Mr. CZ, Binance's assets, and blockchain manipulation

[Raja_MBZ]

Last year, it wasn't funny at all when Mr. CZ came up with an idea of bitcoin's blockchain rollback (through the purchase of mining power) after Binance was messed up by a hacker, resulting in a loss of over 40 million USD. After social media fury, he took the decision back; however, it was still very frustrating (at least for me) to know that the (arguably) most powerful crypto personality can even think of such thing.

Yesterday, I literally kicked myself (twice) after finding out that the voting in one of my favorite crypto-projects, Steem, was manipulated by CZ through the use of Binance's Steem funds. He used all those Binance's funds in the favor of Tron's Justin Sun. Moreover, don't forget the once the tokens in the Steem blockchain are locked up for a vote, they can't be used altogether for straight darn 13 weeks. TBH, this is beyond ugliness and craziness. If even 25% of all the Steem holders currently withdraw their holdings from Binance, CZ will NOT be able to provide them their funds directly and he'll have to get the STEEM from somewhere else!

We all know that keeping the funds at an exchange is bad as they can get hacked, but it seems like our worries should be way beyond that "if-hacked" level if we have stored our funds in an exchange.

[1715067408]

1715067408

[Raja_MBZ]

Steem Community Mobilizes Popular Vote in Battle With Justin Sun

https://www.coindesk.com/steem-community-mobilizes-popular-vote-in-battle-with-justin-sun

[squatter]

Last year, it wasn't funny at all when Mr. CZ came up with an idea of bitcoin's blockchain rollback (through the purchase of mining power) after Binance was messed up by a hacker, resulting in a loss of over 40 million USD. After social media fury, he took the decision back; however, it was still very frustrating (at least for me) to know that the (arguably) most powerful crypto personality can even think of such thing.

Yesterday, I literally kicked myself (twice) after finding out that the voting in one of my favorite crypto-projects, Steem, was manipulated by CZ through the use of Binance's Steem funds.

This controversy highlights the biggest danger POS and DPOS blockchains. Proof-of-stake mechanisms give centralized exchanges and similarly large entities incredible power over consensus changes. Steem users could only turn to social media and shame exchanges into doing the right thing. That's not a very secure model, is it?

Bitcoin, in contrast, puts contentious rollback decisions in the hands of miners, who have rational incentives to remain honest.

I would love to see the conversations that lead up to Binance and Huobi backing Justin Sun's proxies with their customer deposits. Business owners need to be very careful when getting in bed with Justin Sun. He's a slippery guy.

[igglyboo92]

Its not just Binance but also Poloniex, Huobi, maybe even others too?? This is quite a big scandal. Has this ever happened before? Exchanges banding together to overthrow existing DPoS consensus?

[squatter]

After digging a little bit deeper, I don't buy this explanation from CZ that he ignorantly thought it was just a standard network upgrade:

Done, unvoted. 1 oversight on my part. Miscommunication/upgrade rubber stamp. 2 @binance have no interest in chain governance. We stay neutral. 3 will continue to support regular upgrades/hard forks.

I'm not familiar with Steem so I can't verify all the blockchain evidence, but this sounds pretty damning:

Early March 2nd, 2020 the exchange Poloniex.com began a process of embezzlement of an unknown number of user accounts funds. The funds, primarily a crypto currency called STEEM were loaded into the Poloniex account, with the amount embezzled equalling roughly 2,283,437.60 STEEM, which was locked away in a manner making it impossible for users to access their funds for trading or withdrawal from the exchange. This was done by locking up the STEEM by converting it into a form called STEEM Power (SP) which can be used to vote on things or gain influence within the STEEM blockchain.

Two other crypto currency exchanges exhibited similar behaviour which included embezzlement of users STEEM currency via means of converting it in STEEM Power as Poloniex did. These exchanges are Binance.com and Huobi.com, both of which received a substantial transfer which I believe a bribe in order to get them on board for this embezzlement scam, which lead to all 3 exchanges using their ill-gotten STEEM Power, derived from embezzling their users STEEM currency to elect their own delegates on the blockchain, essentially taking it over via the custom software they had deployed.

In the attached image(A1) show a transfer from an account called "steemit" which is owned by Justin Sun, the person who also owns Poloniex.com transfering 2,000,000 STEEM to the account "deepcrypto8" which is owned by Binance.com. This is bribe money from the owner of Poloniex Justin Sun given to the owner of Binance.com in order for them to become a part of the scheme to embezzle their users STEEM funds, convert them into STEEM Power and use said STEEM Power to elect their own delegates onto the STEEM blockchain.

In the attached image(A3) you see a 1,000,000 STEEM tranfser to huobi-pro account from an account called misterdelegation which is also owned by Poloniex.com owner Justin Sun. This is another bribe in order to get them on board to embezzle user STEEM funds, convert them into STEEM Power (which cannot be withdrawn by exchange users) and then use them to elect their own delegates.

CZ's claims of ignorance already look like a cop-out. A direct transfer of 2,000,000 STEEM from Justin Sun to Binance adds fuel to the fire.

I'm also concerned about the allegations about locking customer STEEM and converting them to STEEM Power. How does this process work? Did the exchanges have enough STEEM on hand to meet their customer obligations after doing this?

[pooya87]

Last year, it wasn't funny at all when Mr. CZ came up with an idea of bitcoin's blockchain rollback (through the purchase of mining power) after Binance was messed up by a hacker, resulting in a loss of over 40 million USD.

it was actually very funny since it showed that he has absolutely no understanding of how bitcoin as a decentralized currency, works.

After social media fury, he took the decision back;

he took it back when everyone (including the miners he contacted) laughed in his face not because of the social media nonsense

however, it was still very frustrating (at least for me) to know that the (arguably) most powerful crypto personality can even think of such thing.

he is most powerful personality in altcoin world since he controls all or almost all of the trading volume of all the altcoins and can decide what their price is going to be. otherwise he has absolutely nothing to say in bitcoin.

We all know that keeping the funds at an exchange is bad as they can get hacked, but it seems like our worries should be way beyond that "if-hacked" level if we have stored our funds in an exchange.

this is an excellent point for PoS coins that having coins means having full control (voting power).

[Raja_MBZ]

...and the drama continues:

Notice Regarding Upcoming STEEM Network Upgrade

Fellow Binancians,

In the spirit of transparency, Binance has received a request to upgrade the STEEM network to version 0.23, a hard-fork which includes the following:

An update to reduce the power down (un-staking) time parameter from 13 weeks to 4 weeks, and
Blacklisting of 65 accounts which collectively hold 23.6 million STEEM (currently ~$5 million USD at the time of writing), effectively removing their balances from the STEEM blockchain.

Binance would like to confirm that we do not condone this type of behavior and believe that blockchains should not be used as a tool for censorship or editing user balances. Since receiving the request on May 15th, 2020, Binance decided not to initiate the upgrade, meaning that we have been unable to sync up to the latest STEEM block height, and as such, deposits and withdrawals of STEEM have remained suspended.

However, this decision has negatively affected all of our existing users that hold STEEM, and is not a long-term solution, as they are currently unable to move their tokens on the blockchain. Thus, in the interest of our users currently holding STEEM, Binance has decided to support this upgrade to provide users with the freedom to use their STEEM tokens as they see fit.

As a further response to the above, Binance plans to reduce STEEM trading pairs from the current 3 pairs down to 1 pair over the next two months.

Thanks for your support!

Binance Team

2020/05/23