Curation rewards are the talk of the town this week. Should they st...
Wait a minute. I’m having a serious case of déjà vu right now.
Ah, that’s right. I’ve been here before...all the way back in February of 2017.
And again just a few months ago in this post:
Recent discussions about changing curation rewards back to a 50/50 split with post rewards from the current 75/25 split has me again wondering what exactly it is that some users here always seem to forget...or perhaps never understood in the first place. Let’s start at the beginning with a quote from myself:
The purpose of Steem/Steemit was to provide a means for bootstrapping and onboarding users of a cryptocurrency by creating a popular and scalable format for doing so: a social media website. Steemit is not the end game. It is merely the first building block.
This seems to be a forgotten truth about what exactly our blockchain interfaces are, which basically serve as onboarding mechanisms to the Steem blockchain. The end game is not an interface itself. The end game is to attract people to and retain them on the Steem blockchain and to use the blockchain as a currency transfer system.
The entire purpose of creating the Steem blockchain was to provide a means to quickly and freely transfer money in a peer-to-peer network. It’s the reason we have three-second block times and no transfer fees...and a somewhat “stable coin” (Steem Dollars, or SBDs). These characteristics aren’t needed for a social media platform. The social media interfaces for Steem are just one building block of many that are needed to create and sustain a viable ecosystem for the Steem currencies.
So what does this have to do with curation rewards and why we should have them and actually increase them?
In order to help bootstrap the Steem blockchain/currency, new users are given a small amount of the currency to be used for their activities on the platform. They can build on this initial amount by interacting through content creation, commenting, and voting on other posts. There is also an option to increase their stake by purchasing more STEEM and using the added influence to potentially increase their rewards accumulation over time.
Curation rewards are earned based on the stake of Steem users. But let’s make a slight digression here.
Steem is a delegated proof-of-stake (DPoS) blockchain. This means that certain benefits are extended to users that have stake in the system – more skin in the game. Staking carries additional risk due to the nature of it, which includes locking up STEEM in the network for a set period of time. Many of those invested or “staked” in the Steem blockchain have assumed a double risk – first, by purchasing STEEM, and then by locking it up in the form of STEEM Power in order to receive the extra staking benefits (including witness voting and allocating content rewards).
Any risk-reward assessment must be carefully measured, especially in a space like cryptocurrencies, where rampant speculation on tokens is the norm and price action can rapidly change from hour-to-hour or even minute-to-minute. Those who have weighed the risks and have decided to both invest in STEEM and lock away their investment in the form of STEEM Power – despite many shortcomings within this space and several within this particular platform – shouldn’t be ignored or condemned due to the fear or misunderstandings of the non-buyers, the non-invested, or the just plain ignorant.
Getting back to curation rewards...
If you want more of a certain type of behavior, then you need to reward it. We presumably want more investment and more/better curation. In that case...
Why should those who are assuming the most risk continue to be marginalized by the blockchain protocols and the community?
And let’s be clear about who I’m referring to when I say “those who are assuming the most risk.”
I’m talking about every single user who has purchased STEEM and powered up their STEEM or that has simply accumulated STEEM and remained powered up.
Every stakeholder in this network will benefit from better incentives to hold STEEM Power and to use it for curation purposes. It doesn’t matter if you have 100 STEEM Power or one million – if you actively use that influence to curate content, then you will benefit. If you can earn 1.000 SP by voting on a post under the current 75/25 protocols, then – all other variables remaining the same – you can potentially earn 2.000 SP by voting in the same manner in a system with 50/50 protocols.
But let’s be completely honest: All variables will not remain the same.
Behavior will change, as it always does when incentives are changed. What we need to consider here is how we can reasonably expect behavior to change. It’s not easy to predict, but based on observed human behavior and based on previous changes made to the protocols for this very blockchain, we can get a better sense of what will likely happen.
In the past, when curation rewards decreased (either from declining STEEM prices, protocol changes, or increased/unexpected dilution via delegating), curation quality changed. More users moved to automation and away from manual individual/group curating. We have both factual/statistical and anecdotal evidence of this occurring. Why does this happen?
Because the risks outweigh the rewards.
If we increase the rewards for staking and for curating with that stake, can we reasonably expect that many users may see that these rewards can/will possibly outweigh the risks again? And if so, could we see additional staking and additional purchasing of STEEM that would reflect this? Would this be beneficial to anyone other than those who are purchasing STEEM and increasing their stake?
My answer to all three of these questions is “Yes.”
A 100% increase in curation rewards will certainly make curating more lucrative. And based on the public sentiment and explicit statements of many larger investors, increasing curation rewards to 50/50 could entice them to purchase more STEEM, power it up, and move back to manual curation – and even entice them to create a variety of new curation projects. In other words, they’d be much more willing to assume the risks of purchasing and staking in order to try to grab a piece of the increased curation reward pie. This is precisely how incentives work and why we need them.
Increased investment and better curation practices from larger investors (and all investors, really) will certainly improve reward allocation for content creators. An increase in STEEM prices is beneficial for content creators due to the fact that more SBDs are printed when prices are higher versus when they are lower. This gives creators more liquid tokens to cash out if they are only here to be compensated for their work. If these creators are also here to become larger stakeholders themselves, then they can power up that stake (or leave the non-liquid portion powered up) and join or continue their curation efforts.
So increasing curation rewards not only incentivizes purchasing and staking, but the consequences of that increased purchasing and staking could result in higher creator payouts and actually directing rewards to better creators due to better curation practices. These results would clearly benefit everyone...except those who are not the best at creating and marketing their content.
Why should content creators get less rewards?
I see this question asked a lot, but it’s largely based on some faulty assumptions.
Let’s be completely clear again: A move from 75/25 to 50/50 represents a 33% reduction in post author rewards.
This is true – if all other variables remain the same. But as stated above, the variables will not remain constant. And as stated above, there is a reasonable expectation that improved incentives for stakeholding will attract more buyers and holders of STEEM. Of course, this does not mean that STEEM prices will increase, as prices have much more to do with general crypto trends and random price pumps than any blockchain “fundamentals.” Nevertheless, better incentives should certainly put more upward pressure on STEEM prices.
So content creators will likely see lower rewards at first as the system adjusts to the changes, but these creators can offset some of the losses of those rewards by improving their curation habits. (If they are non-invested, choose to remain that way, and cash out all of their tokens, then we ought to consider whether continually directing rewards to them so that they can be immediately sold on exchanges is a sustainable practice for this ecosystem.)
Over time, the increased investment should be able to offset the near-term declines in payouts. Larger SBD payouts and good old-fashioned capital appreciation could eventually boost post rewards and the net values of user accounts exponentially higher. Assuming that “creators will get less” completely ignores some rather fundamental economics.
These assumptions also ignore that content consumers are in fact the larger demographic among social media users. From my February 2017 post on this subject:
It is my contention that the platform functions better if both creators and curators can be rewarded for their work. It also appeals to a much wider market, since regular/routine or professional bloggers are a relatively small one. The purpose of Steem/Steemit is to onboard as many people as possible into the cryptocurrency space and to create a sustainable marketplace for them. Excluding content consumers from being rewarded for work done is simply not an option.
And from the June 2018 post:
If we want more and better curation, we need to incentivize it. If we want more investment, we need to incentivize it. And if we truly understand that social media is not comprised of 100% bloggers and commenters – that the simple act of voting on content is actually the largest chunk of interaction – then we need to make it more lucrative for content consumers to easily invest and earn for the quality work that they contribute.
It isn’t just “whales” that makes Steem work. Content consumers can come in all wallet sizes. Every new purchase of STEEM is positive for the ecosystem. If we want “mass adoption” – which is mostly what anyone talks about when speaking of Steem’s future – then we’re going to need to attract content consumers from all walks of life.
Imagine for a moment that the aggressive marketing team for the Steem blockchain was able to draw in 100,000 new, real and active users by the end of the year. Imagine if just 25% of those new users made a 100-STEEM investment. That would be 2.5 million STEEM purchased from exchanges, which would account for nearly 75% of the current, total daily volume on all exchanges. That’s not an insignificant number.
Now imagine sustained growth over a period of many months or a few years.
I’m not saying that curation rewards alone can have that effect, but they do target the right demographic to make it possible. Onboarding and retaining users in those numbers would be an extraordinary accomplishment and have an equally extraordinary effect on STEEM prices and Steem blockchain adoption or “network effect.” And, after all, that’s the goal. Remember?
In an ecosystem with sustainable user growth, higher token prices, and much larger network effect, is there any doubt that quality creators will be rather large beneficiaries? It won’t happen overnight, but adjusting the economics on this platform ought to be an attempt at improving them for the long game, not for those hoping to continue drawing value out of the system for quick profits. That isn’t a knock on the profit motive or on personal gain, but it is instead an adjustment to the horizon for long-term, sustained profits/benefits.
Creators and Curators is not “Us vs. Them”
This relationship is symbiotic. A well-curated content platform requires the work of both quality creators and quality curators. And in many cases, Steem users are both.
When people throw around accusations about personal motives for proposals, they ought to keep in mind that most of the people currently here have been, are, and will continue to be both content creators and curators. They should also keep in mind that nearly all of us are invested, either through direct purchasing or through our contributions to the platform. There have been “bad actors” that seemingly want to “poop” on their investments, but the vast majority of users would likely want to see their investments grow.
The knee-jerk reactions to discussions about protocol changes, where users are threatening to sell all of their tokens and questioning the sincerity of the proposals is fun to watch, but it’s really quite absurd. I’m not saying that signaling to the drafters of these proposals that you’d be less likely to invest or remain invested is necessarily bad, but the level of hyperbole and absolutely ignorant assumptions and conclusions that are spammed around these comment threads is stunning. Definitely entertaining, but sad at the same time.
It’s true that content consumers would have nothing to read and curate if content creators were not creating content. But it’s also true that these content creators wouldn’t be making any money if there were no incentives to purchase STEEM, power it up, and curate their content.
One final note
Changing the post and curation rewards to 50/50 should be a fairly easy protocol implementation. It’s something that can be done rather quickly and by itself so that we can observe behavioral changes. I see no reason why we can’t ask for this change to happen sooner rather than later and start evaluating the results. If it does in fact prove to be a mistake, then it’s something that can also be changed back to the current 75/25 split pretty easily.
As a Steem witness in a DPoS system, my vote is for improving incentives for stakeholders.