Understanding Steem's Economic Flaw, Its Effects on the Network, and How to Fix It.
I'm sure most users on this network have seen the same "vote-farming" and flagging dramas on Steem over and over again for the past year. It's not hard to see that a lot of users are doing this "vote-farming" thing, including the largest stakeholders on this platform. It just means the following under Steem's current economic model:-
Please keep in mind that all of these are economically equivalent. For example, I can sell my votes by delegating to a bidbot, or I can also achieve the same effect by using all my votes on my posts only, or give someone $X amount of votes to receive the same amount back. All of these actions are the same: vote-farming. Vote-farming at 100% just means using 100% of our votes only on ourselves. This is indeed the best move under the current economic model, which is fundamentally flawed, and a lot of users including whales are actually participating in it.
Anyone not participating in this activity will just be losing out BIG TIME over the months and years. Like I've said in my previous post, someone with the same amount of Steem Power (SP) as me in the beginning of this year is now already ahead by 50,000 SP just selling their votes, while my votes mainly went to curation while taking my time to post. So I'm not holding back as much anymore, and I'm playing the vote-farming game on my alt-account @etherpunk to keep up until Steemit Inc and the top witnesses decide that some of us are right about our diagnosis and proposal to fix the misaligned economy. An economic system is flawed when it relies on the altruism and sacrifice of some users.
The path of profit maximization is again, vote-farming at 100%. This means maximum profit with the least effort. If you think there's a risk of people flagging, sure it may happen. But over time, you'll come to understand that Steem's current economic incentives just makes flagging arbitrary, futile, and ultimately meaningless. Nobody will even bother flagging anything else other than outright fraud, theft, or just plain retaliation. You can put up 10 random one-sentence original posts a day and just vote yourself up all the time while even buying some extra votes for the ROI too. It's very likely that nobody will stop you these days. Even if someone does, they'd most likely be unable to sustain their flagging on your account over a long period of time, unless you're just pure evil. Bidbots also generally do not have high standards. How else are they going to remain competitive?
It's now a move that I actually encourage everybody to do. Vote-farming at 100%. Instead of selling votes, you can also avoid the middleman and just vote on your post all the time for the same effect with more profits. Now you might think: alright, so everybody just minds their business and do their vote-farming at 100%. Under this scenario, what's the actual point of the ~8% annual inflation on Steem which just goes back to the pockets of the voters? This is why I'm saying that anti-abuse initiatives are contradictory under the current economic model. We're fighting against the tide of incentivized spam and abuse. My as well just set Steem at 1% annual inflation without reward pool just to keep the network running, all while people post whatever they want as usual without voting.
The point is: Steem's economic incentives should be aligned to encourage allocation of inflation to contributions that benefit the platform. While it's impossible to design anything that encourages all SP holders to allocate 100% of the inflation to other contributors other than themselves, we can go for about 50%.
This is the proposal. The best way out of this situation is likely to:-
- Increase curation rewards (50% is a good start)
- Move away from pure linear and into something like n^1.3
- Subsidize downvotes (cheaper downvotes, separated pool)
Doing so will make curation more likely as the economic incentives from doing so will have a better chance to outperform "vote-farming". This "hack" is really about giving people half of every votes given out under a curation game. Some of us have been saying this and repeating the same arguments for well over half a year, but not many seemed convinced at all. I hardly expect anyone who have only put in less than 20 minutes of thought is seeing the problem and solution clearly. But that's generally all the time most people have these days. Some of us have put in dozens if not hundreds of hours just refining our thoughts about this one single problem.
Some words about bidbots: the proposal above will simultaneously make the pricing for votes much less predictable than in a linear economy. It won’t kill the vote bidding business but just introduce some extra risk (which there’s essentially zero at the moment) which would end up being more like promotion with less ROI, so it wouldn’t serve as a bypass to the act of holding SP for more earning power. Yes, there's a leak here that needs to be patched up. More profitable curation services should also emerge after the proposed changes.
The proposal has non-trivial costs, but as @trafalgar says it, nothing is as costly as a completely broken content quality indifferent economic system for social media outlets. Remember there's nothing wrong with profit maximizing behavior, one should expect it. The problem is when we don't align it with the behavior we want that's best for the entire system. To further repeat the point, I'll copy and paste @trafalgar's words here as I think he generally explains the situation much better than I do:-
We currently have a system where stakeholders are incentivized to engage in content indifferent voting behavior (vote selling/self voting) to maximize returns. This completely defeats the protocol’s ability to foster engaging platforms that revolve around content discovery.
We need to move away from an economic system that makes it too costly to vote on work that stakeholders actually deem valuable if we want this place to survive.
Upping curation rewards is an obvious answer, but by itself, it is easily circumvented. Bid bots can just offer to share most of the curation rewards. Self voters can spam hundreds of posts and just upvote the ones that were least voted on by others after 15 minutes to avoid others 'stealing' their rewards.
Non linear should be seriously considered. Having reward amounts/SP that differ per post depending on its popularity is the core component of moving away from content indifferent voting behavior. Yes it has a cost, but the n^2 we were use to was far too steep. At n^1.3 (or any crude approximation of this), we should get most of the benefits at the lowest cost.
Downvotes incentives should also be encouraged. Of course greater downvote incentives has downsides, but in combination with 1 and 2 above it should allow for curation rewards to out compete mindless vote selling/self voting.
Content indifferent behavior is the bane of this system. No social media platform can survive if it's unable to at least sort exposure and rewards by some subjective standard of quality.
Note that the 3 items in our proposal have been considered very carefully to cover all the angles so we can get out of the situation posed by Steem's current pure linear economy with low curation rewards and costly downvotes. Just implementing one item is likely not enough. We need 3 of them. But of course, we only want to achieve an intended effect, so any better implementation suggestions are welcome.
Also, suggestions like passive staking for investor-types so they don't influence the content voting and ranking, etc are flawed. The same problems will still happen since we'd still be under a pure linear economy with low curation rewards and costly downvotes. We'd just be reducing the reward pool here to be reserved for passive staking. The shrunken reward pool will then remain the be used in the same way, which is vote-farming, instead of content and curation.
It's my wish that more community members around here take notice about this problem and solution. If you're convinced, please make some noise about it. I've also written this about this a few times earlier this year. Some of us even wrote about it more than a year ago. The arguments and proposal remain to be in the same vein.
Please save Steem from all the unnecessary suffering and restore our sanity. We just need more users to stop running around headless, stop getting involved in senseless witchhunts under a flawed economic system, and instead seriously consider our specific problem statement and solution here. Some of us are really surprised that nobody at the top is onto this matter like an eagle over the past year.
It's a mistake to pin Steem's problems on culture and greed. Altruism and selfishness should be one and the same, which is what our proposal seeks to achieve in providing voters ample returns if they play the curation game instead of mindless vote-farming. The correct move then is in designing economic incentives to align profit maximization with activities that are good for the platform instead. It's as simple as that!
As always, thanks for reading.
Note: I want to make it clear there's nothing wrong with self-voting or selling your votes. It just has the potential to hurt the platform when there are no checks and balances in a flawed economy.
You can vote on your favorite witnesses here: https://steemit.com/~witnesses. I'm also running as one. If you trust in my choices for other witnesses, you can also set me as your voting proxy on that page.