RE: Where does all the money come from on steemit? How long can it continue?
Carl,
This a very good explanation and addresses multiple points perfectly!
I am pretty sure there is no real question on where the steem coins come from or how they are created on the chain as most people with an understanding of blockchains at all understand the basic mining principles including pow, pos and some understand dpos (which was genius in of itself).
I have just reviewed the white paper again and do find some comfort in fully understanding that the activity of the social network itself is part of the "mining" process. I also fully agree that Steem's 3 second confirmation times gives it a huge advantage over most of the field. (EOS is slated to exceed this -- another ingenious development by the same)
Yes, steem (the token) has a huge potential of increasing in value as does the platform.
But pure math, if there will be more money being transferred out of steemit (selling for fiat or transferring away), than being earned by creating new coins, then there will be a problem somewhere down the road.
Page 16 of the white paper probably answers this for the most part.
Payout Distribution
One of the primary goals of Steem’s reward system is to produce the best discussions on the internet.
Each and every year 75% of the yearly inflation is distributed to users submitting, voting on, and
discussing content. At the size of Bitcoin this could be several million dollars per day being given to the
top contributors.
The actual distribution will depend upon the voting patterns of users, but we suspect that the vast majority of the rewards will be distributed to the most popular content.
The impact of this voting and payout distribution is to offer large bounties for good content while
still rewarding smaller players for their long-tail contribution. The economic effect of this is similar to a lottery where people overestimate their probability of getting votes and thus do more work than the expected value of their reward and thereby maximize the total amount of work performed in service of the community.
The fact that everyone “wins something” plays on the same psychology that casinos use to keep people gambling. In other words, small rewards help reinforce the idea that it is possible to earn bigger rewards.
Problem is when the inflation is gone so is the cash flow as there are no transaction fees on the network to maintain the payouts. We will need money coming in. Perhaps SMT is the answer. I will need to study this more before commenting.
Sorry for the long reply.
I'm now beginning my research on SMT and will try to give an update on all of this.
Thank you and everyone for their great input.
Yes I was going to mention that I had totally left off SMTs, any implementation of which will need enough Steem power to have the bandwidth necessary for users of the SMTs to take actions. Also, and it has been a few weeks since I last ran this query, but last time I checked the % of Steem that was vested as Steem Power was increasing in relation to total market cap, not decreasing. Despite all the SBD outflow, there are more people trying to buy Steem to power up. While there are other coins that allow you to vest your holdings to earn interest, Steem has a far more powerful incentive - without Steem Power you literally can't use the platform at peak use times. And the 13 week power down means Steem has a natural buffer to short term fluctuation that many/most other cryptos do not. Obviously this is a complicated subject, but I personally anticipate the value of Steem to increase over the course of 2018 despite the unintended inflation caused by the weak peg SBD has to the dollar and how the post payout is calculated with the assumption that 1 SBD = $1 USD (which it obviously has not been even close to lately).
Yes, the bandwidth problem has come up by several of the commenters on this thread. I was unaware of this. I powered up to maximize my work efforts and did not realize others without the ability to power up quite a bit, had these problems.
There is no doubt SP will increase dramatically for the near future as the platform is just now in its "awareness" stage.
One of the final statements in the white paper is
So this experiment will certainly have a lot of learning and problem solving along the way. I have a great deal of faith in people with the IQ high enough to have conceived it in the first place, but at this point some basic problems will present themselves soon.
BTW: Where are you running a query to analyze the ratios you mentioned. I would very much like to review this as well.
Glad I ran across you, you indeed have a wealth of information to share!
I'm now following you and look forward to future discussions on this "experiment"
Up until just a week ago or so, @arcange ran SteemSQL database as a free SQL database mirror of the blockchain. Since then he has switched to a paid subscription model with the steep fee of 10 SBD monthly. It is easy for me to justify this fee so I am paying it, but understood it is quite steep when taken out of context. For me, I do all my curating for @curie using custom search queries I have created. I earn 10 STEEM per approved submission to @curie as a finder's fee and see ~9-10 posts approved per week = no brainer for me to pony up for the DB access :)
Thanks, I'll check out his blog -- being a programmer I may just find some reason to justify it.
Please take a look new post created after finishing my research.
Thanks you VERY MUCH for all the information.
https://steemit.com/steemit/@bycoleman/where-does-all-the-money-come-from-on-steemit-fully-answered-will-it-continue-yes