Why basing STEEM's value on speculation alone is a net loss for the bigger picture

There are limits to all speculation cycles. There are limits to human hope and limits to people's willingness to put capital at stake.

To those who bought at a lower price, it might feel good to see STEEM go up in price, but the question we should ask is Why are they buying from us? when the price is going up.

For price to be established, there are two transactions involved, which are paired as one: someone buys and someone sells. If the main reason that someone is buying right now is to sell at a higher price then it means they're hoping to find people who will be willing to buy higher in the future.

But why should they buy?

Should they buy so that they can also hope to sell higher to someone else in the future? And so on and so on...

The above situation is endless speculation.

Speculation is good when there is a value driver underpinning the thing being speculated on. People speculate on houses. Buy low sell high; but in most cases they sell to someone who is buying it for its value. To live in it. There is demand to own property or rent it. Both cases are direct value drivers.

People speculate on shares of a startup. People who bought Facebook shares in the past did so in anticipation of return on investment. The shares paid dividends to shareholders, which were derived from the profit they made from selling ads/data. Had Facebook not managed to monetize as it did, the speculation value would fade and the price of the shares would have tanked.

Can we say STEEM is just a currency? For various reasons, the market does not value STEEM the same as it does Bitcoin. Perception of security and confidence in distribution are just some of the reasons why the two are differently valued on the market.

Can we say STEEM is just a resource token, buying you a share in resources on the blockchain? That is true to an extent, but I don't think demand for this blockchain's resources is that high to sustain prices with inflation, and with plenty of blockchains coming into existence, many options will exist for having a decentralized "public database" to store and access information/content. If that's the only use case.

So what should give STEEM value? All the above, plus the users, their attention and possible services around their presence on Steem.

When STEEM or whichever SMTs are known to buy you a share of resources on a blockchain that enables you to participate in social activities and earn economic value. When they can buy you the attention of people who are interested in what you have to say to them. That is what will give it value, I believe. The more users involved in this value creation and value sharing cycle, the more valuable the underlying blockchain's bandwidth becomes.

Its use as a currency will emerge naturally because people tend to trade with an asset that's relatively stable in value and easy to transfer.

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I am currently working on a new feature called Native Ads, that could be added to Steem communities in a future update.

For an overview of the Native Ads feature and how it will work, read this doc.

If you would like to take a look at the code, visit the GitHub repo.

I post Development Updates on my blog @imwatsi.

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header image from Pixabay