Those with weak hardware like myself can only jealously look at the beast rigs of professional miners. For some time, I couldn’t help thinking, however erroneous and illogical it was, that there was something very unfair about people earning money to buy equipment to make more money. Where did that leave me, late to the party with a budget well under 1000$?
As I started my crypto-adventure a little under two months ago, I stumbled upon different concepts behind crypto-currencies. Proof of Work was the obvious first, but then it turned out there were others – proof of stake/importance, delegation/master nodes and variations of the three.
As clearly naive as it is in hindsight, my initial impression was that decentralized currencies – and especially a community like Steemit - would be able to address a few socio-economic issues, one of them being that of unequal distribution of wealth. Needless to say, the rose-tinted perception was only a pleasant, but short-lived intoxication with self-induced excitement. If a remedy for inequality existed, it would likely be the wise thinkers of the past and not computer nerds who would discover it. Right?
Steemit: Crypto-parody of life (that you probably hate already)
Where does Steem belong in the crypto-world? Steem’s economic structure is an interesting case. It is a mix of proof of stake and delegation with all their beautiful promises and inevitable ugly consequences.
Proof of Stake and Delegation
There is, however, an additional issue unique to Steemit. While in a typical proof of stake scenario one has to only hold onto the coins to gain profit, Steemit allows its whales to have a powerful say in who will get paid and how much. Introducing a social element to the proof of stake concept has led to a repetition of tired and expected life patterns: it is a who you know against what you know situation on Steemit. Did you come here tired of the Facebook and Twitter buzz? Maybe Steemit is for you. Or did you come here tired of life imbalances? Well then, welcome back!
Delegation comes with its own set of downsides. It may give you the right to choose, but it won’t give you options. Delegates, that undoubtedly worked hard investing both time and money to get in the spotlight, will lure you over with incentives it will be hard to say no to. You will vote for them, and the richer will grow richer.
One thing Steemit does right, in my opinion, (correct me if I am wrong) is not letting your witness vote be influenced by your fortunes. If there is something I don’t approve of in the way my currently favorite altcoin Lisk does, it is weighing your vote power against the amount of coins you hold. While absolute centralization is unlikely, there is a “whale” element to the system. I think it won’t be long before different incentives will be offered to voters with different voting power there.
Hard work is not an equalizer.
The proof of work concept is susceptible to the same ailments of the previous two – it is a first come first serve principle with a compounding interest on top. Each serving gets you a larger serving in the future. Give it some time, and if you are not the minority top, then you are the majority bottom.
Crypto may save you from banks, but not from life.
As early birds enter a new market and as the market takes off, those people reap the greatest benefits of being first. Their fortunes grow, and with them grow their ability to grow even bigger. More money will buy you a better mining rig, will give you a higher return on your holdings, and will make you an influential figure in the community likely to get you elected as a delegate. This is the natural order of things, whether you like it or not. You may be entitled to your opinions about what constitutes an ideal world, but life won't hesitate to bulldoze through them.
Join me and many others in DeepThink at @steemdeepthink. Our combined intellectual power may as well be able to save the world from its greatest flaw - our stupidity.