Is Steemit a Scam? - It’s Complicated – Tests 4 & 5.

Test 4 - so what exactly are the risks?

Having spent 30 years in the finance industry, (and designed a few investment schemes myself) I’m examining, in a series of post, whether Steemit is a financial scam or not.

To evaluate the true nature of Steemit as a financial scheme, I am using five tests which can be applied to any financial scheme:

1. Who is making money?
2. Who is losing money?
3. What happens when new investment ceases?
4. Identifying the risk factors
5. Evaluating the risks

In my previous posts Steemit passed tests 1 - 3. Test 1 with conditions: someone else has to be willing to convert Steem to real world currency and will charge for that transaction. Still, 70% (as a random example figure) of something is still better than 100% of nothing.

Test 2 was also passed. Although it is possible for those who invest real world money, but are not prepared to create or curate content (‘work’), to lose money in Steemit, those willing to create and curate content can make money.

Test 3 was passed, but a gain with conditions. If new investment money ceased it would still continue to earn. Whether this investment model is necessary to kick-start the unique content creation and curation model, which would hopefully continue to flourish, is hard to say. All will depend on how the developers wish to take the platform forward should new investment fall away.

Test 4: Identifying the risk factors

Having established that money can legitimately be made and no investment is necessary, I now move on to looking for the catch.

The catch? Of course, every scheme has catches. It is, however, healthier to consider them as risks rather than tricks set to catch us out. Tricks need to be avoided; risks can be assessed and mitigated.

Only after we have identified the risks can we evaluate them and decide to what extent we should participate in the scheme.

Risks identified:

1. If I earn below the minimum amount of Steem currency exchangers wil..
   accept, I cannot change it for real world money.

2. If currency exchangers refuse to accept Steem, the money I have earned or
   invested is locked permanently into Steemit.

3. Currency exchangers will take a fee (possibly substantial) to change Steem
   to real-world money.

4. It is necessary to invest time in creating and curating content to make any
   money.

5. If the underwriting currency (Bitcon) downgrades Steem, it becomes
   useless.

6. If no one likes my content, I will not make money.

7. If Steemit folds I will lose any money I have acquired or invested but not
   managed to take out.

8. Steemit may change the rules to make it harder to earn money or take
   Steem out.

9. Content can only earn Steam for 7 days and will remain in the blockchain
   forever. So the earnings potential of any original content created is limited to
   7 days.

10. Creating and curating for Steemit will take away time I could be spending on
    other commercial activities.

11. As the number of Steemit members grows the potential rewards for each
    post will dilute, requiring an ever increasing number of people to ‘up vote’ to
    earn the same income.

12. The future earnings potential of Steemit is in the hands of the developers,
    who can change the rules without notice.

13. Not getting involved risks this unique idea failing.

14. Where else does content creation and curation have the potential to earn in
    such a way.

Test 5: Evaluating the risks

1. Clearly the largest risk is investing real world cash into Steemit and not
   being able, for a variety of reasons, to get it out again.

2. An equally devastating, but in my opinion lower risk, is if the platform is
   closed down, again without any return of cash.

3. Only being able to earn Steem and Steam Power off a post for 7 days is a
   limiting factor, but manageable.

4. Provided I create original material that can be used on other platforms, I will
   not be wasting my precious time.

5. Content curation will take up time, but is worth an initial investment of time to
   see if returns justify the time investment.

6. Dilution is an inevitable result of success growth for the platform, but more
   members also means more readers/up-voters so could be positive in the
   long run.

Conclusions
-----------------:

Very simply, it all boils down to this:

1. Any investment where you can lose, or be locked out of, your initial
   monetary investment in one ‘foul swoop’ is, by its nature, inherently high risk.
   So, whether you are investing for growth or to up you Steem Power, don’t
   invest any money you cannot afford to lose completely.

2. If you are a content creator, and do not invest money, you have nothing to
   lose except time. In fact, for a content creator and curator, who is not
   investing, the risks are very low. You put in nothing but work; you might
   make some real income.

So does Steemit pass my five financial tests? Yes, but….

• Yes, in terms of the creation and curations system.

• Maybe, in terms investing real money, provided you are prepared to create
and curate, and run the risk of never recovering it.

I don’t give financial advice, but, in terms of making a financial investment, I would consider Steemit a high risk investment. That’s not to say you won’t make a return, maybe even a handsome return, but don’t bet the crown jewels. Seriously, don’t invest any money you don’t mind losing completely, because it could happen, even if it doesn’t.

As for content creation, wow, what an opportunity. From a content provider’s point of view, this is the way we would love the whole internet to work. Will it last? Is it a dream? Is it too good to be true? Who knows, but I intend to take full advantage for as long as I can and support other content creators as much as possible along the way - especially writers.

In the next post: The reason I’m really here.

Image by giphy.com

Other posts in this series:
Is Steemit a scam? Test 1
Is Steemit a scam? Test 2
Is Steemit a scam? Test 3
Is Steemit a scam? What I'm really doing here