I don't understand the claims of "Steem is a Pyramid Scheme"
I'm no economist and so this could all be wrong (if so please educate me in the comments, I'm always open to learn) but to me I think deflationary currencies (e.g. Bitcoin) that have a hard limit to the number of coins (21,000,000 in the case of Bitcoin) are the cryptocurrencies better described as "Pyramid Schemes" because for every fiat dollar buying in every single person who already bought in will see an increase in value of the Bitcoins they hold. So for every friend you get to buy $100 of Bitcoin that adds $100 of market cap to Bitcoin and then in turn adds $100/(number of mined coins) value per coin. If you get in early enough and just wait you can't help but get richer off the backs of those that buy in after you. Now of course the fiat/BTC exchange rate fluctuates because of cryptocurrency markets but at a high level that is my understanding of what is going on.
Steem on the other hand has a defined amount of inflation that reduces over time but never goes to zero. This to me is the opposite of a "Pyramid Scheme" because if you just sit on a lump sum of Steem it's going to slowly lose value and the only way to avoid that is to be active on the blockchain (post, comment or upvote). In my mind that inflation basically ensures that some amount of wealth held by whales gets cycled back around to minnows who join later. This seems like a much more equitable proposition and means that Steem will always be an attractive blockchain to invest in whereas chains like Bitcoin only become less and less attractive to new comers.
If our ultimate goal with crypto is to replace fiat then I worry about the next generation or the poor. How will things be equitable for the poor who get on the chain late? Steem incentivises you to use or spend your Steem otherwise it will slowly vanish due to inflation, but if you upvote minnows posts or comments then you not only protect your value on the Steem blockchain but you also increase value for others.
I bought in to Bitcoin not long ago and it made me some good returns but the more I learnt about cryptos the more I noticed I was just hording Bitcoin and actually the thought of spending it just filled me with doubt so I avoided doing so. This just led to stress. The best thing I did recently was dump all my Bitcoin and move to Steem and then stake it and delegate it to @MinnowBooster. Now I sleep so much better knowing my staked Steem is being used to spread the wealth and I get paid a bit doing so. If I ever get to the point of giving up my day job I fully expect to un-delegate and start using my staked Steem directly but until that day I'm happy to see my little bit of Steem not only keeping its value but also being used to give value to others.
Great Article! Whether or not steemit is a pyramid scheme. The authors do work very hard sometimes to earn the money so its not totally free money.
I don't agree with your idea of how adding value to Bitcoin works. You say that someone buying in with $100 would add $100 to the market cap but that's clearly wrong - it defines the value of all Bitcoin at the price they paid, at least temporarily. That could raise the market cap or it could lower it. If they bought a full Bitcoin for $100 the price just got cut to 1/10 what it was!
Think of it this way: if I buy in for a certain amount, someone else must have sold out for that same amount. The money isn't only moving into the system, and the system only grows if the seller sold for more than they bought for.
How does that work for coin mined every 10 minutes with each block? I can definitely see your point on how it affects coins already in circulation though. Currency exchanges definitely add a level of complexity that makes it much harder to grasp, especially for those of us without economics degrees (I now have on my todo list to look for online economics courses 😁)
Good post and good qwestion steem itself is not a Pyramid but it sort of falls into bitcoin and coinbase pyramid scheme like all other altcoins when bitcoin drops they all do. why has bitcoin eth coinbase exchanges etc got so much power 2 reason first mover advantage. Plus fiat gateways. So what we need need is fiat gateways until this happens we are not in a free market . and bitcoin is daddy.
Good post. So informative
Good work good post
good post
@scottweston ..couple of reasons Steem on first touch point ( to a layperson like me) sounds like a ponzi scheme.
Where does the money come from ?
Ofcourse it is also true for other cryptocurrencies as well , it is only valuable if enough people believe in it but the initial hang up is about who is going to pay for all the people cashing out?
Think of something similar to a bank run - if everyone on steem decided to cash out , will steemit be able to support that?
So , I just make money for upvoting stuff ? sounds an awful lot like a click farm.
On further analysis obviously one realises that votes are weighted and one would not want to ruin their hard earned reputation/steem power by clicking randomly.
So what if we are group of 30 people who keep liking each others post and keep making money in perpetuity ?
Actually that happens a lot on other platforms too ( viz instagram) where people would like your post/resteem for $$ , its just not that visible to outside public.
The vernacular used on steem can be misleading --
Bots are available and used everywhere , a concept that is frowned upon elsewhere in the social media.
If they just called them schedulers/automators/pick a better word it doesn't sound that fishy ..ofcourse it is more of an optics issue.
Convinced steem users want to pull in more people to steem ( i do too) and that sort of chain building system is also observable in ponzi schemes.
There may not be causality because of that behaviour but certainly parallels to be seen in both use cases.
It takes some effort to scratch beneath the surface to get over these hangups and become a believer. I do not think its a ponzi scheme , it just sounds too good to be true at times !!