HF 21 (as well as the accidential HF22) are now behind us and the blockchain is running as smooth and stable as ever again. EIP is working as well and the first proposals are being paid out. Bidbots are taking a massive hit and manual curation has become the new trend. And best of all, Steemit Inc. has stopped its program trading (i.e. selling) for a month. So all is looking just nicely - the problem is just - it does not work!
The way it should be...
In an ideal world, Steem would attract great content producers, because they realize that they can earn better money than on the likes of YouTube. These great content producers would bring new users to Steem, some of which would also like the idea so much that that they invest into Steem. This would result in an increasing Steem price, which in turn would increase returns for content producers. This would attract additional high quality content producers .. a virtuous circle which would help increase the Steem price to the moon.
...but shit ain't like this
Unfortunately, this is not how it works. Indeed, we are in a viscous circle, that continues to drive the Steem price lower and lower.
Let's look at the facts:
- Steem currently has a market cap of 55 million US Dollars.- Inflation is currently at 8.2%, so the available amount of newly issued Steem is around 4.5m US Dollars.
- Of this amount, roughly 65% or 2.9 million US Dollar belong to the content producers
- This amount is shared 50/50 between content creators and curators, so the amount of available for content creators is roughly 1.45 million US Dollars.
- This amount is further reduced by the payments to the bidbots, which are reduced in importance, but not dead yet. Let's see how much they money will flow to these in the future, but I would estimate that the amount at the moment is still north of 0.2 million US Dollar annually at the moment. This leaves the amount of rewards to content producers to roughly 1.2 million per year.
- This means, that only about 3000 US Dollars per day are available for content producers. Further reducing this by self votes and circle jerking votes, I would consider it likely that not more than half of this is really available to content producers. This means that at the current moment, Steem has to offer only between 1000 to 2000 US Dollars in content creation rewards per day.
Comparing this to the rewards you can earn at other platforms - an "influencer" with 10,000 followers is said to earn as much as 100 US Dollars per posting, somebody with 1 million followers even about 12,000 US Dollars - this shows you that it is simply not attractive for any successful content creator to publish exclusively on Steem.
The result is, that the Steem blockchain becomes less and less attractive for content producers - and thus also for readers.
Additionally, the weakening Steem price makes it more and more difficult for any type of project to survive on Steem. As a consequence, they will tend to sell the earned Steem as quickly as possible in order to make sure not to be diluted by a weaker Steem price.
So what can we do to break this viscous circle?
At the moment, rewards for content producers are so low, that we have hardly anything to lose. Content producers who are here today are so mainly for the community - and not for the rewards. Most of them are invested anyway, so they would most likely earn more from a higher Steem price than they would lose from a lower inflation. I would therefore suggest once more that we reduce the amount of inflation by at least 4 percentage points. We would than be on a similar level as Bitcoin is today. I am sure that this would result in a higher Steem price.
The second element is the amount of Steem that is sold on the market for fiat or other crypto currencies. Of course, we cannot force anybody not to sell their position - but we can of course make suggestions. I think the decision by Steemit Inc. not to sell any Steem this month is great - but it is not a sustainable solution. The problem is, that Steemit Inc is not fully funded. They need the income from Steem sales to fund their operating costs. Unfortunately, their costs are not in Steem but in fiat. So if the Steem price is low, they actually need to sell more Steem to cover their costs. This is the opposite of what you should do - buy low and sell high. So my suggestion would be for Steemit Inc to seek typical venture capital funding - or to consider a block deal with an investor, which would allow them to cover their costs before reaching a sustainable income level.
Will any of this happen? I am not sure - but I am convinced that it would help to overcome the current phase of weakness.
What do you think?
Wishing you all the best,