“Steem is a blockchain database that supports community building and social interaction with cryptocurrency rewards. Steem combines concepts from social media with lessons learned from building cryptocurrencies and their communities. An important key to inspiring participation in any community, currency or free market economy is a fair accounting system that consistently reflects each person’s contribution. Steem is the first cryptocurrency that attempts to accurately and transparently reward an unbounded number of individuals who make subjective contributions to its community.”
This is the abstract from the Steem White Paper, and after doing some research I've come to the conclusion that Steem as a whole has failed. Not is failing, will fail or might fail but failed. Steem was the first cryptocurrency that attempted to reward users who make subjective contributions to its community, but it sadly missed the mark by quite a bit. I want to lay out why I have come to this conclusion and it wasn't an easy one to come to, that I can assure you. I'm feeling a little bit devastated, but also like a fool who's been played.
“The Steem community provides the following services to its members:
1. A source of curated news and commentary.
2. A means of getting high quality answers to personalized questions.
3. A stable cryptocurrency pegged to the US dollar.
4. Free payments.
5. Jobs providing the above services to other members.”
Introduction, Pg 5 Steem White Paper
Let's take a look at these five services and ask the question "Do Steem Apps achieve this in 2018?"
Is Steem a source of curated news and commentary? I think this answer to that is both yes and no, in the sense that content is being produced but generally speaking it isn't curated. The trending and hot tabs are unusable at this point, as over-use of bid bots and upvote services means that at any given time the top articles usually aren't the subjective best contributions. The very existence of these services, to me at least, completely pisses in the face of an attempt to reward subjective contributions. There are of course amazing services such as @Curie, but they are few and far between compared to the bid bots. If curation is, for the most part, open to the highest bidder then how can contributions of time and effort be fairly rewarded? A service like Steem could dramatically change the lives of those in countries where money is scarce, but without a large capital injection they don't stand a chance of earning.
Is Steem a means of getting high quality answers to personalised questions? I'd have to say again it's a yes and no to that one, as unless you are a big player, your posts and comments can go completely unseen.
Skipping ahead to the final two for a second, it's fair to say free payments is definitely a thing, and there are jobs created by the system, however there's problems there too but I'm going to have to move on, as there is still so much more to cover.
Now the big one really, is Steem (and SBD) a stable cryptocurrency pegged to the US dollar? Not really. Steem itself is at a near all-time low, at the time of writing this it's only worth $0.66. SBD is currently worth just under a dollar, which is fine, however it's mostly just because supply has all but dried up at this point, keeping it's value artificially high. I say artificially because it isn't actually pegged to the dollar at all.
“First thing to know is that there are no USD’s backing the value an SMD. The value of an SMD is pegged to a USD solely by the SteemIt’s blockchain’s ability to create unlimited amount of STEEM’s, destroy the supply of SMD’s when they are redeemed for STEEM, and speculators/users willing to hold and buy STEEM’s for BTC or USD. When 1 SMD is created, $19 worth of STEEM are also generated to back that SMD.”
I presume SMD was the early sign for SBD. Any economist will be able to tell how this ends based upon that one simple fact that SBD isn't actually pegged, not really. Interest rates are at 0%, so the only way the price is being controlled, that I can tell, is by manipulating the supply side. This isn't necessarily a bad thing, but if the only thing propping up Steem and SBD is the faith in the system and coins, then we could be in for a rough ride. There has been a sudden and sustained decline in the value of Steem, and as a result the peg is broken.
It appears that the crypto markets have finally levelled off, with prices unlikely to ever rise that fast again. You'd be hard pushed to find anyone who hasn't heard of bitcoin or cryptocurrencies at this point, and with the turbulent first three quarters of the year and increased mainstream media coverage, there just isn't the same pool size to fuel another rapid rise.
Think about it; Bitcoin going for ~$23 million would be great wouldn't it? Think of all the new Lamborghinis and Porsches on the road from that, the problem is it just isn't realistically feasible. The real world economy is shakey enough as it is, but to think that cryptos as they currently are, are even capable of reaching such heights is just wishful thinking. There is just no room for further 100x/500x/1000x profit anymore, the market is near saturation. If history is to repeat itself, as it often does, then there's a giant pin coming for the crypto bubble, and only a few will survive. There's a strong possibility that another recession is almost here, likely to hit in the next 18 months, and there is just no way the majority of crypto projects will survive it in my opinion.
“The challenge faced by Steem is to derive an algorithm for scoring individual contributions that most community members consider to be a fair assessment of the subjective value of each contribution. In a perfect world, community members would cooperate to rate each other’s contribution and derive a fair compensation. In the real world, algorithms must be designed to be resistant to intentional manipulation for profit. Any widespread abuse of the scoring system could cause community members to lose faith in the perceived fairness of the economic system.”
Recognising Contribution, Pg 5-6 Steem White Paper
I think it's fair to say, that this is the real problem that was never really addressed by Steemit Inc., as this exact scenario has played out where widespread abuse of the system has caused community members to lose faith in the perceived integrity and equity of the Steem economy. Active new users are rare, and older members are abandoning ship at an increasing pace. If recognising contribution was a key part of the Steem mission statement, then it has failed.
Plagiarism, spam and scams are for the best part allowed on the platform. There are attempts by the community to combat these, however it's often just a game of whack-a-mole as the bad players just alter their tactics. Orchestrated attacks on new users by bad players has put many off, the poor reward rate for content and curation has also added to this problem. Many are pinning their hopes on another wild shoot for the moon, however as I've already pointed out, this is highly unlikely. So, if the crypto markets are unlikely to return to their January 2018 levels, what does that mean for Steem and the social apps built on it?
There's an undeniable inequality in the distribution of wealth on Steem, with just 36 large whales controlling the majority of all Steem Power. That's not even factoring in the huge amounts kept in Steem for quick and easy liquidation. Steem recently celebrated over 1 million users, but are you aware of how many of them are actually active? According to the statistics published by @arcange, there are over 1 million inactive accounts. There are a total of 2086 whales and dolphins in varying degrees of active, and roughly ~120,000 active minnows and fish. These are astonishingly low numbers, and with users powering down and abandoning the platform every single day I can't see how things can get any better. Any audience built over the past 9 months has been decimated by the recent exodus, and with just tiny handfuls of people signing up on a daily basis it is just no longer a viable platform for me. At this point, I feel like my small contribution of time, effort and money has only been used to prop up a ponzi scheme.
A Ponzi Scheme?!
Bold words, I know but what I've recently seen has been the final blow for me and I can't continue to do this anymore. Of the 36 large whales on Steem, the largest is Steemit Inc. themselves. They take up at least two spots on the rather short list, but they could possibly occupy more. These accounts have also been shoveling Steem around like nobody's business, without putting almost anything back into the system. On top of this, accounts owned and operated by Steemit Inc have been withdrawing thousands of Steem to exchanges, as well as to odd and mysterious accounts. I've genuinely spent hours trying to get to the bottom of this murky rabbit hole, however at this point I've had to bring my head back to the surface as I don't really care to see anymore.
First off, there's the fact that there have been past payouts for posts that reach the 90,000SBD threshold. I don't have the data for Steem/SP payouts, but I can tell you now there isn't a single post on this platform worthy of 90,000SBD. As already mentioned, SBD payouts have basically come to a complete halt, and if the price of Steem can't recover then it's goodbye SBD. Already this is causing problems, as what is essentially the day-to-day currency of Steem has become so scarce that it's stifling creativity. Contests are few and far between, with SBI shares more common than any SBD prizes. I ran contests myself for a while, however there came a point where I couldn't afford to pump money into a system that wasn't rewarding me.
Who controls the purse strings?
Next, let's take a look at the official accounts of Steem and Steemit. The two big ones are @steem and @steemit, with the 11,000,000 SP behind @steem being used to delegate to new users, which is absolutely fine. The @steemit account has 2,000,000 STEEM sat in it's wallet, nice and quick to liquidate, and over 44,000,000 SP which is just an eye watering amount. That amount of SP put to work could change lives, but instead it sits there. They have another 2,800,000 STEEM sat in their savings account, and 9,000SBD sitting there too. 4.8 million Steem sat not being put to use raised alarm bells for me, and the 44 million SP not being put to work is just a shame. Looking at past transactions for the @steemit account brought up some interesting things though.
Going back to August 2016, I noticed large amounts of Steem being transferred to a whole range of accounts. Starting with @steemit1 and going through to at least @steemit60 (with some not appearing to be official STINC accounts), hundreds of thousands of Steem have been moved around. @steemit8 powered down 1,500 SP and transferred to it an account called @deepcrypto8 just 8 months ago. An account by the name of @cdec84 has had funds transferred to it by @steemit2, which it has then sent to bittrex and the aforementioned @deepcrypto8. This @cdec84 account was created by a tiny account that has little activity on it... and it just goes on and on. This is some shady fucking accounting, and it's clearly a way of liquidating Steem without being too obvious. On the surface, the two big accounts are perfectly fine and aren't doing anything, but going all the way back to March 2016, this endless loop of account has been used to shuffle money around before finally withdrawing it through an exchange. The fact that this has been happening throughout 2018, further devaluing the currency is just disgusting to be honest and shows how little Steemit Inc think about their users.
@steem - 47,000 Steem, 11 million SP - used to delegate to new users, figures add up here
@steemit - 2 million Steem, 44.5 million SP, 2.8 million Steem Savings, 9,000SBD
@steemit1 - under 500SP, 1,700SBD
@steemit2 - 1.6 million Steem, 10,000 SP, 5000SBD
@steemit3 - 150,000 Steem, 3,600 SP, payments to inactive accounts memo “net”
@steemit4 - under 500SP, mostly inactive
@steemit5 - 1,500 SP, mostly inactive
@steemit6 - 1,500 SP, mostly inactive
@steemit7 - 1,500 SP, mostly inactive
@steemit8 - Used to have 1,500 SP, powered down beginning of 2018, sent to @deepcrypto8. Some chinese posts, one post addressing the inequality problems 2 years ago
@steemit9 - Doesn't appear to be an official account
@steemit10 - 1,400SP
@steemit60 - 20,000 Steem, under 500SP, 400SBD, transfered 31,000 to steemit2
All of this really is just scratching the surface, as the list of accounts that I can link back to Steemit Inc surpasses that of the SDL. There's a mysterious account called @alpha that has ties to Steemit Inc and @buildawhale, @appreciator and others that is clearly used to withdraw funds to bittrex.
The fact that so many of the current top users are anonymous is of concern to me too, and others have even speculated that these mysterious seemingly feuding accounts are merely two sides of the same coin but that's a whole other topic.
With all of this in mind, I can't see a way for Steem to recover. Steemit Inc. have been slow to respond, unresponsive and the appointment of Randy Baker as CFO only makes me think that the writing is on the wall. If they are covertly withdrawing funds to try and prop up a failing company, what does that mean for the future of Steem? Randy has an awful lot of experience in selling companies, but very little in terms of social media or cryptocurrency experience.
The fact that Steemit Inc. control the majority of the chips, it's they who control the price and they certainly aren't doing anything about the spiralling decline. If they have abandoned this experiment, why should I continue with it? I don't know whether I should start the power down process and maybe try and salvage something out of this, if it's even going to be worth anything in 13 weeks time. Maybe just chalk it all up to a loss, and pray to the tech gods that someone, somewhere manages to turn this thing around. I don't know yet. I've seen some users stating that as a community we need to abandon the pursuit of quality, to which I say fine. I cannot see the logic there but whatever, I guess at least it's trying something.
In conclusion, this is me saying so long, and thanks for all the fish. I wanted to be transparent in my reasoning, because Bieber knows someone's gotta. Medium seems like a good place to explore, but if you scroll through my profile here you'll find articles on what I consider to be the most promising looking alternatives. I'll find my feet somewhere else, and I'll usually be found under the johngreenfield name if it's available. Hopefully, I'll see you around.
Banner image courtesy of Know Your Meme (https://knowyourmeme.com/photos/1022360-the-hitchhikers-guide-to-the-galaxy)
Steem price chart courtesy of CoinMarketCap (https://coinmarketcap.com/currencies/steem/)
Steemit Statistics from @arcange (https://steemit.com/statistics/@arcange/steemit-statistics-20180910-en)