Open decentralized networks such as Steem are a great place for scammers. Unlike centralized networks, your account cannot be banned, your coins cannot be frozen (as long as you control governance). It makes perfect sense that Steem attracted many shady individuals through the years.
Before the coin-delete fork, these scammers were a minority in the network. The biggest whales were acting neutral: no governance voting, no content voting, no DAO voting. Scammers were allowed to try to scam, but regularly had to adapt, find new exploits, or improve old ones, because of hard-forks or community outrages.
I can list many abuses and find the scammers in the top witness or whales:
Close-source GPU miners in 2016, back when Steem still had proof-of-work rewards. Money is in @freedom account still
@steemsports reward pool abuse: ran by @thecryptodrive a long time ago
Bid-bots: ran by many of the current witnesses including @therealwolf, @nextgencrypto, @themarkymark
Selling delegations: similar to bid-botting, just less work. @blocktrades offers that "service".
Fake accounts creation: UIs like @steemmonsters, @esteemapp or @drugwars. They generate keys of the users on their server and store them in a database. All accounts created by these apps are technically belonging to the UI.
Automated articles publishing and farming: See @arcange and @esteemapp
Voting trails. A lot of now-inactive users subscribed to these trails but the trail owners are still here so they control the voting power of these inactive accounts: @ocd-witness, @curie
SBD/HBD manipulation: mostly managed by @smooth and all his sub-accounts (@smooth-a, @smooth-b, @smooth-c, etc...). He has trading bots using the internal market, and he created A LOT of 'burn posts' that had the ultimate goal of creating profit for his trading bots.
Now scammers are the majority and can control everything in the network. Therefore they are going forward with a new type of exploit: proposal system abuse.
The Steem Proposal System (SPS) or DAO or DHF, whatever its name, was coded by @blocktrades staff, paid for by SteemIt Inc., and included in HF22 without any discussion about it, as HF22 included the long-awaited EIP that fixed the bid-bots issue.
Ever since recently, the SPS distribution seemed to be under control, but it's now escalating quickly:
@netuoso is currently the #1 beneficiary of the SPS with 425 HBD per day with two funded proposals running at the same time. He's been making 150 HBD per day for an application he did not develop (it was created by @jesta). On top of it he also makes 275 HBD/day for continuous development. He is currently pretending to work on making Ledger hardware wallets work with steem, when actually it was already created and open-sourced on github 8 months ago.
@howo managed to get 180 HBD/day for SMT testing for 6 months. A work that was never accomplished. Now he is an official Hive developer earning 275 HBD/day
@yabapmatt, the creator of @steemmonsters and the most used bid-bot software, as also been slowly syphoning and will keep on syphoning 200 HBD/day for keychain, a software that barely got updated in the past year. And apparently @stoodkev is the one doing most of the work.
@good-karma (owner of @esteemapp previously mentioned), is also getting 70 HBD/day, for HiveSigner, a copy of SteemConnect created by @fabien, a now inactive dev.
@themarkymark seems to be more reserved for now. He is only taking 20 HBD/day for hosting a blacklist of usernames (literally a .txt file).
@justineh (NEW). What if you could claim that one individual is responsible for the Bittrex, Huobi and Binance listings? If you think @justineh is this person, and is entirely responsible for the recent pump in HIVE value, you should vote her proposal and give her 500 HBD/day
@blocktrades (NEW). This guy is not a kiddo, so he went forward with an impressive 1000 HBD/day proposal for an image upload server that realistically costs less than $100 a month... In any healthy organization, the boss needs to be the one getting paid the most, so @netuoso will have to lose his #1 SPS abuser spot.
425+275+200+70+20+500+1000 = $2490 / day, for a team of 7 useless people who either don't work at all, steal others work, or are just using contractors like @blocktrades, and taking a cut as the middle-man.
6 out of these individuals are also syphoning from the Witness rewards for running a server passively. It generates an extra 0.250 HIVE per minute per node, which presently converts to about $144 / day per node.
Total estimated yearly budget for this team: $1,224,210
Now compare these amounts to the highest daily content payouts in the network (the only fair way you can earn Hive), and you realize there is a big issue. The SPS daily reward represents more than 20 times the top daily content. Just imagine if everyday @blocktrades had a 1000 HBD article, @justineh another one at 500 HBD, etc. Don't you think people would start downvoting and complain? Luckily the SPS is well-hidden, and its design makes sure that minnows are completely disinterested from it considering their votes are irrelevant.
How to stop the SPS/DAO/DHF abuse?
1- Upvote the return proposal. That's the only thing you can do that has an impact. Voting it will make it harder for whales to get something funded from only their votes.
2- Redesign how it works so that minnows are less irrelevant to the system. Probably instead of having a threshold and go from 0% funded to 100% funded, the funding amount should be growing as you get more votes for a proposal.
3- Remove the SPS entirely and put the money back into content rewards
4- Move back to Steem where Justin Sun effectively disabled the SPS and this abuse doesn't take place