The drama with STEEM is probably the most important thing happening in crypto now. It’s an amazing experiment in crypto M&A, adversarial strategy and the legal/social repercussions of “stealing” via hard fork, forcing tough discussions across many large exchanges. /1

2/ Binance’s lawyers had to think about the safest legal route, not an easy question here: https://binance.zendesk.com/hc/en-us/articles/360043558352-Notice-Regarding-Upcoming-STEEM-Network-Upgrade

3/ we haven’t really had a legal test yet (to my knowledge) of where responsibility rests in a case like this. With STEEM, both sides are threatening legal action. If it actually goes to court, the precedent set could be very meaningful.

4/ members of larger and more decentralized communities like bitcoin and ethereum may be tempted to dismiss this situation as peculiar to a far more centralized network, but I think that’s a mistake.

5/ decentralization is a spectrum and it’s not clear to me how to draw sharp lines. What this drama really shows is that the arbiters of reality in a practical sense are likely to remain “economically important nodes” (I.e. mostly centralized exchanges) for the foreseeable future

6/ most centralized exchanges chase customer volume and react to some degree to customer pressure. But...they also are often huge voters in PoS network decisions using customer deposits, and some run very large mining pools.

7/ in the bitcoin community, people sometimes talk about the individual node runner as having meaningful veto power, but the real belief is shown in the social attacks on the “New York agreement” for example. Social consensus matters, and “economically important nodes” matter.

8/ imo, any person or community that wants to avoid a STEEM-like outcome has to take the threat seriously, long in advance. As crypto matures, we see tougher, better financed, and more vicious players exerting hard and soft power to change “decentralized” outcomes.

9/ with BSV and BCH, we saw hints of that possible drama, but never saw the fireworks, when a rich BSV’er controlling susbstantial hash power threatened to mine empty blocks in BCH in secret and launch sudden block reorganization’s.

10/ that was a threat that couldn’t be trivially dismissed at the time. BTC has never faced a similar credible claim, but the difference is only one of degree. At the time, it would’ve been roughly 10x as expensive to do the same on BTC.

11/ crypto often feels “warm and fuzzy” with social norms or assumptions of simplistic “skin in the game” game theory preventing on-chain attacks, but this is naive imo. As the industry matures, expect more well financed vicious mercenaries to try increasingly clever attacks.

12/ as we saw with STEEM, in a network with consensus determined by token holders, large holdings of tokens by exchanges or custodians can be easily abused.

13/ In a PoW network even if hashpower superficially appears decentralized, I worry about ASIC backdoors, supplier oligopolies, or more simply, hacks or coercion of mining pools that redirect hashpower.

14/ valuable crypto networks are probably like countries - peace without force behind it is likely to become an intermittent exceptions. Human history has shown that a country with great resources and a weak military rarely survives long (unless protected by allied military.)