The recent controversy between Steemit Inc and the community - the premine, control, and where it leads this blockchain

I'm not going to candy coat any of this, since I think the greater community needs a splash of realism and less pandering. At this point in time I have nothing to lose (besides wasting my time) and just think this entire situation is absurd. The vast majority of the "scare" surrounding the issues discussed over the last week have no actual merit and are, in my opinion, cases of manipulation to maintain the status quo.

Buckle up, this is going to be a long one.


How we got here

To start with, let me explain all of the events from an objective perspective. I'll try my best to leave my opinions out until later in the post, after I first try to give a better sense of what has happened up until this point.

Last week/weekend (between the 10th and 13th of January 2019), a discussion started and set this entire chain of events in motion. This was in the so-called "Secret Slack", a Slack community controlled by Steemit Inc which houses discussion between Steemit Inc employees, Witnesses, Developers, and other randomly selected Steem community members. I was present and participating in these discussions, as were a many others.

This specific conversation started as a discussion about how to attract developers into the Steem ecosystem. Ideas being tossed about, examples of other comparable systems debated, and opinions being stated about the challenges in the current environment. This type of chatter happens a lot - which isn't surprising due to the incredible amount of passion in this community.

The conversation eventually turned though, when a Steemit Inc employee chimed in. At this point in the conversation it was specifically about incentivizing blockchain developers (external of Steemit Inc) to contribute to the code that runs the platform. A disagreement occurred involving the approaches, the value of, and the effectiveness of this sort of effort. There were a few comments made during this exchange, which were viewed as talking points and an excuse not to act. This sparked the powder keg. From this point on the conversation was no longer about attracting developers but a serious discussion about Steemit Inc, it's overall competency, and it's leadership.

This is actually another common topic that comes up in the "Secret Slack" regularly. With the New Year having just occurred and everyone reflecting on 2018, it's been brought up more than usual. As the conversation progressed, with some strong statements from community members on this topic, this is the point in time where a fork was mentioned for the first time, on Friday the 11th. It was mentioned as a method to force Steemit Inc to change how they are operating, as opposed to all of us involved "just complaining". The fork proposed would have done one thing: freeze Steemit Incs premine assets.

The participants in the channel (community members) engaged in this topic. During this time there was no mention by anyone of supporting the idea. It was discussed like any other idea proposed, with speculation of both the good and bad it would do for the Steem ecosystem. The discussion continued over the weekend, hopping to different channels, as more community members were invited (even those not in the "Secret Slack"), and the debates continued.

As far as I'm aware, no one had planned on talking about any of this, it just happened organically. It was presented as a "nuclear option" to force change.

Sunday the 13th is when Ned joined the channel on the Secret Slack and made his first remarks of 2019 to any of us. The immediate tone was a defensive posture, labeling one of the participants in the discussion a "hacker", and then claiming the witnesses were considering the going through with the fork. Around this time is also when the Steemit Inc power down began (directly to exchanges), in an effort to protect themselves against this "threat".

No one anywhere at this point had expressed support for actually performing the fork on the live Steem network.

The participants attempted to defuse the situation on the spot (with mild success), and since Ned wanted to talk (after being absent for the previous weeks), those involved decided sure, why not talk. It was then decided that instead the usual tactic of "everyone just saying whatever we want in chat", a committee would be setup to represent the views of the group, while trying to address the problems at hand. The idea being less individual voices (from the community) = less confusion (for Ned).

I am/was a member of this committee, which regularly talked with Ned over the week (14th-18th). Many suggestions made by the committee were outright dismissed without any discussion. Unlike the public discussion where we discussed the merits of an idea, regardless of personal opinions, this discussion was unproductive in meaningfully exploring anything. It's unknown if any benefit will come from the efforts of the community and committee due to these efforts.

Yesterday (the 19th), we've all decided to open up publicly and share with you what's been going on.

So here we are. I'm a day late, but this post took a while to compose.

Note: This is where my objective view of the situation ends.


Why we are here

From here on out I am expressing my views as an individual, based on the behavior I've observed and past experience/history.

To disclose: I have been very vocal in these private chats about the direction Steemit Inc has been taking Steem over the years, especially over the last year. None of my opinions should come as a surprised to anyone involved in the "Secret Slack", whether they're a community member or Steemit Inc employee. I typically don't bring these opinions up publicly, like I am right now, because Steem and DPOS have enough public perception problems as it is. However, at this moment in time, one of the following is true: either I am at a point of inflection or the entire community is.

To put a TLDR in front of this entire section, the reason I believe we are here today is because Steemit Inc exists within the Steem ecosystem as an "unaccountable actor" who ultimately controls far too much. I'll attempt to highlight this belief as we push forward through this post.

The situation from a general crypto perspective

To help frame the conversation a bit, let's step back out of Steem and look at crypto in general. When you're considering the viability of a DLT project (blockchain or otherwise), in order to gauge "risk of investment" (either your time or money), one of the things you generally look at in the distribution is "how much control is the founding entity retaining?". This is typically referred to as "reserve fund" or a "premine" (depending on how fancy of ICO terminology you want to use) and is critically important in any system that relies on a token as a mechanism of control.

Generally from my perspective, the less tokens the founders control the better. There are multiple reasons for this:

  • Risk: a platform which contains a premine almost always relies on the entity receiving it to be successful.
  • Risk: the "control" (mostly in block generation) of the decentralized aspects of the platform can be manipulated by this premine.
  • Risk: the entity could cause downward pressure on a market as they sell this premine (which typically is why there's a lockup/vesting period).
  • Risk: the potential for corruption and abuse, due to the non-binding agreement in which they are granted tokens in a premine.

Today, I, as an investor, will likely reject the premise of a blockchain on this single merit alone. I didn't hold this view when I got started in Steem (which was the first chain I engaged full time developing on), but as I've learned (thanks to so many people here), this belief has been cemented in my head.

Any individual actor in a blockchain ecosystem that is just "granted" a significant portion of the token distribution becomes an "unaccountable actor". That doesn't mean they are good or bad, just that they are unaccountable to the token holders. It's a very common misconception that by owning a specific token, you have a say in how these prefunded entities operate, but you don't. You don't own any portion of whatever company was created with that distribution, nor do you have any say in what they do. They're completely unaccountable to anyone but themselves.

Steem

That brings us to why we are here today. We are in a situation, as witnesses, developers, and members of the community, where the unaccountable actor in our space has repeatedly failed to accomplish anything meaningful or even meaningfully consider alternatives.

From my point of view as an "insider", Steemit Inc has:

  • used their premine irresponsibly, likely due to inexperience (common startup problem)
  • consistently failed to resolve some of the biggest issues facing the Steem platform
  • retained/taken control of this "decentralized" system, both with their rhetoric and threats to use their stake to control it
  • acted in the best interest of their company, their product, and not in the best interest of the platform
  • has demonstrated a priority of company over the platform, refusing to entertain ideas simply on the grounds that it may be detrimental to Steemit Inc

The really sad part is they have every right to do this, and aren't in any way accountable to any of us.

I am not here to argue about ownership of the ninja/premine stake, simply because in every legal sense on this chain it’s Steemit Inc property and there’s nothing concrete that holds them accountable for its usage in anything. Ned could literally decide to retire, and using the same logic he's promoted over the past few days, shut down Steemit Inc because it owes nothing to anyone. Why? Again, there’s absolutely no accountability or responsibility.

It's always been this way, even though many of us would like to hold Steemit Inc to higher standards. That, to me, is the core problem of this entire conversation long before the discussion of a fork occurred. There’s not really a way you can force someone who is “accountable to no one” to change course, no matter what harm or good they cause. This is the case in most situations where a premine exists.

The committee and it's conversations with Steemit Inc

Sadly - through the process of this entire conversation, we actually pushed everything further in the opposite direction of the goals.

Not only are we in a situation where we (those involved in the conversation) have to explain ourselves against outlandish claims of a supposed fork, but now we have Steemit Inc powering down their premine to ultimately make it less transparent than it already is. Not only are they unaccountable to anything the community wants, but now they by hiding their funds we've lost transparency... all based on a conversation that started about addressing their constant failures and what the system would be like if they were actually held accountable.

I can tell you now, if over the past 2.5 years since launch they were being held accountable, Ned would have been fired, the entire organization reworked, and the direction would have changed to a more sensible approach to build great things for Steem. That's not happening and there's literally no leverage to make this happen, at least there wasn't until the word "fork" was brought up. Sadly those conversations also didn't go anywhere because many members of the community latched onto Ned's spin of "theft" and "hackers" causing further distraction.

Speaking of which, let's talk a bit about the fork that was being discussed.

A fork

I just want to make this very clear regarding the fork: these talks never even got far enough for anyone involved to decide anything. The idea wasn't immediately dismissed either, but in discussing nuclear options like this, you can't be dismissive.

Not only did no one commit to doing it, but even after reassuring Ned of this in private, Ned then started a social tour to drum up favor in advance of anything put out by the community. When asked about the power down cited this group as a "threat". Suddenly not only were we trying to have talks with Ned, but those who bought into the spin started expressing concern for what was going on. Either someone fed Ned bad information, he's spinning this for some more nefarious reason, or most likely he's making incorrect assumptions based off his limited understanding. That last one sounds just about par for the course.

Regardless of how it happened, it was a manipulative play, which is yet another common occurrence in a system where a premine exists.

Overall, the idea of the fork had a single goal of forcing accountability, it was not about "theft" or "hacking", it was about correcting one of the biggest problems in this entire system. A problem, which isn't recognized by the only people Steemit Inc is accountable to, themselves.

Fork Alternatives

During the discussions a few other ideas took shape that essentially achieve the same goal of making Steemit Inc accountable. Most of these ideas got pushed aside during the talks with such an intense focus on the fork option. Personally I don't think with Steemit Inc's recent statements of "this is our property" any of this will actually happen, but I figured I'd share them since there's such an intense focus on the fork alone. Some of the other ideas were:

  • Steemit Inc voluntarily giving all/majority of their tokens to an elected body which would, in return, fund Steemit Inc. This provides oversight, transparency, and accountability based on performance.
  • Steemit Inc being willing to burn their token supply in exchange for some sort of alternative funding mechanism.

These both remove the unaccountable aspect of Steemit Inc, which ultimately would lead to a more healthy ecosystem. Ned has made it crystal clear that he's not giving up control of those tokens or his grasp on the Steem.

Where to go from here?

If the goal is still to achieve accountability, I don't see a path forward anymore.

As someone who's spent 2+ years working on Steem, this is a really hard pill to swallow. Probably even harder to accept for those who have actually invested their own money in Steem. At this point the options are incredibly limited. We have already been told "if you don't like it, leave". In reality (and again, sadly) "leaving" is the first step in most of the options available for anyone unsatisfied with the status quo.

It's either drink the kool-aid Steemit Inc is serving and pretend this isn't a problem, or quit.

My confidence that things will improve is nearing zero, so I'm leaning towards the latter of those options at this point but still haven't decided. The last shred of hope I have for any success here isn't completely gone, which is the only reason I haven't officially quit. I'm still watching as things unfold, but with the direction things are heading (the discussions, threats, and the power down), that last bit of hope is slowly fading.

The status of my decision can easily be monitored on block explorers as to whether or not my witness is disabled, which will be the last move.

Final thoughts

I've spent far too much time on this post already, and while I could continue to ramble on a number of topics within this post, at this point I even question the value in it. I also didn't expect to be engaged in any of these topics this week, let alone for the situation to get far worse than it was a week ago (which mind you, is when this happened, along with the "reason").

My perspective today: Steem at this point is corrupted by the "unaccountable actor" and the premine it performed years ago. Those who still believe in Steemit Inc won't believe this - at least not yet, but that doesn't mean it's not true. A centralized actor is in control of this blockchain. Not only a centralized actor, but arguably a malicious one who does not listen to reason, ever admit fault, persists down unproductive paths, makes rash decisions without thinking them through, acts superior despite consistent failures, and also attacks the decentralized community that makes it all possible. All while there's nothing you or I can do to hold them accountable for this behavior.

Ask yourself, is this what you want in a system like Steem? If you're just here for the rewards, you probably don't care where it comes from. More power to ya for that, keep up your hustle. If you're here for the same reasons I am: the ideas a blockchain represents, a fundamental shift in how we can communicate and trust one another without third parties, I would hope this matters to you. There is plenty of innovation happening in this space right now, it's just unfortunate it's not here.

Everything in this system is voluntary. The reason Steem has value is because you believe it does. Steem, and every other blockchain, are all huge social experiments we choose to be a part of. The situation in this experiment at the moment is pretty dire, and it's up to every individual to decide if this is acceptable and if they want to be a part of this.

I'm trying to make that decision and it's not easy.


For further reading, may I suggest a number of other posts, created by community members participating in the same discussions:

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