Why You Shouldn't Criticize Liquidity Monopolists: Liquidity Is More Important Than Spread - It Gives Steem Value!
I have seen a wave of posts criticizing certain whale liquidity providers for hoarding all the points and offering wide spreads.
However, I feel as though those raising these concerns are in general not so much interested in the development of the ecosystem rather than trying to get a taste of the 1200 Steem pie.
The criticism often appeals to notions such as "greed", and more credibly the fact that a handful of whale liquidity providers have demonstrably little incentive to tighten spreads.
I feel as though appealing to greed is just a way to frame the argument in a negative light. Because what is really happening is a handful of people acting on incentives that are present.
Why would they provide liquidity in a new, highly volatile and virtually untested crypto without some substantial reward?
Would a rational market maker not try to maximise rewards?
Secondly, liquidity is what will attract newcomers to Steem, it matters much more in this growth stage that Steem is in, than tight spreads do.
Newcomers will probably be fairly agnostic about Steem (coin), in the sense that they will want to convert Steem into fiat, which is far more valuable at present.
And the faster they can convert Steem into fiat, the more they will be incentivised to engage with Steemit.
And so, a newcomer or a Steem agnostic user will not care that his Steem value is being essentially debased by 10% due to wide spreads, since writing a blog post costs near $0, and the value the user extracts from Steem is being able to convert it into fiat.
I hope liquidity whales are incentivised to continue providing liquidity to Steem and let's not allow envy to dictate policy!
Check out my other posts:
Don't panic sell you'll regret it
Beware of the Catfish scammers
The reflections of a professional Steemer in 2031
Steem needs to invest in a better sub-reddit
https://steemit.com/steemit/@positive/steemit-needs-to-invest-in-a-better-sub-reddit
#steemit #steem #money #investment #trading #internalmarket #blockchain #market #marketing #bitcoin #cryptocurrency #fiat #future #security
Ignoring the problem won't make it go away. STEEM is hemorrhaging 26+ million dollars a year on a liquidity incentive system that doesn't work.
Brushing off all criticism of the liquidity incentives on the basis that the antagonists are jealous and want the incentive rewards for themselves is silly. I don't want the 1200 STEEM a hour, all I want is for the flaw to be fixed. No, they are not providing useful enough liquidity for the amount STEEM is paying ($3,756 USD per hour, $90,144 USD per day, $631,008 per week, $2,208,528 per month, or $26,502,336 per year). The spreads are huge and the "useful" liquidity amounts to very little.
You need to understand that SP/STEEM stakeholders are paying a few people 26+ million a year for these liquidity incentives in the form of debasement, and they aren't even doing a good job. Tell me... in the real world... what job exists where it is okay not to do a good job, yet you still get paid millions? There are only a few people getting a share of the 26+ million a year... for providing a crappy service. There are wide spreads and there is low market depth unless you look a large percentage away from the peg.
Liquidity providers work for us (SP/STEEM stakeholders.) They are doing a bad job, and we need to like any other business on the planet would and fire them. Liquidity incentives are and will always be game-able, no matter what parameter is tweaked or added. We need to do away with liquidity incentives all together and implement something better... autonomous liquidity with tighter spreads. Sadly, your post encouraging this madness is getting more than my solution to the madness. I can't even...
The Solution:
https://steemit.com/sip/@coinhoarder/steem-proposal-abolishing-liquidity-incentives-and-reverting-the-funds-to-provide-actual-autonomous-liquidity
I feel like this argument isn't altogether honest. People haven't been appointed. They earn the rewards because they trade the largest sums in Steem/SD as market makers. Otherwise they'd get replaced by those who could essentially stake larger sums.
Secondly, with this autonomous fund, you risk spending more than with liquidity rebates, which is why liquidity rebates exist. In practice, in some periods that may not be the case but that's a very credible risk.
Assuming no wash trades, in one case you are paying someone 1200 each time he provides liquidity, in the other case you are paying someone (the autonomous maker) 1200 regardless.
Assuming wash trades, wash trades can't carry on all day without providing at least some liquidity, given that limit orders will be placed by agents other than the market makers, so you would still be paying less than the agent who is receiving 1200 Steem an hour regardless.
Why? Because you'd be paying for the liquidity they provide, rather than just paying to equip them with the tools to provide liquidity.
Satanic price)
hahaha
I feel like my criticism is indeed honest. It doesn't matter if they were appointed or not, either way it is a huge waste of money. Sure, there is some liquidity being provided, but it is not largely "useful" liquidity (a decent amount of liquidity close to the price feed).
As to your other point, you misunderstand how my proposal would work. Any liquidity incentive scheme you could come up with will cost stakeholders 100% more STEEM than my proposal. Read what I wrote here, that should clear it up... not all dilution is created equally:
Oops, didn't read that part.
That's a pretty good idea, and I would endorse it actually.
After viewing the price of steem on https://coinmarketcap.com It makes sense. I also think it’s important.
liquidity is important, Heres hoping the whales are as benevolent as you think they are.
I don't envy people because of their own success i love it when someone makes it in the world, what i do not like is these same successful people trying to shame the little man from voicing their opinions or throwing his/her weight around in an effort to silence dissent.
Time will tell which way this goes.
I understand your point. But I believe this can really be solved quite feasibly through a different client implementation that encourages diversity of content, if that's what you want to see.
It's not just diversity of content that we need but also quality of content, if we are not careful it can turn into another 4chan
For example and also bringing me closer to your original topic is, the bots that are running and becoming larger and lager in their power bring basically nothing original to the table and dilute the quality of this medium .
Great positivity, per your name :) I think you're right that newcomers may not understand the deeper implications of this platform, but will enticed by the ability to convert Steem to fiat. In the near future we hopefully won't need to convert to fiat anymore at all
I honestly think fiat will probably always have more value. Though it may be blockchain based in the future. Simply because the majority of people, or so it would seem like the safety net of government interventionism.
The Ethereum calls for a hardfork I believe exemplifies this.
the good side of the story is that the whales often have wealth in Steam Power. But to get the Steam Power out of steemit.com will take 2 years. The Bad thing is that there voting power is really high which looks for me like a problem. There are again people who have a lot more "to say" then the average guy. This is a big problem in a decentralized community platform.
my understanding is that the main criticism is that the liquidity monopolists arent actually providing liquidity, just swapping back and forth with gimmick accounts to get the liquidity provider reward (which amounts to like $5k per hour)
I was addressing the criticism that liquidity monopolists are forcing out competition by monopolizing rewards, and offering wide spreads.
A lot of the market making is genuine and they're providing real liquidity.
They are not providing useful enough liquidity for the amount we, as SP/STEEM stakeholders, are paying via debasement... $3,756 USD per hour, $90,144 USD per day, $631,008 per week, $2,208,528 per month, or $26,502,336 per year. They need to be fired and replaced with an autonomous market making solution that doesn't hemorrhage stakeholder equity.
I upvoted this because I hope people read the comment section, and come to understand how much money STEEM is wasting.
I agree the wales are large investors in steemit why would they try to adjust or move the spread if it is not in there favour
The illusion of value.
Почему вы так считаете?