Justin Sun Bought Steemit. Steem Moved to Limit His Power

STAND BACK: Justin Sun's Gucci sneakers on stage at the first NiTron Summit in San Francisco, January 2019. (Photo by Brady Dale for CoinDesk)

The people who run the Steem blockchain executed a reversible soft fork Sunday, stopping one of the largest piles of tokens from voting. The move comes days after Justin Suns Tron Foundation acquired Steemit, the blockchains most prominent app.

The protective measure is a striking one in the cryptocurrency space and illustrates some of the thought-provoking realities of delegated governance.

The blog post describing the fork describes the involvement of a well-resourced entity as potentially very exciting. But its authors were quick to qualify:

"In these early stages the most important task for witnesses [Steems version of bitcoin miners or EOS block producers] is to ensure the security of the Steem blockchain. To this end, we have updated to a temporary protective protocol to maintain the status quo currently established in regards to Steemit Inc's stake and its intended usage."

Steem is a delegated proof-of-stake blockchain (DPoS), much like EOS, which means a smaller number of decisionmakers are needed to coordinate in order to counter a major new stakeholder. The community deemed action necessary because Steemit owns a giant pile of tokens that could be used to take over the blockchain, though the pool has never previously voted. It is believed that Sun, a savvy marketer and controversial figure in the industry, now owns that giant pile.

When the soft fork was executed, the networks validators, called witnesses, blocked STEEM held by a limited set of accounts from voting on who governs the network and participating in other ways that might allow it to seize control. Within the community, this pool of tokens is known as the "Steemit Inc ninja-mined stake.

As far as we can tell, the fund amounts to something like a founders reward or pre-mine on most other similar blockchains. Sources tell CoinDesk the ninja stake could potentially represent something like 20 percent of the current supply, which would apparently make it a decisive voting bloc.

As the post about the soft fork notes, "There have been a lot of uncertainties around [Steemit Inc] and its continued use of the assets it controls."

Steemit's holdings have always been a source of tension between Steem and Steemit, but as long as co-founder Ned Scott ran Steemit, the community felt relatively comfortable that he would not intervene in governance. The ninja stake was meant to be used to grow the network. With a new owner, the group is less sure.

The move prompted a response from Sun, who wrote Sunday night, "We have so much to work to do to make Steemit.com the power that it really can be." He went on to list plans for incorporating Tron's various cryptocurrencies, getting STEEM tokens onto more exchanges and getting influencers onto the blogging site.

Sun is organizing a summit called STEEMit 2.0 Town Hall for March 6, inviting the top 50 witnesses to take part, according to the post. A key question for that meeting will no ...

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