May 13, 2021

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Binance sends an apology letter to Steem community for the centralization scandal associated with Justin Sun

2 min read
Binance sends an apology letter to Steem community for the centralization scandal associated with Justin Sun

Binance officially apologized to the Steem cryptocurrency community for its involvement in the scandal during which Justin Sun basically centralized this DPoS cryptocurrency for a short time.

 

The Exchange today issued an apology letter to the Steem community. He states that “he remains neutral and has no interest in managing chains outside the Binance ecosystem.” In other words, he will no longer vote for Justin Sun’s appointed witnesses. Witness is the name of Steem for the elected delegate. Steem,as a delegated-proof-of-stake cryptocurrency, do not stake all the hodlers but only the elected validators – witnesses.

 

Justin Sun first purchased the Steemit platform and announced a plan to migrate coins to Tron blockchain. At that time, the community at Steemit took the whole thing positively, though many were shaking their heads in disbelief at how Justin Sun wanted to accomplish this in a decentralized cryptocurrency where such a change would require community consensus.

 

A centralization scandal followed. Justin Sun teamed up with Poloniex, Huobi and Binance to give him the voting power of their customers’ stewards. The DPoS algorithm has shown a weakness because, due to the huge amount of coins on the stock exchanges and the amount that Sun purchased with Steemit, he was basically able to control the entire network of this cryptocurrency as an individual.

 

Problem DPoS

 

The scandal is also interesting in terms of testing the use of the DPoS algorithm, which is also used by some other known cryptocurrencies, such as EOS, Tezos, Lisk or Cardano. It turns out that centralized exchanges manage too many cryptocurrencies and can take full control of the network, which is understandably extremely bad news. Over time, with the potential boom of banking custody services (cryptoactive management), a similar danger could come from banks or other institutions that will accumulate their customers’ cryptos.

 

A second look at the matter

 

However, the scandal itself was preceded by something that Sun had described as a hack and a violation of the law. The community attempted by softfork to prevent the premined Steemit coins owned by Steemit, which were transferred to Justin Sun’s possession after the purchase. That meant basically justin Sun Sun losing 74 million steems.

 

Justin said that just turning away this “hack” was the only reason he organized the whole scandal and involved the world’s leading crypto exchanges. However, it seems that Binance did not know at all what she was involved in, which she now confirms in her apology letter. He says they wanted to support the usual upgrade / hard fork of Steem. But this was certainly not common.

 

Binnance added:

“Hopefully, the Steemit community and TRON will reach consensus in an efficient way. If they fail and fail to reach agreement and if this causes potential risks / damages to STEEM users on Binance, we reserve the right to take appropriate action with the consent of our users.”

 

 

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