Falling STEEM/SBD Price: A Comment on @timcliff's Article
I've already posted about the problems and solution to Steem's falling price, but there are other authors, like @timcliff, who have a different perspective on Steemit's problems. You can see his article here. Follows my reply, summarizing the current reason why Steem's price is falling and the only possible solution at this point.
Holding Steem in or out of the system has no actual effect on the price of Steem.
The reason is simple - as long as the single most influential user and producer of Steem is Steemit, then Steem will always be traded like a company share. Add to that the constant printing of new shares (devaluation of the rest) and no information about the actual value of the Steemit network, and you have a serious problem on your hands.
To better understand this problem, ask yourself the following:
If a company of unknown value has 100,000,000 shares (and their number keeps increasing), but only one share is sold on the market, while the rest are held by company investors, are you going to pay a premium to obtain 1 share out of a million, or would you rather pay a millionth part of what you, as a trader, consider the company to be worth now and in the future?
As far as holding on to SBD - it was a huge mistake to introduce a pegged currency, in the first place. The developers couldn't have known how their project and attached currency will fare. This was a psychological gimmick for investors, but a huge risk for the system. And as we are now aware, the developers' expectations were wrong, especially considering the overprinting of Steem. In fact, hard coding economic growth is always wrong. The last time someone tried planning its economy, it changed the lives of hundreds of millions of people (USSR and the Eastern Block; China in 70's).
If a country pegs its currency to another, to make its economy stable, it never:
- Changes the peg.
- Trades with its pegged currency.
Why? Because changing the peg speaks of continuing instability and trading with a pegged currency leaves the country's economy in the hands of the foreign exchange market, which always reacts negatively to instability.
There is only one solution to Steemit's problem:
- Stop printing Steem.
- Start offering something unique in exchange for other currencies.
The first one won't happen, because of the way Steemit is designed (see my reply to @mindhunter in the comments below). The second one will soon be changed with the introduction of advertising banners on Steemit (we will be selling our somewhat original articles for fiat currency obtained by income from banners).
Why not limit Steem to 250 millions coins just like Bitcoin is limited to 21 million coins??
The founders, @ned and @dan, wanted people to get paid without investing any money. The only way to achieve this is by printing money daily and then distributing it to authors through upvotes.
If there was a clear and well communicated limit (using your proposed number) of 250 million coins, then Steem wouldn't keep losing its value, as traders will engage in the following logic:
So the price of a Steemit share (which we refer to as Steem), when we hit the limit of 250 million, would be equal to SUBJECTIVE VALUE OF STEEMIT / 250 million shares.
After this point in time, the only thing driving the price of Steem up, would be the subjective perception of the price of Steemit.
However, since authors keep selling Steem for fiat currencies, sooner or later all the Steem will leave the system and there will be none left for upvotes and authors will gradually stop getting paid. In fact, all the shares will become property of the cryptocurrency exchanges, such as Poloniex or Bittrex (you can see all the Steem they've bought in their Wallets), who will basically own (a defunct) network.
Would you buy Steem to go an upvote an article and save Steemit? Not really, right?
That's why Steem (shares) keep getting printed. But this is akin to a company, which is worth very little, printing millions of shares, trying to sell them on the market and get some cash in for the authors. Steemit is basically running on hype at the moment, and it's quickly disappearing.
In order to put some value back in the shares, the company must increase its capital. In order to increase its capital, money must flow in the company's accounts. Hence my prediction that soon we will see banners on the site. It would also be good if our company offered unique products and services*, which would also attract more investors, but at this point in time there are none.
* You know why Bitcoin became popular - there were tons of illegal services and products offered in exchange for this semi-anonymous currency, which is one of the big reasons why it's so widely accepted and used today.
An excellent analysis there @dek
I suppose its like a company going bankrupt that keeps printing corporate bonds off to raise capital!
I know @ned has talked ads to get around the problem like you say, so I think it's only a matter of time now!
Aha, there you go! Thanks for the nice comment!
Let's hope ads bring in enough revenue to compensate for the rate of Steem printing.
Let's hope so @dek - we deserve better for all the hard work you and I have done on here :)) Steem on my friend!!
I highly doubt that. Nothing disappears into thin air when it is sold. It just gets a new owner.
Yes, the new owners will be the exchange accounts - Poloniex, Bittrex, etc. Would you buy Steem from them to upvote user comments? No, right? That's why Steem will be forever printed and will lose value, unless value is invested back (through advertising, for example).
In the end, the winners will be the domain name and content holders and the exchanges, holding all the Steem. Unless Steem losses value and then the exchanges will be the losers.
Do you consider "advertising banners" to be something unique ?
No, @svamia, you misunderstand.
Our content is unique, as we have more original articles here than on any other social network, but we don't get anything in exchange for it - remember, anyone can follow a Google link and read our articles for free. Advertising will put back money into the network, in effect increasing the value of Steem over time.
That said, as original our articles are, there is already similar information on other sites. We need to offer unique products and services in exchange for Steem. Remember why Bitcoin got popular - it was a convenient and semi anonymous currency, used to obtain drugs, weapons and shady services. This is what made it popular and widely used today.
I don't suggest we engage in illegal activities, but we do need to offer something valuable, which would increase the price of Steem. Right now the only thing we offer - our somewhat original articles - we offer for free to the wide public.
Btw, I don't like advertising and neither am I in charge of such decisions. I'm making an educated prediction that there will soon be advertising on Steemit.
I consider Steemit concept to be sort of ahead of time )
Imagine that in the middle of 19 century you have created automobile and present it to the public. Will it go to the moon? - Not nessesery.
Because you'll need roads, you'll need refinery, and, probably most important you'll need to teach people how to use it. Otherwise people would just say, "nice coach, but how to couple it with a horse?")
So, Steemit is very misunderstood thing now. To hope that using advertising banners might somehow help is like trying to couple automobile with a horse )
I do very much symphathize with this post, which is actually also a response to the same post of @timcliff you are inspired by
https://steemit.com/steem/@dragosroua/steem-is-a-river-sbd-is-bottled-water-and-steem-power-is-a-dam
To continue your analogy, I'm looking at Steemit as a mechanic, whereas you look at it as a car fan who would enjoy the lines of a brand new vehicle.
I do consider Steemit innovative, but its core idea of freedom of speech and decentralization is slowly starting to fade. In a couple of years, Steemit will be yet another website with banners, with which to pay its authors. The downside is that authors will have to bother converting from an exotic crypto to a fiat currency, instead of getting paid directly in USD or euro.
Why are steem dollars a mistake? You don't explain why. Steem dollars retain their value more than steem or steem power have. I feel that steem dollars make better payments than the other two - https://steemit.com/news/@ilovefashion/my-suggestion-to-steemit-for-payments.
I did explain quite well. I suppose you just needed to post your link here.
In case you really don't understand, then ask yourself the following question: In case of an economical crisis, would an employer pay his employees in a stable foreign currency, or in the local unstable currency?
If your employer pays you in a foreign currency, this means that every month he would have to pay you more and more of the equivalent local currency, while making less and less, by operating on the local market, right? What would be the result of this policy? His business would go bankrupt fast.
That's why SBD has become a liability for Steemit - and will become more of a problem, the less valuable Steem is. I wouldn't be surprised if the developers soon switch to STEEM for article payouts. And I'm not even discussing the advertising banners, which will soon be plastered everywhere.
Well one of the more important changes to begin with (might be easy to do) is make all the posts private to where one must have an account and log in to read the articles. This would bring more people on the platform... now they do not need to be here. Batten down the hatches.
That's not a profitable scenario if Steemit will have ads. A lot of people won't bother creating accounts to view the content. For ads to work, the content needs to remain public.
I have to agree with @joanaltres - if we use banners, then the site has to be easily accessible. Think about it - would you pay money to read Facebook articles? :)
So after banners are introduced, I suppose we will be urged to remove any ad blockers and possibly click on a couple of banners every day, so the price of Steem holds. Which brings about another issue - Steemit will steer away from decentralization, as its survival will depend on the whim of the bank account holders, where the advertising income will be depostited.
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