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Binance CEO Says Steem Too Centralized but Exchange Must Support Controversial Hard Fork

Binance is forced to “technically” support last week’s hard fork of the Steem blockchain, according to the crypto exchange’s CEO, Changpeng “CZ” Zhao.

In a statement on the company’s official blog Sunday, CZ said that, while the exchange is “very much against zeroing other people’s assets on the blockchain,” to not support it would mean that Binance users would not be able to withdraw their steem tokens.

The result of a dispute in the Steem community over the acquisition of SteemIt – the blockchain ecosystem’s biggest and more powerful application – by Tron and Justin Sun, the hard fork was used as a tool to strip 64 dissenters of their token holdings. At the time around $6.3 million-worth of cryptocurrency was grabbed, with one of the affected parties, Dan Hensley, saying he alone had lost around $1 million of the total.

Wiping out people’s token holdings “goes against the very ethos of blockchain and decentralization,” said CZ. The fact that this can happen on a blockchain means it is overly centralized.”

The fork put Binance in a “tricky” situation, he continued. While the exchange would not otherwise support the fork, “if we don’t support it (technically), no users can withdraw any STEEM coins.”

CZ explained that Binance had waited to see how other exchanges reacted to the fork, saying that soon some had enabled the upgrade. He added that users had been demanding support for the fork too.

Reading between the lines, CZ appears to be encouraging users to withdraw their steem tokens, mentioning several times in the post that support that supporting the fork would allow withdrawals – of course, it could allow continued holding or trading too.

“We do not want to block people’s funds. In this case, we should allow users to withdraw their funds, whether we willingly support this hard fork or not,” reads one of his lines.

The issue of the hard fork – launched apparently with the sole purpose of confiscating the holdings of key community members who were unhappy with Justin Sun’s power in the ecosystem and how he was wielding it – followed a previous hard fork that saw some Steem users create a new blockchain called Hive. The new chain copied over all the tokens from Steem, but not those of Sun and some Steem witnesses.

While the tit-for-tat fork may seem to some a fair reprisal, it’s worth noting that Hive’s tokens were effectively a free copy, while original holdings on Steem were obtained through genuine investments.

In the post, CZ notes that crypto advocate and author Andreas Antonopoulos had suggested in a tweet that Steem’s latest fork would likely result in litigation, with supporting exchanges also to be included as defendants.

The Binance CEO said:” I would have thought that [a class-action lawsuit] would go against everything he is preaching. In a decentralized world, anyone should be able to support any fork. Exchanges providing choices for users to get a ‘forked coin’ is no different by definition.”

The Steem saga illustrates that decentralization is not a utopia and that the community must work together “build a healthier decentralized ecosystem,” he concluded.

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Fed Up With Its Fork of Stellar, Kin Is Looking to Move Onto Solana

The kin cryptocurrency is exploring a move from its own fork of Stellar to the Solana blockchain. 

To recap, the mobile app company Kik ran a $98 million initial coin offering (ICO) for kin in 2017, which was made on the Ethereum blockchain. Then the company said that it would use Ethereum for security and Stellar for transactions. Then it forked Stellar and ran its own chain. Now that’s proving to be inadequate so the cryptocurrency will port over to Solana in a matter of months, pending adequate support from app developers in the Kin ecosystem.

“The fork of Stellar enabled Kin to reach millions of consumers, but we knew it would not be a long-term solution,” a draft Kin Improvement Proposal shared with CoinDesk reads. “Stellar has five-second block times, so irrespective of network load, a consumer could be seeing five-second latency on their transactions – not what we would deem a great consumer experience.”

Read more: Goodbye Ethereum: Kik Plans to Move Its ICO Tokens to Stellar

Solana is a high-throughput blockchain that relies on a concept called optimistic concurrency control, which assumes that transactions generally don’t conflict with each other. The project describes several other key features of its technology on Medium.

“Kin is one the best ways to show what Solana is capable of,” Anatoly Yakovenko of the Solana Foundation told CoinDesk. “We expect to see other projects looking for speed and raw horsepower to migrate to Solana as well.”

The Kin Improvement Proposal says the move would enable an 84% reduction in latency. “Solana is measured to have approximately 60,000 transactions per second, with 400ms block times,” it says. 

The Solana Foundation would actually pay the Kin Foundation for making this move, however, awarding it with up to 1% of the supply of SOL (roughly $6 million at today’s prices), with 0.1% unlocking for each new 1 million active users that join over a 24-month period. 

Next steps

The next step will be for Solana to make a presentation to kin developers about the process for switching chains. If enough developers agree to make the move, Solana staff will largely facilitate it and the process should be complete in a matter of months. 

“It is ultimately up to the developers in the Kin ecosystem to decide if they want to migrate to Solana; however, we know that speed and throughput are two key issues within this community, and those happen to be two areas where Solana shines brightest,” Yakovenko wrote. 

Read more: Solana Blockchain Adds Korean Stablecoin Terra for Better Payments

Based on the Kin Improvement Proposal, the Solana Foundation will start tracking progress on Jan. 7, 2021. 

“Few projects in the blockchain space have shown an ability to grow a user base as fast as Kin has,” Gokal wrote. “We expect to see a myriad of use cases that come out of the Kin ecosystem within the near future that perfectly exemplify Solana’s leading performance.”

Why now?

“What has happened over the last year, but mostly has been accelerated in the last six months, is the kin ecosystem has been growing like crazy,” Tanner Philp, head of corporate development at Kik, told CoinDesk.

Kin has seen a dramatic uptick in its core metric – monthly active spenders – over the course of the coronavirus quarantine period, Philp said.

In early March, there were approximately 1.5 million people who had spent kin in the prior 30 days. On April 20, the growth spike peaked at 4.4 million. The numbers have trended down somewhat since then but it’s still running at about 3.5 million, a significant gain over prior numbers.

Read more: Kin Foundation Publishes First Transparency Report Amid SEC Court Fight

Kin has been integrated into 57 different applications, but usage is dominated by a few popular ones, including apps for sharing media and making funny, shareable shorts. 

Kik, the company that still oversees kin, began investigating new blockchains to pursue eight months ago in anticipation of the need to get to something faster, Philp said. 

The key use for kin is payments, and that was what Solana was always designed to accelerate. 

“Solana is one of the solutions, if not the only solution, that scales transaction times down into sub-second territory – the type of experience you’d demand for any mainstream application, such as Kin,” Yakovenko wrote.

Kik believes its Stellar fork has room for several more months, though pending developments could shorten that runway.

“What we’re getting close to is rolling out the new wallet for kin that Kik Inc. is working on, to connect the ecosystem, and that’s where you’ll start to see some more vibrancy within the ecosystem,” Philp said. 

New features

The wallet will make it simple to move kin earned in one app over to others. The company isn’t committing to a timeline but that wallet could appear in late Q3, Philp said. 

When that happens, if users start moving tokens around between apps, it will become important to add metadata to transactions showing which application drove the spend. That data helps apps get properly credited by the Kin Rewards Engine. Stellar does not support a large enough amount of data to make its metadata features useful.

Read more: Blockchain Gaming, Messaging Apps See User Growth Amid Coronavirus Lockdowns

Kin was founded out of the company that formerly ran the Kik mobile app. The vision for the cryptocurrency was to create a way for people using mobile and web-based products to have a marketplace of value, but one where that value could be very tiny, for trade in items like digital stickers and access to small games.

Companies are rewarded for building out the kin ecosystem with daily emissions from the Kin Rewards Engine, which shares out its vast trove of undistributed kin to developers who are driving transactions. 

“Kin started out with getting a lot of users using it across a lot of different apps,” Philp said. “Now it’s about getting people to spend larger amounts, and by that we mean going from fractions of pennies to pennies spent.”

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Caught Up in Steem Squabble, Bittrex to Return Tokens Diverted in Hard Fork

Bittrex really didn’t want to get involved in the war that’s currently raging within the Steem community.

Richie Lai, co-founder of the U.S.-based crypto exchange, posted an announcement late on Wednesday saying his firm would return – reluctantly, it seems – million of dollars worth of disputed cryptocurrency back to a Steem wallet no one knows who controls.

After the 23.6 million steem tokens were confiscated from community dissenters in a tit-for-tat Steem hard fork Wednesday, they were quickly diverted to Bittrex by an unknown individual (or individuals) in the hope they would be returned to their original 64 owners – currently all persona non grata at the blockchain project.

The controversial hoard is worth a little over $5 million at press time and was worth approximately $6.3 million at the time of the fork.

“We wish the entire Steem community could have addressed legitimate concerns in a manner which was viewed as fair by everyone,” said Lai. “The fact is, we only interpret the data on the blockchain, and in this case the consensus of the blockchain, regardless of how it was reached, agreed that the funds from those 64 accounts be moved to the ‘community321‘ account.”

“We believe in the sanctity of blockchain, and as an industry we need to adhere to the consensus rules of the blockchain without interjecting whatever our personal opinions might be,” he continued. “If we want blockchain to succeed, we must live by the rules of the blockchain.”

“While I am among those frustrated by the outcome, my own personal feelings do not matter,” Lai said.

See also: Tron’s Takeover of Steemit Is Internet History Repeating Itself

Wednesday’s Steem hard fork was the culmination of months of bitter infighting between those for and against the Tron Foundation’s takeover of Steemit – the largest application on Steem – earlier this year.

After the anti-Tron faction forked the network to create HIVE – a near-identical copy of Steem that copied over and then confiscated tokens linked to Tron founder Justin Sun – the pro-Tron team retaliated by forking Steem to seize tokens belonging to 64 of the former witnesses – blockchain validators – and stakeholders involved in creating the HIVE splinter group.

The tokens were sent to the mysterious wallet known as community321 but, as CoinDesk reported, were almost immediately sent to Bittrex’s platform. A note on the transaction said the funds had been “stolen by the Steem witnesses,” and asked Bittrex to “please return them to their original owners prior to the fork.”

No one knows who carried out the transaction (publicly, at least), but it was evidently someone from the anti-Tron lobby.

A former Steem witness, who goes by the name “Marky,” and had $46,000 worth of Steem confiscated Wednesday, told CoinDesk he believes this community member – whoever they may be – had access to an app and were able to cling on to the keys linked to the community321 wallet.

“There is a service run by an original community witness called AnonSteem, it allows users to make anonymous accounts,” Marky said. “They [the community321 wallet creator] used this service, and my initial guess is [a community member] saved the keys generated. Then used them to send the funds to Bittrex to rescue them.”

See also: Why Crypto Should Care About Justin Sun’s Steem Drama

In an interesting twist to the whole saga, Bittrex’s procedure for returning hacked tokens is to first receive proof of ownership from the victim. “We must review the facts of this transfer in order to return these funds to the original wallet owner provided the owner or owners of the wallet can prove the funds belong to them,” Lai said in his notice.

In other words, whoever is sitting behind the community321 wallet may have to declare themselves, at least to Bittrex. It could be interesting to see who does, eventually, break cover.

At the time of writing, the funds still hadn’t been returned.

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Steem Hard Fork Confiscates $6.3M, Community Immediately Takes it Back

The Steem blockchain has just split, or hard forked, controversially seizing the tokens of key community members who opposed TRON’s recent acquisition of the ecosystem’s biggest dapp, Steemit.

At 14:00 UTC on Tuesday, Steem implemented hard fork 0.23, significantly codenamed “New Steem,” shunting some of the former Steem “witnesses” – blockchain validators – and stakeholders who created a splinter group called HIVE out of the ecosystem, it seems for good.

New Steem, which was only announced on Monday, will “seize some user accounts that participated in criminal activities by actively contributing to the threat against the Steem blockchain and/or to the theft of STEEM holders’ assets,” said a Steemit blog post, announcing the fork.

The hard fork’s GitHub page lists all of the users who will have their tokens seized: 64 in total. A letter sent on Tuesday by a legal firm representing affected members – calling on exchanges to not support the hard fork – says that a total of 23.6 million steem tokens will be seized – worth roughly $6.3 million at press time, according to CoinGecko.

One affected community member, Dan Hensley, told CoinDesk in an email that he’s losing around $1 million-worth of steem as a result of the fork.

See also: Steemit Sets Up Shop on Tron Network

The hard fork is the latest episode in an ongoing struggle for control of the Steem blockchain. It began soon after Justin Sun’s TRON Foundation acquired Steemit – Steem’s most prominent dapp – for an undisclosed sum back in February.

Concerned Sun would use Steemit’s sizeable token allocation to run roughshod over the rest of the community, the Steemit ecosystem quickly executed a soft fork that effectively nullified its voting power. A few weeks later, they implemented a splinter blockchain, HIVE, which duplicated over all tokens from Steem.

However, the allocations owned by Sun and some incumbent witnesses, around 83.2 million STEEM tokens in total, were immediately confiscated and stored in a separate wallet. The Steemit post says the exclusion of selected Steem players from HIVE was illegal and a “clear violation of the property rights of STEEM holders.”

While Sun himself has denied any involvement in the hard fork, on Monday he claimed he was working with law enforcement to recover his confiscated HIVE tokens.

See also: Tron’s Takeover of Steemit Is Internet History Repeating Itself

It’s hard not to see the New Steem hard fork as an example of a tit-for-tat move. But that’s not how they phrased it. One current Steem witness known only as “Triple A,” told a Korean news site that the HIVE dissenters’ tokens were seized, not because its own assets had been seized, but because these select accounts had “continued to attack the Steam blockchain ecosystem.”

These include allegations that HIVE members have damaged network stability, spread fake news about the blockchain – picked up by the “misleading media,” according to Sun – and generally tried to discredit and besmirch the Steem community’s name. Triple A also claimed some HIVE members were guilty of verbally abusing community users and even “threatening murder.”

Emotions are fraught. Echoing Triple A’s comments, the Steemit blog post states: “The Steem blockchain has been under constant attack from malicious accounts and this has heavily influenced user experience, Dapps useability, and the stability of the chain itself.”

Its post goes onto say that Steem witnesses who helped implement HIVE’s “hostile split action” had effectively “betrayed STEEM holders.”

See also: Why Crypto Should Care About Justin Sun’s Steem Drama

That’s not how affected Steem users see it, though. The legal letter calls the fork a “planned theft” and threatens legal action against any exchanges that voted in favor of it. “[Y]ou may become an accessory to criminal offences including grand larceny and securities fraud as well as expose yourself to civil liability for damages,” the letter warns.

It’s probably unlikely that exchanges like Binance and Huobi, some of Steem’s largest stakeholders, will want to involve themselves in this dispute. Binance CEO Changpeng “CZ” Zhao, who was initially supportive of the takeover, recently washed his hands of it. “We didn’t know it was, like, a contentious fork,” he said in an interview with Laura Shin at Ethereal Summit.

“Every Steem witness that is human has quit. Justin denies involvement with the heist yet replaces the witnesses that quit with a sock puppet minutes later to do his bidding. Exchanges are the last line of defense,” Hensley said.

There remain unanswered questions: chief among them is what happens to the seized steem tokens? The letter says these will be transferred to a new wallet account, “@community321.” Set up just under two weeks ago, what entity actually runs or owns the account has yet to be revealed.

Soon after the fork, it was claimed that the tokens had been moved en masse to the Bittrex exchange in an attempt to return them to their original owners. The Steem Witness Twitter account seemed to confirm the news, but pledged the “assets will be recovered.”

CoinDesk reached out to the TRON Foundation for comment, in its capacity as the owner of Steemit, but hadn’t received a response by press time.

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Sidestepping Telegram, Devs and Validators Launch Fork of TON Blockchain

Telegram’s blockchain network finally launched today – or, at least, a version of it. 

TON Labs, a startup that helped Telegram run the test network for the Telegram Open Network (TON), launched its own version of the blockchain Thursday, with the support of professional validators. Called Free TON, the fork comes after the group decided not to wait until Telegram is able clear the regulatory hurdles it faces before it can officially send TON live.

The initiative is supported by 13 validators and used code maintained by TON Labs. During a Zoom call livestreamed on YouTube, the “zero state file” of the new blockchain was generated, effectively marking its launch.

“The network must not be censored, it must go to the world,” TON Labs CTO Mitya Goroshevsky said on the call.

To distinguish itself from the original TON project, this forked version is named Free TON, and its tokens are called “tons,” not “grams,” as Telegram’s were dubbed.

Telegram did not reply to a request for comment on the initiative by press time. 

Telegram was not involved in the launch, according to Alexander Filatov, CEO of TON Labs. “It’s an independent launch of the open-source software,” he told CoinDesk. TON Labs is providing technical support for the code, while the team of (for now) 13 validators will be supporting the network. The code will be used under the GNU Lesser General Public License, version 2.

The original TON had initially been scheduled to launch in October 2019, but was delayed after the SEC sued the messaging app company for allegedly selling unregistered securities. An injunction to halt the project was granted by a U.S. court in February, making the second launch deadline of April 30 unfeasible.

Devs in

However, as the code for TON is publicly available on GitHub, it’s technically possible to launch it without Telegram’s participation. “This project has its own community, its own idea, its own ideology. Not launching it would be a mistake,” said Konstantin Lomashuk, head of P2P, a Moscow, Russia-based blockchain startup and a Free TON validator. 

It’s not a mainnet, but it’s not a testnet, either, said Sergey Vasilchuk, founder of the Kiev, Ukraine-based EverStake, also a validator. “We’re trying to launch the alpha version, see how this software works in real life,” Vasilchuk said. Like the Kusama network is for Polkadot, Free TON is serving as a proving ground for the tech before it can be launched in full, he explained. 

“The way we see it is as a testnet that has the real distribution but might – and will possibly be – rolled back to the genesis state at any time if there are vulnerabilities in the code and black hats [malicious hackers] decide to exploit them on the live chain,” said Hendrik Hofstadt, CEO of the Berlin-based staking startup Certus One. 

Currently, the 15 entities acting as validators include EverStake, P2P, Berlin, Germany-based Certus and other professional validation-as-service startups that are already supporting networks like Cosmos, Loom, EOS and Tezos. 

There are also three cryptocurrency exchanges in the role, according to a list of validators shared with CoinDesk, including Kiev-based Kuna, London-based CEX and Hong Kong-based HitBTC. They won’t list ton tokens at this point, and will only act as validators, Filatov told CoinDesk. 

Some of the validators came from the TON Community Foundation (TCF), also supported by TON Labs. The foundation launched its own testnet for TON earlier this spring. However, Filatov said “TCF didn’t become a truly international movement,” and thus didn’t succeed in leading the blockchain launch. However, its members can join the new network, too, he added. 

“There is absolutely no technical reason now for somebody to join this network (except the common reason for all altcoins – to get some coins),” CTF cryptographer Alexey Pryanishnikov wrote in a chat while watching the launch livestream.

From launch, each validator will receive 380,000 ton tokens to stake and start producing blocks for the proof-of-stake blockchain. There will be a limited supply of 5 billion tokens, as was the plan for the original TON blockchain. Out of those, 85% will be distributed to “Free TON partners and users,” 10% to developers and 5% to validators, a press release says.

“We expect the TON network to mature quickly and transition into a mainnet state over time,” Hofstadt said, adding that crypto exchanges will later list ton tokens, so that early participants will ultimately be rewarded. 

Investors out

As a fork of TON, Free TON will have nothing to do with Telegram’s obligation to distribute tokens to investors in its $1.7 billion token sale, the participants say. 

“It’s also very cool to launch a network with just validators and developers and having the vast majority of tokens controlled by a community pool, as opposed to investors. It’s a great experiment,” said Brian Crain, co-founder and CEO of staking firm Chorus One.

Hofstadt echoed the sentiment, saying: “We’re very excited about TON because it is one of the first networks that is launching with a token distribution that is not centralized around early stage investors and VCs.”

Telegram’s investors are unlikely to get their tokens. The firm sent them a letter last week, just before the launch deadline, saying the event has been pushed back to 2021. Five days later, Telegram fired off a new letter saying that the token distribution, awaited by the investors for over two years, is now not on the table

Those who funded TON now can opt to either take 72% of their investments back now, or lend their funds to Telegram for a year to get a return of 110% in April 2021. U.S. investors, though, have only offered the first option.

On Wednesday, the deal was further detailed. According to the Russian publication The Bell, Telegram sent over the terms of the loan, offering the 52.77% annual interest rate. It seems Telegram is reserving the option to repay investors at any time, meaning an investors would get 72% plus interest for the time the company utilized the loan, but with a minimum of three months.

Sergey Solonin, founder of the Russian e-payment firm QIWI and TON investor, told CoinDesk there’s no point in lending money to Telegram on such terms.

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