Can STEEM ever become a reserve currency?
The advent of SMT's will undoubtably disrupt the current paradigm. The role of STEEM within the ecosystem will grow considerably and it will increasingly resemble a reserve currency.
What is a reserve currency? a strong currency widely used in international trade that a central bank is prepared to hold as part of its foreign exchange reserves.
Essentially it's a strong currency that people are prepared to hold. So this leads me to my next questions:
Is STEEM currently a currency that people are prepared to hold? Will SMT's make STEEM a currency that people are prepared to hold?
The answer to the first question is obviously no but what about the second question?
While SMT's will certainely create more demand for STEEM, I don't think people would want to hold it as a reserve currency. The reason for that is that STEEM has permanent inflation, even if this inflation gradually goes down and will be very low in the future it will still be there. People want to hold something with a limited supply which is why bitcoin is so popular eventhough no one actually uses it, it's a holder currency.
This brings me to the main question:
Could STEEM be a real reserve currency with a limited supply coin?
The answer that first came to my mind was no. Blockchains that uses bandwith rate limiting can't pay witnesses/miners with transaction fees so they are condemned to inflate supply indefinetely at least to pay for network running cost.
But what if STEEM witnesses were paid in SMT's. Say for example each SMT have to allocate 1% of their newly created tokens to STEEM witnesses. This to me makes total sense because the STEEM witnesses are the ones running the SMT infrastructure and it is also logical from a scaling point of view that the more SMT's are using the STEEM blockchain the more money witnesses should earn.
The current SMT whitepaper assumes that the price of STEEM will increase due to demand for bandwith but we don't know exactly to what extent. In my opinion it is entirely possible that the price of STEEM remains pretty low while SMT's grow wild, ( especially if STEEM becomes the SMT cash out currency instead of the one people want to hold), this could become problematic scaling wise.
Back to the initial question. Yes STEEM could become a real limited supply reserve currency, Steemit.com will have to create it's own SMT's ( this could be a chance to do a new fairer distribution so that the haters can shut up and the whale drama can be left behind), all existing apps like dtube,dlive,busy,etc..will have to create their own SMT's ( most had the intention to do it anyway).
All SMT users could have a current account ( SBD ) and a REAL savings account ( STEEM with limited supply).
I think it's really important for the future of this ecosystem to position STEEM as a strong currency with a limited supply ( which could take effect immediately). Unlike most on this platform I don't necessarily believe SMT's are going to increase the price of STEEM significantly, we've had a lot of new users lately yet the price has taken a nose dive so bandwith and price doesn't seem correlated. One reason people don't invest in STEEM is because they don't want to lock their funds in a contract , if people can hold STEEM like a normal currency and that currency is useful and limited in supply then speculators will jump on it. There is also some complexity issue, the wallet is way too complicated for the average person to understand.
I want to hear you guys's opinions on this. Are SMT's going to reverse the steem price trend or is the issue of STEEM deeper than that?
Ive had the same question. Lovely to see it here as well, and nice responses of the community.
SMT's are the inflationary currencies of Steem, i guess...
D.
It's possible for Steemit to be the reserve currency only if it somehow manages to overtake Bitcoin as the number one traded cryptocurrency with the userbase that facebook enjoyed.Limiting supply in my opinion would not be healthy for the platform long-term as people with the highest amount of steemit could crash it if they ever sold off a majority of their holdings much like the domino effect bitcoin is having from the sale of bitcoin by Mt Gox to pay off it's investors.
A limited supply creates stability in a coin, the more strong hands the less brutal the crash.
Also the bigger the marketcap the more money you need to crash the price, limiting supply increases demand and so increases marketcap.
Hi @snowflake, i have only just started to read and learn about smts, so this article is timley for me. I was under the impression that smts ran on their own side chain, with only lets say summary transactions sent to the steemit block. This would mean steemit witnesses and smt witnesses would be different and smt witnesses will be paid with the smt (please do correct me if im wrong).
Hello @paulag SMT's run on top of the STEEM blockchain which means there are no SMT witnesses.
Everything is processed and verified by the STEEM witnesses.
if this is the case, the steem witness servers will be very very busy and the current steem witness reward system will not cover the costs of the servers. I have so much to learn, thanks for the clarification
Indeed, this is my concern.
And i have just found the line in the whitepaper that states steemit witnesses will be respinsible
now I am on the same page. I'm actually reading the SMT whitepaper now
I'm still curious if SMTs will see the light of day any time soon. We don't really know how they will play out in detail... they might be changing some paradigms... they might wreak havoc on this already bloating chain. Who knows?! We'll see! But I agree it might be a game changer.
Apart from that, the issue of STEEM feels "deeper than that". I think the rampant abuse of vested stake under "money-printing-mentality" and circle-scams that do cause the biggest downwards pressure... I can see where that may get even worse with SMTs in the mix but maybe I'm just paranoid.
I don't totally agree with this. Most people in crypto don't care about abuse as long as they can profit from it, 99% of coins are abuse because they have no utility or working product, yet speculators are buying it like hot cakes. Same goes for ICO's. The issue with STEEM is that people have to lock their funds in order to abuse the system, that's something speculators don't want to do. Also the general idea that steem lacks a revenue model is something holding investors's back. SMT's that want their price to grow will have to integrate some kind of revenue model because investors are uneasy with the concept of giving free money printed out of thin air ( we can agree on that point tho)
I agree that STEEM already has a ton more to offer than most cryptos out there, it's the #32 crypto by market cap for perfectly sound reasons. So I don't quite see where the comparison with pump&dump coins comes into play.
The risk for further downwards momentum that I see with what I dramatically called "rampant abuse" is the fact that there's a big pressure to extract value from the platform rather than contributing to it.
I do see a point can be made that SMTs may be drawing in more permanent engagement and thus create value. I certainly do hope that's what we'll be able to see. I am just a bit concerned it will bring another wave of scammy SMT-ICOs like we see with tons of ERC20 tokens... where there's only one motive... value extraction.
Either way... it will be interesting to see it play out in the steem ecosystem. Let's hope for the best. While I might sound a bit pessimistic here, that was just concerning this little point I wanted to make... all in all I still believe we can make this platform grow into a wonderfully diverse and thriving platform.
I did make the comparison to show that abuse is not something that's putting downward pressure on the price. 99% of coins are abuse yet they have lots of volume and demand.
If you look at how much people are 'extracting' from steem each day and the daily volume of STEEM you will see that it's meaningless.
It would be interesting to see crypto currencies's volume that comes purely from utility.
Most coins would be at less than 1% of their volume. Even STEEM which is a very useful coin have almost all of its volume ( which is low) come from speculation.
Ok that's a fair point! But then isn't that maybe also one of the potential main reasons why the crypto markets are tanking generally?! And yes, that also underlines that the sky-high prices were driven by speculation primarily.
I guess there's only so much speculative capital that can flow into a market and the "supply" gets drowned in exit scams like bitconnect and the countless drained ICOs... where does that lead in a longer term? And how could such scenarios play out inside of the steem-economy with SMTs?!
I think we share similar concerns there
Absolutely.
As long as you have winners the capital will come, same concept as gambling.
There is one concept that crypto and the free market re-introduced to us which is to take responsability for our actions. I think it's a good thing.
That's an interesting way of looking at it actually. I hadn't seen this before, but it does make sense to me!
The responsibility is an interesting aspect, too. Because I guess that's what I feel is lacking a bit in this landscape. It's not a secret that many players go out of their way to avoid accountability for how they use their stake.
This is a great article indeed... To be honest, One part of mind is loosing hope in cryptocurrency because of this deep dump that does not look like it will end. Just tell me something that could make me feel good about it, because sometimes a deep voice comes from inside tell me don't worry It will all become better than the last all time high,,,,, and thats why I am still attached to the market.
nice post !
flow me @rahulrana , @rahulrana1 , @rahulro -Thanks.
I think the steem will have a great future because of its giant projects and who said it will be able to compete with the rest of the mines
It could if buisnesses started accepting it as payment which I believe they should. Steemit has a working product one where we share in content creation.
I think there are alot of bugs that need sorting out and it's hard for new people to raise enough Steemit to make it worth it. I'm still sticking around though. I want to see Steemit work!
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i think the price could reverse however only if it takes bitcoin down
@snowflake