Steemit Smart Media Tokens: A Promise Waiting to be FulfilledsteemCreated with Sketch.

in steem •  7 months ago

Back in 2017, Steem announced two exciting projects: Hivemind Protocol and Smart Media Tokens (SMT). Hivemind would improve Steem linearly, but its the SMT project that could really alter the "attention economy". It has been a few months so I thought it would be great to revisit SMT in particular with what has happened since that announcement. I’ll leave Hivemind for another post.

What are SMTs?


SMTs are to Steemit as ERC20 is to Ethereum. They allow app creators to develop applications on the Steem blockchain or to turn their existing websites into tokenized economies. Within these applications the SMT serves as the app's native cryptocurrency. Two apps that do not issue SMTs as rewards, but Steem rather, are Dtube and Dsound. On both these sites, content publishers can upload their videos onto Dtube and their music/podcasts onto Dsound. Videos or sound clips that are upvoted/liked will reward the creator with Steem. An SMT based application would reward their creators with their own native token. Like any cryptocurrency, creators can then exchange their earned tokens for other tokens or back into their fiat currency of choice. This is potentially a game changer for several content sites. Media content has long been dominated by traditional revenue models (discussed below). Audience members have had no choice but to deal with these intrusive business models. SMTs have the potential to disrupt these business models. Let's dig in further.

How content publishers generate revenue today


There are three options for content publishers to generate revenue from its users. I exclude business-to-business (B2B) revenue streams such as classifieds and sponsorships in this article. Here are the existing revenue models in order of my preference:

  • Donations: You pay what you feel is appropriate.
  • Pay walls: New York Times, The Economist, Wall Street Journal all employ pay walls. Basically you pay a subscription for content access.
  • Advertising: I'm not a fan of targeted advertising because it feels intrusive. However, I have fallen prey to buying an item or two that popped up on a website. So it can't all be bad can it? Advertising is annoying but far less intrusive than a paywall.
With the launch of SMT, Steem can empower new revenue and incentive models for content creators. In order to realize this vision, Steem will need to recruit entrepreneurs and developers to its ecosystem (same as any other blockchain such as Ethereum and NEO). Similar to Ethereum, SMT serve as a fundraising mechanism for entrepreneurs. Basically it's also an ICO (initial coin offering) platform. Now that you're familiar with how SMTs can enable fundraising and token economies for content based applications, let's explain what Steem calls their Proof-of-Brain algorithm.

Proof-of-Brain

Proof-of-Brain positions SMTs as a tool for building perpetually growing communities, which encourage their members to add value to the community through the built in rewards structure.

~SMT whitepaper (link).

I’m not a fan of this name. I’d prefer any of the following:

  • Proof-of-contribution
  • Proof-of-creation
  • Proof-of-doing-stuff (okay I’m just kidding here)
In Bitcoin, solving its Proof-of-Work algorithm determines the block reward. In an SMT enabled ecosystem, the block reward mechanism is called Proof-of-Brain. I'll leave the "does everyone have a brain" joke aside for now. In all seriousness, Proof-of-Brain is exactly what you think it is. As a content publisher, you used your brain to create a piece of content. Based on how your content is upvoted or liked, the creator is rightly rewarded for their efforts. All you had to do was like the video, the article, or the song. Steemit already has this built in. It begs the question why do we need SMTs when we already have Steem? You did not have to pay for a subscription. You did not have an ad in your face. It's just you and your favorite content creator(s).

Why not Ethereum

Apps can build on Ethereum, but content driven apps make sense on Steem instead. Faster speed. Lower cost. Ethereum's blockchain may be older and larger in terms of the number of applications built on it, but Steem offers a blockchain focused on media assets. Additionally, Steemit users are avid community members. Steemians are a tribe. I can’t say for the same for holders of Ethereum. As far a technology, three second block times on Steem. Zero fees too. Hard to beat that. Ethereum as an all-purpose blockchain will have its advantages eroded in niche areas with industry solution focused chains.

Steemit is not all roses

As a Steemit user myself, I have quite a few complaints about the platform. I'll list them out below, then dig in. I mention these downsides to Steem not to tear the platform down. Instead, I offer them up as opportunity for content focused blockchains to use as a starting point of innovation. Hopefully the new SMTs will enable more parity in their ecosystems.
  • Bots: paid services to upvote posts
  • Subpar UI/UX: just visit Steemit.com. It's practically a mid-90s website.
  • Lack of outsiders: Non-community members can view article but cannot upvote article unless they sign up for a Steem account.
  • Oligarchical distribution of influence: Steem Power is the token of influence within Steem's community. If you peruse through Steem Power distribution it's clear that influential power is held by a few. This leaves genuine content creators constantly searching for large holders of Steem Power to vote for their article. Unlike in Reddit where each upvote is 1 vote and that's it. If Steem were a nation unto itself, it would appear to be controlled by a few powerful parties who have every incentive to collude to continue enriching themselves. Multicoin Capital has an excellent article on the tradeoffs of DPOS systems.
Steemit does have solutions for each of these items above but the platform runs the risk of disruption if these items persist in the long run. One aspect of Steemit I do enjoy is the constant release of Steem into the ecosystem. I go into more detail below.

Inflationary crypto economies

Inflation funding is where things get interesting. It allows economic rewards that are otherwise unthinkable. Remember, if Ether holders believed an upgrade (ex: sharding) would make the price go up by >10%, they’d be happy to pay close to 10% of their tokens for it. That means Ethereum could crowdfund a $3bn feature bounty by inflating the number of ETH by 10% and pay the newly created tokens to the creator(s) of the upgrade. This is somewhat analogous to taxes: everyone in the community chips in to fund common infrastructure (ex: roads) which no one would build alone.

~Fred Ehrsam, Funding the Evolution of Blockchains

Unlike Bitcoin's fixed supply of 21 million coins, Steem is constantly created. This allows for inflation to be rewarded to incentivize certain actions in the network. SMTs reward content creators just as BTC rewards Bitcoin miners. Adding coin supply to the economy devalues existing coins in the marketplace, much as the US Dollar devalues when the Federal Reserve prints additional money. For content creators who have made their fortune in the past, they rely on copyright laws to protect their revenue streams. But copyright laws also have an unintended consequence. Copyrights are meant to expire, but major corporations such as Disney are keen to protect their golden goose. Major companies logically create lobbies for copyright protection extensions (see "the Mickey Mouse Protection Act"). The intended consequences of such lobbying kept these creative properties from moving into the public domain, and arguably stifling new innovation. These corporations and music royalties effectively become rent seekers (an organization or an individual to obtain economic gain from others without reciprocating any benefits to society through wealth creation)*. They extract market value long past their innovative days. An inflationary economy will devalue wealth holdings and force market participants to spur new ideas. Additionally, it is also a key mechanism to decreasing wealth concentration. This will pressure the wealthy to continue upping their game. Innovation is to be rewarded. Meritocracy in perpetuity.

SMT use cases


I'm intrigued by a few use cases where SMTs can turn mundane web activities into highly interactive experiences. The obvious use cases for SMTs is to build communities such as social networks. Steem listed five core use cases in their whitepaper (it's a midnight thriller so curl up in your bed and enjoy this read... which will put you to sleep guaranteed). There are obviously a few more which I will explore down below. Let's first look at the five "low hanging fruit" cases if you will.

  1. Content Publishers: monetizing a site's user community, think Disqus with a cryptocurrency
  2. Forums: issue single or multi-token support for general purpose chat or niche-specific conversations. Chain.bb was an example of this until it shut down last month (see post).
  3. Comments Widget: Imagine a Wordpress plugin for comments. Likes and replies issue tokens.
  4. Sub-Community Moderators and Managers: The whitepaper brings up Reddit moderators as a use case. I like that one so let's stick with it here.
  5. Arbitrary Assets - Tokens Representing Real World Assets: Essentially a pegged token-to-asset mechanism as an IOU. Personally I don't see this use case taking off as there are many other digital ecosystems that may be more secure than the Steem blockchain to handle this.

Putting my idea hat on

Aside from the 5 use cases up above I thought it might be fun to get a little creative. After all, I struggle with the argument of financial payment as a sufficient mechanism to keep a user on a social network. Based on my own usage of Facebook and Instagram, I think users are willing to sacrifice privacy and advertising placements for a slicker UI, cutting edge features, and a place with all of their friends/family. But I think SMTs can be applied in interesting service sectors. I list a few ideas below (these are just ideas!):
  • Customer service: reward good service with an upvote. Rather than a "tip jar" for the service worker, I propose a mechanism where the voter receives a "token" for submitting a review. The user then keeps that vote token in their account and can submit it to a lottery. Based on the average rating for service, prize offered by the network provider (company) is adjusted based on how great the service is. Payouts are then distributed to the customer service reps above the average and distributed to a percentage of voters based on a lottery system. You don't necessarily need a token for this but I sure do think it's fun.
  • Food chains: Reduce incorrect food orders (or any sort of business where yield is critical) at quick service restaurants. Patrons tip (again, the "tip jar") or upvote the service they received. Food workers are incentivized to reduce returned orders and the business cuts down wasted food and expense.

SMTs waiting to happen

Proof is in the pudding as they say. So how many SMTs are out there today? I'll admit, it was difficult to put together a list. It would be so much easier is Steemit explorers had a listing of all SMTs out there, similar to tracking down all ERC20 smart contracts on an Ethereum block explorer. For now, let's consider SMTs as "vaporware" at worst. At best it's closed source code waiting to hit the GitHub repo. If you search online, you'll find a couple of recently announced SMTs, they include:
  • APPICS ($XAP) - currently undergoing ICO. I find it interesting they are issuing an SMT but raising funds outside of just Steem
  • Vice Industry Token - completed their ICO but raised funds in ETH, not STEEM
  • OnStellar - ICO failed
  • Chain.bb - now defunct
There's not a whole lot to find when you type in "Smart Media Token" in Google. The whitepaper features a ton of logos surrounding the Steem logo, indicating there is already an ecosystem of applications using SMT. Most of the logos appear to be apps generated by Steemians to seed the ecosystem. This makes sense as it helps to show developers the potential of SMTs. If you follow the SMT Telegram channel to learn more. you will see several developers and entrepreneurs discussing incorporating SMT into their platform (i.e. Steemia). For now, most participants in the Telegram channel admit SMTs are currently vaporware and not ready for production.

My concerns

Months have passed by and SMTs are not ready. The GitHub is steadily ticking away at open items so there is clearly progress. When SMTs are ready to go I hope Steem can clear through a few hurdles:
  • Immature technology. SMT is simply not ready. Battle tested is a badge earned through the passage of time.
  • Lack of awareness. Developers now have a smorgasbord of chains to develop their own tokens on (ERC20/Ethereum, Neblios upcoming wallet launch)
  • Investors would rather use other cryptocurrencies as funding vehicles (i.e. ETH).
The fact that many SMTs have raised funds through Ethereum suggests to me that point #3 is already in play. It's early days for this platform and I am encouraged to see Steem actively working. Here is their GitHub project tracker. It's clear to me they have accomplished much (22 tasks completed), but still have many things in works planned (11 items).

There aren't many production level apps at the moment but many are on the way. I stumbled across SteemHunt (a play on Product Hunt). I suggest bookmarking this site to discover apps that are building on Steem. SteemHunt does not use SMTs but instead uses Steem as its currency. This would have been a great use case for using an SMT.

Where are we going with this


I'll say it once more. SMTs are early. The use case for tokenized economies within applications is clear in my mind. Ethereum established this. I'm hopeful Steem can reach production grade for SMTs so that it can fully recruit apps onto its ecosystem. With "create a token at the push of a button"-like services launching (Waves last year, Neblio), competition will stiffen for mindshare across applications. Steem's head start in decentralizing content with Steem, Dtube, Dsound gives it a leg up in their conversations with content based applications. I'm hopeful Steem will drop SMTs in time with some killer partners. That would give the platform an incredible boost and a reason for $STEEM holders to rejoice.

Thank you to: S. Kelley Jackson, Jr. (Steem) and Sam Stone for their invaluable editing input.





About Quantalysus


Quantalysus publishes blockchain research and analysis to raise awareness and increase adoption of digital assets. Please follow on Twitter, Steem, and Medium to stay up to date.

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I’m surprised we havent heard much about smt’s, I thought it was going to blow up faster

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@yonny check out the Telegram group. There's quite a bit of chatter in there from devs. The prevailing sentiment is its vaporware at the moment. If you check the GitHub they have a project tracker. Many items are completed. Personally, I'd love to see a percentage gauge of where they are with the overall project. It would be awesome if they also set up @steemit developer bounties for certain features. @jerrybanfield is this a topic that can be brought to the core team? I'm personally worried other projects will beat Steem to the punch.

I think that if EOS takes off as predicted, this will be the chosen funding model for most new projects, drawing projects away from ERC20 tokens and removing any incentive from producing SMTs.

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@grizgal agreed. Steem was the first to solve the paradox of preventing Sybil attacks with a zero fee network by using a network weight ownership model.

Hi, I’m one of the creators of Steemhunt. Thanks for such a great view on SMT as well as mentioning Steemhunt.

We are actually building a concept of HUNT coin based on SMT platform, but the timing is not ready yet. We want to build the healthy community first before the ICO (especially nowadays there are too many ICOs for not-even-a-single-user-existing app 😂).

Anyway, thanks again for your great post 👍

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I saw Steemhunt and immediately thought... Product Hunt! I'd love to connect to talk about your project as it matures. I admin for TheCryptoZombie YouTube channel and we're always looking for interesting content.

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Oh great! I know the Youtube channel :)
Do you use Telegram or Discord? If then, we can have chat when you have a chance later.

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Yes you can find me on Telegram at @jeffignacio

You have good points in the article and plenty use cases for SMT's some of which are already starting to show. You mentioned as a tool for tipping and there was an article that i saw earlier which has a concept like this.

https://steemit.com/steem/@followbtcnews/steemtipper-is-taking-off-tip-steem-easily-and-safely-on-twitter-and-social-media-platforms-with-no-fees.

Where I think the major success will be is when an existing site with ad revenue buys into the system as the will have the money coming in to fund the tokens and use it to monetize the users.

If say a social media site designed more along the lines of facebook started using a SMT then surely they would get more users and therefore create more ad revenue so that everybody was earning from the site.

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Agree with your points. Centralized networks such as Facebook can easily use Steem's blockchain to continue mining "like" data for themselves as well as reward the user with Steem. Actually, the only thing that holds them back from doing that is control of the data, privacy, and latency. But surely, networks with powerfully built-up network effects would splash into this space in a major way.

I did see steemtipper. Seems like a worthwhile venture to bring non-Steemians into the world of Steem and its benefits.

Thanks for your insights here. I think it's important to have an SMT architecture in place as steem is providing a real world use case to many for the first time. Having the same tools as other platforms will encourage people to stay on steem and therefore cement its first mover advantage. Whatever replaces steem will need to be 10x better than steem. However the platforms that are building on top of steem already have demonstrated that value is value is value; Utopian.io already has a moderator system, looking around the platform I can see a nearly limitless infrastructure for building anything we can imagine already. The trouble areas here of course are privacy, as anything posted without encryption is public forever, and smart contracts.

Inventory control, internal POS, virtual reality, and rich media are all coming. I truly believe the attention market/brain paradigm on steem will encourage people to spend their time here. Politics, knowledge, science, art, news, sports, games, gambling, shopping, and even memes... anything that is public or is done in public has a place here.

Imagine autonomous cars you hail by posting on a "d-uber" platform; it requires a 100% upvote, and it's platforms wallet also upvotes the ride. Bringing tangible value to its users, and funding the cost through inflation that then gives steem another defining edge outside of exchanges and in real world commodities.

SMT may have it's uses, I'm glad it's coming, it may also provide more market edges for price discovery; but the innovation already present is mind boggling.

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This is the kind of comment I'm hoping for! While true that blockchain is immutable it's possible to mask certain content based on how 1) transactions marked private or public (Wanchain, Monero have privacy built-in), 2) visibility settings (Steem has a low rankings setting). I just published another blog entry on Holochain's project. It's not a blockchain, in fact it's much more similar to Git in that each node can carry its open copy of a localized ledger, and merge to the greater ledger when needed. I could see a whole new decentralized architecture around what Holochain is doing, and blockchain in its entirety could be left behind as a truly decentralized solution.

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Privacy coins may have to wait for quantum penetration testing. As is anything that is centralized or encrypted may only be as safe as the next innovation or hacker. Steem has mechanisms for privacy as well(memo system) but the nature of this blockchain relies on openness in general. Systems with multiple points of view aren't as secure as single POV systems like the directed acyclic graph... IPFS is one such system that relies on distributed hash tables, but these tables aren't updated at the same time which allows some conceivable vectors of attack though I'm not aware of any success. Blockchains make trust ubiquitous, trust is the fungible commodity we wish money was. It's value to us can not be understated. I will look further into holocoin, but my initial belief is that EOS (a multithreaded DAG) will provide the first solutions that holocoin seeks to answer which may leave it in the dust. I'm also less trusting of hardware dependent software after seeing the intel chip exploits.

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@disregardfiat I used to work at Intel. Exploits at the chip set level. Send over a link so I can read up on it. Multicoin just published a very detailed analysis on EOS. I haven't dug much into EOS myself but have the analysis printed on my desk for a readout sometime this week.

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Intel Admits Flaw This exploit was a back door by the intelligence community.

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You're an LA steemian? We should meet off chain sometime.

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@disregardfiat yes I'm in Koreatown. Are you in LA? Feel free to message me. My contact information is on my website (quantalysus.com).

SMTs would be a game changer. Will follow it's progress on GitHub. You have my resteem, upvote and follow for posting this article.

@quantalysus thank you for giving us an amazing look inside smart media tokens and Steem as it is today because this helps us keep our faith strong in Steem and provides motivation to keep making our contributions each day! I will resteem soon!

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Thanks @jerrybanfield. Aside from @steemit I'm a huge fan of what @dtube and @dsound can enable from a "diversifying" media perspective. SMTs are essentially a "partner" strategy for other devs to build on Steem. Something great must come out of it.

wow!! great....its a very very helpful post for me..thank you.....

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waiting for this... steem will be the best platfrom in the world.

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good content..\Arbitrary Assets - Tokens Representing Real World Assets
that's great..@upvoted you

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Thank you. Following you in return.

I thought SMT would be implemented much faster. Seems we might just have to wait a little longer......

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Same here. I only just heard about SMT's recently as I started writing about cryptocurrencies starting mid-March. I assume building new capabilities into an existing blockchain is much easier said than done.