There is a situation that is rarely talked about on here yet could pose a major threat to Steem. In fact, it could be the biggest threat this blockchain could face if it became successful.
That threat is the idea of STEEM being a currency.
I know this seems like an odd thing to say but it is something to be mindful of.
Let us follow the course of action as it is expected to unfold. During the first quarter of 2019 the SMT protocol will be released. We already have a number of tokens being distributed on here with more certainly added.
Now, suppose this protocol is successful for content creators and we do start to tokenized the Internet as was originally intended when they were announced. If you really think about it, there is a lot of content out there to be monetized. Steem has a monetization system that is shown to work.
If we reach that point where the SMT penetrates the content market with anywhere near the degree of success the ERC20 had with the ICO market, we could ultimately see hundreds of billions of dollars in value created on this blockchain. It possibly could morph into trillions if some big names join the party.
Of course, this would be a wonderful thing. It does potentially create a major problem that we are seeing across the world of cryptocurrency.
It comes down to governance and having the ability to take over (read sabotage) a network. We see this with Bitcoin and the fact that a few miners have most of the power. Naturally, Steem uses a different system but the same potential threat exists.
Steem solely as a currency to conduct transactions for what is built upon it would be catastrophic. This would mean that taking over the entire system would not be very expensive. Why? Because currencies are not stores of value. People convert their currency into other assets to protect and grow their wealth.
This is something that Ethereum could face. If it ends up as the gas for all that is built upon it, presuming it converts from POW, those coins could end up in the hands of people with ill-intentions; governments for example.
Hence, STEEM needs to be more than just a currency. It ultimately needs to be a store of value. The idea is to get people to hold the coin as opposed to using it. Again, this might seem counter-intuitive but look at where wealth is throughout the world. Even in the crypto world, the idea that the tokens of what is built on a block chain being worth more than the native coin is not foreign.
Fortunately, Steem does have a built in system to protect against this. It is called STEEM Power and it is a genius idea. Powering up means that people are creating a store of value with the coin. As more of this is done, the amount floating freely on the open markets is diminished. This makes it a lot harder for people to get their hands upon.
Consider it this way: There is just under 300M STEEM issued right now. Over the next couple decades, if the chart I saw was correct, that number will about double. At the present price, the total market cap is about $240M. Thus, for about 3 times the total amount of Elon Musk's fine by the SEC, one could exert enormous influence over the network.
Obviously, this is not possible at the moment since 60%-65% of the STEEM available is locked up as STEEM Power. Certainly this could be powered down and sold. To start, it would take a more than 3 months to fully do that. The other thing that I see is that one is not going to be able to get people to do that for under a dollar. A situation like that would certainly push the price higher.
The other challenge with breaking SP out of people's hands if there is incentive to keep it there. People are rewarded in a number of ways for investing in the network. While not often mentioned, powering up actually protects the network from attack. This only strengthens with each SP that ends up in a wallet. It does not hit the open market.
We can see why it is crucial for STEEM to be in the hands of people who are committed to what is taking place here and have a long term view. Strong token hodlers provide a defense for the entire ecosystem. This is only compounded when the SP is then delegated out to applications that are building upon the network. Under this scenario, not only is the SP used to stimulate growth, it is also being utilized by the ones who protected by a stronger STEEM.
Many are creating projects where they are trying to figure out how to make people want their coins, use them, but not have everyone dump them. Essentially, they are looking for the answer of how to make their currency valuable. As I see it, this is not likely simply as a currency. Money tends to be for transactions, not stores of wealth.
As I look out at the major tokens we see some of this in action. One reason I think Bitcoin will be a major player is because the name gives it the store of value. The idea of digital gold is being embraced. Ethereum, as I noted, could be in trouble. Litecoin, I do not see much of a defense there since it was set up to be digital silver but there are other options. Hence, that is nothing more than a transaction coin in my view.
Steem has that built-in defense. Yet it is not something we can take for granted. It is imperative that everyone power up when they can afford to. I know there are many where STEEM is income for them. That is also a wonderful benefit to this blockchain. However, for those who are not dependent upon STEEM to pay basic bills, powering up at every opportunity only strengthens the system. Imagine what things will look like on the open market if 80% of the STEEM in existence is powered up.
People often scoff at those who buy STEEM and power up. This is a crucial aspect of the long term viability for this blockchain. Taking coins off the free market is always a good thing. Just look at what happens when companies announce stock buybacks. The market goes nuts because it means increasing the value (on a per share basis). It is a similar situation although not the same because coins do not represent ownership or entitle one to any profits. However, they do adhere to the laws of supply and demand.
Last night I moved a bit of money around to buy some more STEEM. It is around 11 months since I did that but I think it is time. There are many advantages to it in my view so adding to my SP hodliing helps in a few different ways. Adding another 1,000 SP, give or take, will help to remove some more from the open market while also increasing my stake on the blockchain.
And that is a win for all of us who are hodling STEEM.
In my view, there are at least 11K people who have a serious interest in this idea. Those with 500 SP or higher, if the price approaches triple digits, are looking at a nice chunk of change. It certainly is nothing to scoff at. These are the ones, in addition to other accounts that see the vision, who will want to keep this in mind.
As we know, an investment in STEEM is an investment in oneself.
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Please note none of this is to be consider financial advice. This article is for informational purposes only. Seek out the proper counsel before ever making a financial decision. I am not that counsel.