My take on the situation of Steemit Inc - and what you can do now

Good morning everyone,

just as most of you here I was relatively shocked a few days ago when I heard the announcement from @ned that Steemit Inc has to save costs and to lay off the majority of its team. I feel with all of you guys, but I am also sure that you will not have any difficulties to find a new job.

Since the announcement, I have thought about the consequences of the announcement for the whole Steem universe and what everybody of us can do to support in this situation.

Steemit Inc's business model

The first thing I thought about was the role of Steemit Inc and why it was doing what it was doing.

Steemit Inc is a private company as we learned (if we had not known it), and as a private company you need one thing to survive and foster - a business model that will allow you to cover your costs and make profits. As I am an equity analyst by profession, I think that I know a little bit about the analysis of business models, but you do not need to be a genius to realize that Steemit Inc has no business model. They try to improve Steem and Steemit, but they do this free of charge. The rational is that they sell their own Steem in order to cover the costs of their development - and hope that their own development will increase the value of Steem. But for various reasons, this does not work:

Almost all crypto currencies have a very strong short term correlation to Bitcoin and the market as a whole. This means that even if your project develops well, it is highly unlikely that you will be able to escape from the overall market slump - even if you have a great development.

Unfortunately, your costs will be relatively fixed and tend to increase over time. So if you need to rely on the possibility to sell your Steem at a reasonable price, you are screwed from the beginning - especially if you have relatively high costs. When the Steem price goes down with the overall market, you need to cover your costs by selling more Steem. Given that the market is relatively low in volumes, this is likely to create even more downward pressure - which will require you to sell even more Steem. A viscous circle.

The right thing to do from the beginning would have been to make a plan for the development phase right at the start. Estimate the costs that are needed to reach a certain development which you think is necessary for the network to proser on its own. This money should have been raised and kept in fiat - even though this might not be liked by the crypto currency lovers. But your costs are in fiat and there is one general rule for investing: the higher the volatility of an asset the longer should be your investment horizon. But blockchain development needs to be fast - so its is clear from the beginning that you will have only a short term investment horizon - and crypto is not suited for that.

But of course, this is history now and cannot be changed.

What can - and should - Steemit Inc now?

I think the first reaction was the best they can do in the short term - cut costs to make sure to be less dependent on the Steem price. Concentrate your efforts on actions that are necessary to ensure the short term operations.

In the medium term, I am convinced that Steem does not need Steemit Inc. Even today, Steem would not die if Steemi Inc were to disappear. The network itself is not run by Steemit Inc. but by the witnesses and others that run a full node. Steemit.com as a condenser is not necessary - and most likely not your best option as other condensers such as @steempeak or @partiko are in my view better options to go to.

Nonetheless, in the short term it would be of great disruption for the system if steemi.com and the services by Steemit Inc. would fall away. Most new users will come in through this website, as it is the brand name by which Steem is know to the outside. Also many of the DApps rely on the APInodes provided by Steemit Inc.

Medium term, Steemit Inc should develop a real business model, which allows them to generate revenue, which help to cover their costs. This could be the sale of ads. My suggestion would be, that Steemit could keep the revenue from the these ads and pay the users which upvotes. This would help to finance the infrastructure and development costs for steemit.com.

Additionally, Steemit Inc. could take money from DApps, which make use of its APIs. This is a service which is not necessary as every DApp could also run its own node and would thus not need an API - but having publicly available APIs is of course a great thing, which makes developing a DApp really easy - which is one of the things I love about Steem.

What can you do to support Steem?

There is many things that users can do to support Steem and I am not going to repeat all of them. Be an active member of the community, tell other people about it, help newcomers, be generous with your votes, especially to new users.

But specifically in the current situation, you should vote for the witnesses - and consider who is doing what to support Steem. One thing that I would advise to look for is who is running an API node. For a Top-20 witness I would consider this a key criteria, as it would allow for alternatives to Stinc.

I wish you all a merry first Advent!
Tim