What does drive value of steem?
As an investor and active member of the steem community I am interested in how the eco system of steem works. Not only from a technical but also from economy perspective.
At the moment I am thinking of increasing my share in steem. In this thought process I was thinking what will drive the value of steem fundamentally?
I'd like to share with you my thoughts on what will drive the value and therefore the price of steem hoping to start a conservation with different views. I am very open to change my mind if reading good arguments.
Of course the biggest asset of steem is the user community. Obviously the platform will generate more value if more users are on board. Bad and good at the same time - steem works like a spiral. If price rises steem is attracting a lot of new users due to massive payouts. If steem price drops it gets less interesting to get on board.
But will that increase the price of steem significantly as well? I think it depends which kind of users join - users who are interested in investing into steem to increase their influence through steem power versus users who just want to create content and cash out (e.g. professional steem authors who need earning for a living).
In case the second user group is the majority I am wondering if that even could lower the steem price instead of raising it while the user base growth. Why?
So in my opinion steem has two factors keeping the price from exploding:
- inflation which is needed for the reward system and also help to keep community active. But it also means that one coin loses if all other circumstance stay constant
- Users who are writing with the goal to earn constant income they sell regularly.
While the first point is true for a lot of crypto projects (and the market seems to ignore that at the moment) the second is unique to steem.
On the other side I see certain reason which will push up the price
- steem power lock reduces volatility and smoothens the ride. I think that is very helpful to grow
- steem seems to be addictive - when you are in the community you want to build up steem power to make a difference
On top of this comes the "whale" risk - 1% of the steemians have 76% of all steem and another 1% has 17%. So the top 2% have 93% of all steem. That is quite centralized in terms of voting power and in terms of sell pressure if one of the big ones decides to get out.
So what is my conclusion? Starting with the result - I will invest into steem. Not to much because of the pro arguments but because I got addicted to it. I just love the idea.
From an investor perspective my gut feeling tells me that some things in the coin economy need to change so that steem can prosper. Which additional reasons can someone have to invest money into steem beside steem power? How could the token supply be reduced (e.g. burning coins for consuming services?)?
What are your thought? What am I missing. I am looking forward to your comments
I believe Steem is being held back by lack of exchange support. If you look at Coimarketcap's page on Steem, you'll see that most of the volume has been on Poloniex and Bittex, with Korean exchange Upbit just recently adding a STEEM/KRW pair.
However, the other major exchanges like Binance have not added Steem pairs, despite all the growth. This needs to change! If Steem gets on major, regulated exchanges with real fiat support, the game will change very quickly.
Yes - I would love to see steem on Binance and Huobi. That would give it a push. I am wondering why that hasn't happend. Steem is well established and under the top 50.
These are very valid points, but I see the situation much more complex. First there will be SMT in the near future and other App using the STEEM blockchain. We have to always remember, that Steemit doesn´t equal STEEM - STEEM is much more and Steemit only the first App that uses the blockchain. The second point is, that with increasing user base (on Steemit and other Apps that follow), the need to get attention also increases. Since the only chance to get attention is to raise your SP, people need to buy in and with that, the price will increase. On the other hand - as you correctly stated - it will get harder and harder to close the gap between the STEEM rich and the poor. 99% of all Steemit-Users will stay poor and be deficient in attention, which again decreases the motivation and people moving from Steemit to new Apps on the STEEM blockchain - which again will only increase the demand of STEEM (but only on other Apps).
So it´s a very complex economical situation and also kind of a social experiment, which is unique in the history of social media by the fact alone, that suddenly you can "measure" social influence in monetary units! What will happen, when the 99% call a revolution against the 1% and will this mean, that the 1% gets only richer through it (one way or the other?). Definitely if I was an Alien race that wants to experiment with the social behaviour of earthlings, I would create something like Steemit and broadcast it prime time in a daily soap opera! ;)
Love your comment. And you are right I absolutely missed the point that steem is a platform and steemit just one app.
That said I am wondering how inflation distribution (in steemit used for curation/author and witness rewards) works cross all apps. If a lot of new apps coming and fighting for the same "inflation pool" than new apps will reduces curration/author rewards. That would lead to a major problem - the more success steem as a platform gets the more steemit loses its attraction.
What did I miss?
I guess this is the reason there are internal currencies like SBD. All new apps will also have an internal currency/token like that.
Hmmm interesting. I need to understand that better. It seems to be a task for some evening ahead.
Just a quick info so that you don't get things mixed up:
Apps like @dtube, @dlive, @dsound, @steepshot that are built directly based on the Blockchain don't have their own token.
Smart Media Token, SMT, like the upcoming Instragram-like-App @appics have their own currency but are also not connected to the reward pool of the STEEM blockchain.
I think you missed the big point that a drop of rewards in STEEM doesn't mean the rewards drop in €/$ - and that's ultimately the currency people care for.
So if more people want STEEM and the price rises, the rewards could drop in terms of STEEM per post/video/picture/whatever but would maybe still rise in terms of $/€.
I will write my own answer to your post later @famunger, need to go for food now :)
I belive you don't need to burn coins or fight the inflation.
To be valuable, token needs to be distributed. And you know what? Inflation is suppresing most those who have more steem in possesion! So it's healthy. Constant sells by authors give new investors opportunity to buy steem and get in.
Actually you are right. Inflation hurts the whales most - but only if they are not active. If they are active they get the biggest share of the inflation. In that case it leads to an increased clash between the big and the small one. Don't you think so?
You right: more weight = more shares. But as far as I know our whales are not as active as minnows.
We need some statistics here!
After 3 resteems of knircky, you got my respect, good views, will follow you. This majority of shares in a few hands is the biggest obstacle to wise investors entering the market. They should really burn up at least half to get a bit of fair distribution.
Thank you - following you back. Knircky is a great guy and I am thankful for his support.
Imagine 50% distributed to new users. That would be an awesome marketing program and would push steemit to the moon. But what could be the interest for the whales to do that? I don't see any and that worries me because I think like you that is essential for steem to have a better distribution.
Thanks. I am speaking about the Steemit account which has most of the distribution. The original intent was to use these shares to promote the platform but they just seem to be sitting on it. I think Steemit has more than 50% even, that is so 'not decentralised'...
Oh I get your point. I am 110% with you on that. I am wondering why those steems aren't used for that purpose. Maybe @ned has something planned with it on his roadmap.
I looked up the figures to finish this off properly. Total supply of Steem = 250M while SteemIt account has 71M so that is 35% and not +50%
Is the second point so different to proof of work coins though?
I mean, they increase coin supply with mining. Those miners must be selling the coins to pay the costs of mining, probably to a greater degree than people on the steem blockchain, many of whom have no particular running costs to consider.
Plus half of the new Steem coin supply is automatically powered up.
Interesting thought process to compare that to mining. That is exactly what I was trying: getting some different view which make me rethink.
In my bullets mining was included into the inflation. And steem also is mining (witness rewards) beside the curation and author rewards. But at the end you are right everything - rewards, mining - is inflation. So it is a question on how high is inflation.
But why I find author and curation rewards special is that when you do it as a profession you probably would sell a significant part of your rewards to pay for a living (my assumption). Other projects may give more incentives to buy and holding strategy (e.g. smartcash) or projects which don't need inflation to work well.
But I need to stress - it is my assumption which would need to be verified by statistics and my be proven wrong (I would be happy about it). But at the end we are not getting away from the fact that inflation (should) have a negative impact on the price and if the model needs a high inflation to work it doesn't help.
I have always been against automatic vote, if you really build relationships with other users, it implies the reading of their materials and live comments on the subject.
But, I understand that it's hard to find free time for this (every day follow updates of friends and participate in discussions). And auto-vote in a sense is an opportunity to say Hello, to express respect for your relationship. Accordingly, if you withdrew from somebody list you have lost the interest of this person to you. So your actions in this case are absolutely correct.
I agree - I would prefer an automatic free steemit in respect of content acknowledgement etc. But on the other hand I also do understand that when you invest a significant amount into steem that you need auto upvoting to ease the pain of inflation.
But at the end I think the coin-economy should support the cause instead of "being" the cause. Auto-upvoting is in my opinion the latter
that comment, word for word is the same on my blog, be careful for upvoting these things.
When I read "Steem power lock reduces volatility and smoothens the ride.", I started to think about that for a moment. Although I've always thought the same thing, somehow I doubt this now.
In the crypto market the price of a coin/token is actually the price of the last purchased coin/token. If I am not mistaken, that means that no matter which % of the total supply is locked-up in Steem Power, it is about the price of the liquid supply. So in theory, if order books on exchanges are empty except for 1 sell order of 1 STEEM for $0,10 and somebody buys it, the price of STEEM is $0,10 per coin. That price than 'artificially' applies to the total supply at that moment. So big drop in price at that point when you would look it up at for instance CoinMarketCap. So, by powering up more and more of the supply, are we actually increasing volatility?
I agree that the risk of Steem being dumped in large amounts in one particular second is dampened by everybody powering up and the powering down process taking 13 weeks.
Wait...now I am a bit confused actually. What do you think of the above reasoning?
Locking up steem kinda reduces supply as it cannot be sold.
Long term however it wont matter as the sp can be made liquid.
However less supply will always lead to higher price and selling large amounts at once will not be possible.
Perhaps the top 1% should commit to divesting or giving back to the community at certain user thresholds (Daily active users above 1m/5m/10, total user accounts above 1m/5m/10m)
This would mean that they are giving back a percentage of their stake, but only upon the community making their stake more valuable!
I agree - that would make sense. I do understand with the price of 4$ steem everyone sees a big number on his steemit account - so what is the motivation to give it away?
You really need to believe that giving coins away will strengthen the community to your own long term benefit. Also it probably would need a combined effort from the 1% together. If you follow the war between haejin and randowhale you get an idea how difficult this will be.
I believe the main focus should be growth and user adoption. Most everything else will take care of itself. You are right, Steem is the most addictive app I have every used. Centralized or decentralized. The quality content and user attitudes are positive here with many other apps and features that will drive a lot of value to Steem's blockchain and its underlying token Steem. I great article I just found that includes the updates coming in 2018: https://steemit.com/steem/@aggroed/back-up-we-go-and-some-good-steemit-com-news
Thank you for sharing. Will look into it.
User base is the key asset for steem - we are on one page about that.
My thought is that the right metrics for the community to trigger a give away would have to be those that directly add value to the 1%, aligning the incentives. Then maybe the community works/builds a little harder to earn the give away, and the 1% sees their amount of pie grow even if their percentage declines.
I agree with your point though that we'd need to get them to collaborate. Maybe a Steemit petition to get a coalition of the 1% to participate in it would nudge them.
Interesting thought process. Have you thought about creating such a petition? I would support it!
Haha. So subtly noticed that Steemit is addictive. That's for sure. And now, after spending here almost six months, I also want to strengthen your voice. I don't want to take the money. I want to grow! Want to have great weight here on the platform.I want to develop. I think that now so many do.
I feel smaller than a Minnow. I am Zooplankton >-<