Tron's Justin Sun's takeover incident highlights Proof of Stake risks? Vitalik Buterin: Ethereum won't experience governance disputes like Steem's.

After Tron (TRX) founder Justin Sun acquired the decentralized social content platform Steemit, a series of community forks, asset freezes, node manipulation, and other events have emerged, reigniting the debate between centralization and decentralization in community governance. Ethereum founder Vitalik Buterin, on the other hand, adamantly states that Ethereum's PoS mechanism will not face such governance disputes.

• Vitalik Buterin: Ethereum Holders Cannot Participate in Governance
• Research Shows Centralization Risks in Proof of Stake

The Steemit Controversy

Earlier reports have fully documented the incident. In short, community leaders first conducted a soft fork upgrade on Steemit, freezing all pre-mined tokens to restrict Justin Sun's authority on the Steem blockchain.

Major exchanges (Binance, Huobi, and Poloniex) quickly amassed over 42 million voting power overnight and intervened in the witness voting on March 2, instantly propelling Justin Sun to the top 20 witnesses. They then proceeded with the Steemit 0.22.5 soft fork upgrade and released all previously frozen pre-mined tokens.

This incident has sparked criticism from the broader crypto community and exposed the risks of on-chain governance. Following the event, original Steemit core members resigned, and Binance CEO Changpeng Zhao apologized on Twitter, stating:

No vote was actually cast. Due to miscommunication, my earlier involvement was a mistake. Binance has no interest in on-chain governance. We remain neutral and will continue to support regular hard forks/upgrades.

The Steem blockchain employs the Delegated Proof of Stake (DPoS) mechanism, akin to a democratic proxy system, which some see as a variant of Proof of Stake (PoS). As Ethereum may transition to a Proof of Stake mechanism this year, Ethereum's founder also commented on the governance controversy:

Ethereum validators are only involved in transaction validation and do not have voting rights for on-chain governance. However, if mining power is used as a voting weight, it could lead to a more serious disaster.

Coin voting != PoS. In PoS validator's just verify blocks, they are not voting on decisions. Using PoW to vote on decisions would be even more of a disaster than using coin voting.

— vitalik.eth (@VitalikButerin) March 2, 2020

Proof of Stake Mechanism Highlights Centralization Risks

While Proof of Work is renowned for its high security in mainstream consensus mechanisms, it is also criticized for its energy consumption and low efficiency. Hence, Proof of Stake is gradually becoming mainstream. However, there is no perfect consensus mechanism, and research by crypto firm Messari indicates that Proof of Stake carries a more centralized risk:

In a world where public trust in government institutions is waning, the distribution of power and wealth in public chains is crucial. Proof of Stake presents a risk similar to the "rich get richer" scenario, which could stifle future adoption.

Researcher Ryan Watkins noted that the model assumes most token holders acquired tokens during the ICO phase. As token prices rise, passive holders may start selling, thereby granting more power to the initial holders.

In fact, Proof of Work may also lead to centralization issues, such as high concentration in geographical locations (China's dominance in mining). The "impossible triangle" problem of blockchain security, decentralization, and scalability remains a challenge to overcome.

Further Reading

• Unraveling the Steem Controversy: Justin Sun's "Takeover" and the Original Community Becoming "Hackers"
• As Voice Enters Beta Testing, Steemit Announces Migration to the TRON Blockchain

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