the hackers who froze over 10 million dollars worth of STEEM & threatened to destroy the assets. The risk of nullifying the #STEEM network puts every STEEM holders’ interest in danger.”
Huobi further offered their response on the matter stating reports on a possible STEEM Network attack. The announcement further read,
“We take all allegations seriously, so we worked with both teams to better understand the situation and carefully assess the risk at hand. 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.”
Furthermore users were assured the voting process is not final offering a possibility of reversing the decision, a move that CZ, Binance CEO’s approved.
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
“We will commit to withdrawing the votes ASAP once we’re sure malicious hackers can’t sabotage #STEEM anymore & will give the voting rights back to the community. All exchanges’ votes will be withdrawn soon.”