The Steem Takeover and the Coming Proof-of-Stake Crisis

The Steem blockchain reportedly experienced a troubling episode recently, whereby the blockchain’s entire governance system was disturbed. Tron founder Justin Sun, new owner of the Steemit social network based on the Steem token, appears to have successfully executed a takeover of Steem by leveraging not only tokens directly controlled, but also tokens held on several major exchanges, in order to vote out the previous delegates (Steem uses a delegated proof-of-stake system) and install new ones. This means that customers of these exchanges likely had their funds used without their consent in this blockchain power struggle.

While it was an unfortunate episode and certainly fascinating to watch play out, the Steem takeover may have just outlined a critical vulnerability in all proof-of-stake cryptocurrencies — exchanges.

What this means for proof-of-stake

What does this mean for proof-of-stake consensus models? In short: they may be more vulnerable than advertised. Proof-of-stake…