Steem's Hidden Transaction Fees and More Confusion!
One of Steem's main selling points is that it's a very fast decentralized blockchain with no fees. With only a 20 static witnesses, centralized Steem Power, and constantly unresponsive features, one could argue that this is all false advertising. However, that's not what this post is about. Instead I'd like to address some of the more confusing aspects of Steem.
Transaction Fees
Who verifies a transaction on a blockchain? The person who created the block.
Who creates the blocks on Steem? Witnesses.
Do witnesses get paid? Yes, yes they do.
Therefore, saying Steem has no fees is ridiculous. The fees are hidden in the form of inflation paid to the witnesses. In effect, it's a flat fee based on time that everyone has to share. How communist! If the witness spends the coin, the value of Steem drops from inflation. If the witness HODLs the coin, more of the future inflation is controlled by the witness. It's all very strange when you think about it.
In the end it's important to recap that this "no fees" dynamic of Steem is charging Steem Power holders for transactions. In effect, the whales of the site are paying for near everything; transactions, blog posts, replies, dapps, and everything else the witnesses handle; basically the entire platform. Obviously this is fair because they are also making the most money off of the site.
The next time you want to complain about whales this may be something to think about. It's easy to complain when they take the lion's share of the reward pool, yet no one praises them when they take losses, prop up the value of Steem, and literally run the entire platform.
Inflation
I'd like to revisit a post I wrote about some of the math I did on inflation. I came to Steem because I wanted to teach myself and others about cryptocurrency. This post really shows I had/have no idea how Steem inflation works. At the end of it I concluded that the reward pool is not being exploited that bad because Steem only has like 9% inflation, but my math showed you could double your money in less than two years. I assumed this was because big whales weren't using their voting power. A assume a lot of things. I made an 'ass' out of 'u' and 'me'. Let's take a more in depth look.
Assumptions
In my post I assume that 40 SP = $0.01 upvote. Oops. No one even corrected me, lol. The value of an upvote is variable, based on the value of Steem in relation to USD. When I created that post, Steem was worth $4.47 per coin. Post payouts are pegged to USD, so back then 40 SP was worth $0.01 upvote, but now it takes about 100 SP for $0.01, because Steem is currently valued at ~$2.
Another thing I didn't take into consideration was SBD value. SBDs are supposed to be worth $1. When I made that post 1 SBD = 5.64 USD. The math was showing that payouts were about 5 times higher than I expected. Coincidence? No.
So, when Steem is worth more money, our upvotes are worth more, and when SBD is worth more than $1, we get yet another bonus. Right now my 100% upvote is worth around $0.10. If Steem were to go x10 from $2 to $20 my upvote would be worth $1. If SBD was pegged to $1 then this would mean my $1.00 upvote was actually worth $1. However, what if SBD was worth $10? Now my $1 upvote is worth $5.50. Half of the payout is pegged to USD in the form of SP ($0.50) while the other half is pegged to SBD ($0.50 * 10 = $5).
(Side note: you should only pick 100% SP payouts if the value of SBD is less than $1.00)
The simplified equation is:
(p + c)/2 = USD value
Where p = displayed payout and c = SBD to USD conversion rate
In the above example (1 + 10) / 2 = 5.5
At least I got some of my maths right. Unfortunately, the confusion doesn't stop here.
Curation wtf?
I've read that curating a post early before the other big upvotes hit it will grant you more rewards, yet I haven't been able to find any specific information on this. Does anyone know? I was thinking about testing this out myself today. I'm going throw a $0.10 upvote on a trending post that's been up for a few days. If I get a 25% $0.025 curation reward back from that upvote then there is no bonus for curating a post early.
Confusion breeds suspicion
All these complicated features, combined with limited documentation, cause people to not trust the system. I'm a smart guy with a technical background and I'm still trying to figure it all out three months later. What's Average Joe going to think about all this? We already know, and it's one of the big reasons why blockchain technology is having trouble going mainstream.
Very recently I wrote an article that was not exactly spinning a positive light on my suspicions and confusions toward Steemit and you called me out on some of the things I was discussing. I have to admit that I do like the information that you are putting out there and there are a lot of topics you mention from fees, to inflation, to confusion about how certain aspects of the platform work that I can relate to except you lay it out in a much better way than I was doing. So the point of this is to say I took something away from this and honestly I'm going to use this article / write-up as a frame of reference on how to write better and more compelling material. So thanks for this.
To be fair you did say your math could be grossly incorrect on the last post. I'm not sure how it all works. I think the interface is awkward and there is a difficult learning curve to use Steemit currently. I have noticed when I upvote a good post early that gets a lot more votes and grows in value later I usually get more curation rewards.
Sure but then they don't post the rules of curation... only vague generalizations.
I just now searched the white and blue papers for "curation" and still didn't find it... seriously.
Congratulations! This post has been upvoted from the communal account, @minnowsupport, by Edicted from the Minnow Support Project. It's a witness project run by aggroed, ausbitbank, teamsteem, theprophet0, someguy123, neoxian, followbtcnews, and netuoso. The goal is to help Steemit grow by supporting Minnows. Please find us at the Peace, Abundance, and Liberty Network (PALnet) Discord Channel. It's a completely public and open space to all members of the Steemit community who voluntarily choose to be there.
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