I'm glad to see this conversation happening. As a newcomer to Steemit, but not (at all) to questions of ethics, I'd like to offer a few observations:

1. Yes, what is described in @farazahmad's post is (as far as I can tell) within the rules of Steemit. That doesn't make it right! The laws of the land (where-ever you live) don't capture everything about morals & ethics; lots of people act within the law, but are still mean or dishonest or manipulative. Similarly, the rules here don't cover every possibility of unethical behaviour.

2. The discussion can (and should) be about what kind of system we all want here. As an Aussie journalist said recently: "Economy is destiny". Steemit and will rise or fall based on the form of its economy. I'll leave my views on what is the appropriate compromise between what will work and what's fair for another day, but I will say this: If the status quo turns out to be bad for attracting new users (and new money) to the platform, then eventually even whales may regret supporting it.