So there are quite a few parts to the proposal that you are not understanding.
First of all, it is only talking about the distribution of SMTs (not STEEM). The rewards system for STEEM/SP will remain the same. If someone wants to influence STEEM rewards, they will still need to buy more SP.
Second, Oracles are the key part to the proposal. An Oracle is going to be an entity that verifies the uniqueness of someone's identity. Most likely these will follow similar protocols to the KYC policies used by the major exchanges. The primary idea behind the proposal is that each person will only have one account (that is verified by the Oracle).
Regarding your accounts, account recovery is handled by whichever entity created the account. If you go to steemd.com/@accountname, it will show who the Recovery account is. If you created the account through BlockTrades, then BlockTrades would likely be the recovery account, and you would need to work with them if you needed your account recovered.
Regardless of where you created your account, you can always change your keys using the "Change Password" tool on steemit.com. If you do, just be sure to save and backup your new key.