The scandal surrounding the Steem blockchain continues to unfold. After juggernaut exchanges Binance, Huobi and Poloniex were heavily criticized by community members for allegedly mobilizing customer deposits to take over the network, two of those firms announced they were backing off. Meanwhile, Tron CEO Justin Sun, who has recently acquired Steemit \u2014 the startup behind the major blockchain-based blogging and social networking platform \u2014 has referred to the disgruntled voters who tried to reclaim control as \u201chackers\u201d who have been \u201csuccessfully defeated.\u201d However, as the latest developments show, Sun intends to withdraw all of the orchestrated votes \u201cASAP,\u201d while the community has already started to restore balance. Brief introduction into how Steem, Steemit and Tron are interconnectedSteem blockchain went live in March 2016. It was developed by the United States-based entrepreneur Ned Scott and developer Dan Larimer. In July of that year, Scott and Larimer founded Steemit Inc., and launched the homonymous Reddit-like social media platform, the first application built on the Steem blockchain. The Steemit company is also known for releasing blockchain-based alternatives for major social media outlets like Youtube and Instagram, replicated by DTube and APPICS respectively. Currently, there are more than 1.3 million registered accounts on Steem, according to data provided by a blockchain explorer. According to the project\u2019s white paper, Steem is \u201ca blockchain database that supports community building and social interaction with cryptocurrency rewards.\u201d To support the \u201creward\u201d option, Steem has integrated two in-house cryptocurrencies \u2014 STEEM, a volatile cryptocurrency, and USD-pegged stablecoins dubbed Steem Dollars, or SBD. Users can \u201cpower up\u201d their accounts to have more influence on the distribution of rewards by transferring from STEEM to Steem Power, although the powered-up STEEM cannot be withdrawn for 13 weeks.Steem is a delegated proof-of-stake protocol. Consequently, it is governed by a limited number of \u201cwitnesses,\u201d who are elected by STEEM holders to validate transactions and secure the network, akin to miners on the original Bitcoin (BTC) blockchain. Votes are allocated according to the number of tokens they hold.Although the platform had amassed over 1 million site visitors by 2018, the number of contributors began to drop at some point, as Steemit Managing Director Elizabeth Powell explained to Cointelegraph at the end of February, and the company entered a turbulent period. In November 2018, for instance, Steemit reportedly dismissed more than 70% of staff.Last month, on Feb.14, Scott announced that he had sold Steemit to Justin Sun, a high-profile Chinese tech entrepreneur who is known primarily for founding the Tron foundation, acquiring Bittorrent and spending $4.5 million to lunch with multi-billionaire investor Warren Buffet. Scott\u2019s tweet has since been deleted; the merge was marketed as a \u201cstrategic partnership\u201d in the official press release. As Steemit\u2019s Powell previously claimed in an interview with Cointelegraph, the Tron partnership essentially saved her company from failing: \u201cWe\u2019ve been in a holding pattern due to a financial lack of resources. We\u2019ve always had roadmaps but we couldn\u2019t execute them.\u201dThe market reacted positively to the news \u2014 the STEEM token surged more than 25% over a 24-hour period while TRX gained a hefty 10% \u2014 but the original community wasn\u2019t as happy.The takeoverOn Feb. 24, worried that Tron might upend the security of the Steem blockchain, Steem community members (represented by witnesses, developers and stakeholders) banded together to implement a soft fork. The upgrade essentially deactivated the so-called \u201cninja-mined stake,\u201d which has historically been owned by Steemit and is said to be comprised of approximately 74 million STEEM tokens. The community representatives were afraid that Steemit, under the new management, might use the stake to govern the network, while apparently it is supposed to be used solely for the advancement of the Steem blockchain. Luke Stokes, a long-time Steem Witness, told Cointelegraph:\u201cThe Steemit \u2018ninja mined\u2019 stake has always been a concern and some in the community wanted witnesses to fork it off the chain last year when the relationship between Steemit Inc and the token holders continued to go sour.\u201dStokes further stressed that he is \u201cjust one member of a distributed community and no one person can represent the Steem blockchain community\u201d before providing a comment.In response to the community action, Tron allegedly orchestrated what has been described as a \u201chostile takeover.\u201d As seen on the blockchain tracker, around March 2, a number of major cryptocurrency exchanges who have STEEM tokens listed on the platforms, namely Binance, Huobi and Poloniex, mobilized customer deposits to stake large amounts of STEEM tokens to vote in support of removing the previous witnesses. According to community reports, a total of 42 million Steem Power was leveraged to oust the top-five witnesses in favor of a single user, @dev365 \u2014 an account allegedly owned by Justin Sun himself. As a result, all of the top-20 witnesses were eventually replaced with accounts powered by Steemit, Binance, Huobi and Poloniex, all of which were created in February 2020.That move prompted a community outcry, as decentralization pundits were outraged by the seemingly monopoly-inducing tactics. Ethereum developer Vitalik Buterin tweeted on the situation: \u201cApparently Steem DPOS got taken over by big exchanges voting with depositors\u2019 funds. Seems like the first big instance of a \u2018de facto bribe attack\u2019 on coin voting (the bribe being giving convenience and taking their votes).\u201d Moreover, following the largely negative reaction on social media, Steemit\u2019s head of communications, Andrew Levine, resigned from the project, clarifying that it was his own decision. Similarly, another key Steemit employee, a senior blockchain engineer Michael Vandeberg, also announced that he was leaving. In addition, some Steem DApp creators allegedly chose to remove their product from the blockchain in the wake of the power struggle. Soon after the takeover, Sun took to his Twitter to report on defeating the \u201chackers\u201d:\u201cSTEEM has successfully defeated the hackers & all funds are super SAFU. and community is now stronger than ever since we united & solved the difficulties!\u201dAs Sun explained in the following tweets, on Feb. 22, \u201csome malicious hackers\u201d froze 65 million STEEM tokens legally owned by Steemit, most likely referring to the \u201cninja-mined\u201d stake. Upon consulting with the lawyers, Sun and his team \u201cwere told this was definitely a criminal activity,\u201d which is why they chose to \u201ccontrol the network for a short period of time\u201d in order to prevent the said \u201chackers\u201d from destroying the assets. Sun further tweeted: \u201cWe will commit to withdrawing the votes ASAP once we\u2019re sure malicious hackers can\u2019t sabotage STEEM anymore & will give the voting rights back to the community. All exchanges\u2019 votes will be withdrawn soon. Shoutout to all the exchanges & parties who helped us save STEEM!\u201d Sun also went on to add that all reports suggesting that Steemit and Tron collaborated with exchanges on a \u201chostile takeover\u201d are false, claiming that, \u201cOur intention was never to take over the network & all parties\u2019 votes will be withdrawn. We wanted to protect the sanctity of private property & the interests of all from malicious hackers.\u201dIn an official blog post entry posted on March 2, Steemit reiterated the Soft Fork 0.22.2 was \u201cmaliciously structured\u201d and even \u201cmay be deemed illegal and criminal.\u201d In the same post, the team presented a fix to mitigate one of the major consequences of the recent takeover. Since the powered-up STEEM cannot be withdrawn for at least 13 weeks, the customers of Binance, Huobi and Poloniex are essentially locked out of their assets during this period. To prevent that problem, Steemit is now deploying an emergency hard fork to reduce the power-down time to \u201c1 to 3 days.\u201d The post read added that, \u201cAfter the 4-6 weeks period, the Steemit team will give the governance back to the community when it\u2019s back in order and mutual agreement.\u201d Exchanges are backing offSoon after Sun posted about defeating \u201chackers,\u201d Binance CEO Changpeng Zhao announced that the exchange had removed its votes that contributed to a sudden shift of control over the Steem blockchain. The Binance head confirmed that he had been made aware of a forthcoming \u201cupgrade\/hardfork\u201d that he approved support for, adding: \u201cProjects do this all the time, and we are usually just in a supportive position.\u201dIn a separate tweet, Zhao denied that Binance was compensated for assisting Steemit in the power shift. \u201cWe didn\u2019t take a penny, thought it was a regular upgraded\/hard fork,\u201d he said. Nonetheless, Zhao refrained from clarifying whether Binance used customer deposits to partake in voting. Meanwhile, Huobi also announced that it had removed its vote, explaining why it decided to partake in the alleged \u201ctakeover\u201d in the first place. The exchange claimed that they were alerted by Tron and Steemit that the Steem network was at risk of an attack that would have impacted their user\u2019s assets: \u201cWe take all allegations seriously, so we worked with both teams to better understand the situation and carefully assess the risk at hand. Based on the information provided to us and out of an abundance of caution, we decided that helping Steemit and Tron was in the best interest of our users \u2014 and the network at large.\u201dNotably, the Singapore-headquartered exchange also admitted that \u201cfrom time to time, Huobi stakes user holdings to help block malicious activities and attacks on blockchain networks.\u201d However, it is still not clear if both Huobi and Binance have withdrawn their votes altogether. As noted by Steemit community members, there are still some accounts on the blockchain who might be voting on behalf of Binance or other interested parties. Poloniex has yet to publicly comment on the incident, although it is worth noting that the platform is affiliated with Justin Sun. Bittrex, another major exchange that has STEEM listed, reportedly did not partake in the alleged coup.Community wins back Now that centralized exchanges are withdrawing their proxies, original Steemit witnesses are claiming their space back. As of press time, all of the current top-9 as well as the 11th witness are \u201capproved,\u201d have over 10,000 voters and joined the network circa 2016\u20132017, while the remaining 10 witnesses have just around 80\u2013150 votes each and were created in February 2020, data obtained from Steemian info tracker shows.\u201cTo the community\u2019s credit, you all started withdrawing from exchanges, which is just fantastic. You started powering up your accounts, you started voting, you started proxying for witnesses,\u201d Stokes noted in his recent update on the incident. \u201cIt does seem like an ongoing battle though,\u201d he said in a separate comment for Cointelegraph. \u201cThis account, for example, continues to power up 500,000 STEEM at a time and vote for these sock puppets\u201d.Stokes also said that he participated in the first discussion between a \u201csmall group\u201d of witnesses, stakeholders and community members and Tron\u2019s side, represented by Justin Sun himself, which took place on March 3. According to the alleged recording of the private conversation, which has been leaked, Sun said that he doesn\u2019t view the current situation as a conflict between the two parties. \u201cOur side, we do not want to governance. Basically, we want to stay neutral too,\u201d the Tron Foundation CEO said in the purported recording:\u201cThe only reason why we voted was because our funds got frozen in the first place. Basically the bottom line for us is as long as our fund is secure, we don\u2019t have any other demands. We want to withdraw our votes also ASAP to give rights back to the community We do not want to intervene as long as our stake is fine.\u201d When asked whether he had been advised that the Steemit-controlled \u201cninja-mined\u201d stake is intended to help with the advancement of the Steem blockchain and was not intended to be sold for profit, Sun allegedly replied, \u201cWe don\u2019t know any of this,\u201d and stipulated that he has all the legal documents to prove that the stake belongs to his firm.Steemit\u2019s former CEO Ned Scott has since referred to the soft work as \u201ctheft,\u201d adding that Justin Sun \u201cis a great addition to Steem,\u201d and Witnesses need \u201cto stop bullying and lying to get others to take responsibility for them.\u201dAccording to some experts, the whole drama might end soon with no serious consequences. Lior Yaffe, co-founder and director of blockchain software company Jelurida, told Cointelegraph:\u201cThe existing blockchain industry is still quite forgiving towards mishaps like the Steemit incident, therefore I don\u2019t think it will have a long-lasting effect. Consider that other protocols froze their operations for weeks or reversed malicious transactions and last I checked they were still doing well.\u201dMeanwhile, a spokesperson for the Tron team told Cointelegraph that the \u201cTron leadership is currently mediating the situation with Steem Witnesses and will provide further details during the upcoming Town Hall,\u201d a public discussion involving Steem stakeholders which is scheduled for March 6 at 9 p.m. PST.