Math of Steem: Stake distribution and metacuration with increased curation rewards
Metacuration is the act of curating curators; in the case of Steem, this means building the stake of curation accounts so they can vote on a broader range of content and distribute rewards among a larger group of people than I have time and attention to do myself. Let's take @pifc and oversimplify their program a little bit as an example:
I vote on the PIFC account, as well as a bunch of other things. The PIFC account votes on its curators, who in turn vote on and interact with new users. This allows my stake, eventually, to reward those new users by making each account in the chain larger. The process is glacial, in that it's very slow but it eventually makes a large impact. This is what I've worked to build on Steem, and this is why 50% curation rewards are going to drive me away when it happens.
What happens to centralized stake moving down the line under increased curation rewards? Here's a chart of a four-level metacuration and account stake under 75/25, starting fresh - a million-SP account wants to spread the wealth to other curation programs and eventually end users starting from scratch.
| Year | Founder | Curator 1 | Curator 2 | Curator 3 |
|---|---|---|---|---|
| 1 | 1045615 | 142724 | 9925 | 468 |
| 2 | 1094268 | 298733 | 41166 | 3817 |
| 3 | 1145184 | 468950 | 96629 | 13358 |
| 4 | 1198470 | 654362 | 179496 | 32981 |
| 5 | 1254235 | 856013 | 293233 | 67222 |
As you can see, the growth at the bottom is slow, but recursive. As each curation account gathers stake, it can go forward and pass on the value to others.
Here's the same chart under 50/50:
| Year | Founder | Curator 1 | Curator 2 | Curator 3 |
|---|---|---|---|---|
| 1 | 1093269 | 99484 | 4616 | 146 |
| 2 | 1197328 | 217910 | 20024 | 1239 |
| 3 | 1311292 | 357979 | 49181 | 4533 |
| 4 | 1436103 | 522737 | 95599 | 11711 |
| 5 | 1572794 | 715617 | 163433 | 24979 |
Things have changed around. The starter account now has 320,000 more SP, man, I'm sure that's great for them. In five years they've increased their holdings by 25.4% over the 25%-curation system.
In order to pay for it, everyone else has become less effective. The first-level curators are the best off, they've only been cut by 16.4%. In Year 3 they managed to get enough SP that they're reaping some of the benefits of 50% too, so they're actually starting to catch up; they'll match where their 25% counterparts were somewhere during year five, and actually surpass them around the end of year 8.
The second-level curators got a little bit hosed, they're down 44.27%. Almost half of their effectiveness has been stripped, but they're starting to get some benefit from curation here in year 5. They'll be where 25% Curator 2 was midway through year six.
The third-level curators were pretty much destroyed. They've lost 62.84%, and moved from an orca to a middling dolphin. They'll catch up to their 25% counterpart toward the end of year 7.
It gets worse if we add more levels. Level four drops by 75.22%. Level five drops by 83.48%.
It also gets worse if we add more years. For every year out, it takes longer for the accounts under 50% to catch up to where they would have been under 25%. You can see this in the chart - in year 2 Curator 3 was less than one year behind his 25% counterpart, by year five he's almost three years behind.
This is the long-term stake distribution change being promoted on Steem through the 50/50 rewards proposal, simply and obviously. Do you wonder now why I think it's terrible? If you're a top dog and all you care about is your own ROI, you'll get a nice little benefit. If you're not a top dog, or you care at all about your effectiveness, you're dead meat.
(By the way, these numbers include recursion for everyone reinvesting liquid rewards and voting with their curation SP. Guess what happens if anyone cashes out.)
Assumptions:
- current amount of system inactivity
- curation rewards at par (25% of vote at 25, 50% of vote at 50)
- all accounts use all votes
- all rewards used to power up
- either 100% powerup or SBD stays at $1
- I compounded weekly rather than trying to guess when posts happen.
Based on further thought from this I've developed an alternative proposal which would allow natural discovery of optimal curation levels, and I believe should work to the benefit of all stakeholders.
This pretty much invalidates your math. This is not a static environment and these are bad assumptions to make. You also failed to consider the impact on STEEM purchases and/or power-ups from the increased incentive for holding SP.
I get that you really don’t like the 50/50 proposal, but that’s no excuse for pushing asinine scenarios or questioning other users’ motives for protocol improvements.
There have been several long-time users, investors, and witnesses explaining to you the history of our protocols, the observed behavior before and after previous protocol changes, and the valid economic and behavioral concepts behind the proposals. You may not like those explanations, and that’s fine, but this crusade of ignorance is a little absurd.
You can assume that all of us are only interested in destroying our investments, but it’s a pretty stupid assumption. Instead, isn’t it possible that you might not be comprehending some of the points that have been made?
Have you also considered that the people explaining these things to you are the very curators that had reduced their curation activity due to the protocol changes that disincentivized the better manual curation? If you’re still looking for “evidence,” I’m sure @smooth, @pfunk, @kevinwong, @trafalgar, and myself can tell you what we used to do in the past when spending more time and effort on curating was actually worth it. And there are plenty of other accounts and projects that are no longer active for the same reasons.
Keep that in mind when you continue asking for “facts” and “evidence” about user behavior and how it’s affected by protocols.
Purchases are irrelevant. More powering up and voting could lead to a lower inactivity rate, but a lower inactivity rate makes the math worse, not better. The inactivity rate is pumping all of this. Every change to any of those assumptions makes the scenario worse, unless you're proposing to acquire a higher percentage of Steem going unvoted somehow.
More purchasing of STEEM (adding upward pressure on prices), more powering up of STEEM from new users (contributing to existing stakeholder dilution of influence), and more/better targeted curation via reward incentives is “irrelevant” and makes things worse? How so?
And for whom would things be worse? Those who are not invested? The ones who decide to cash out their rewards as blogging income?
You keep claiming that things will be “worse” and you point to a worthless chart of SP growth based on faulty assumptions, but I have yet to see any rational explanation about how things will actually be worse for anyone. Even if we were to assume that SP accumulation would occur according to your assumed scenario, who is worse off? All stakeholders would have the opportunity to earn higher returns for their curation.
The only “negative” that you have somewhat reasonably argued is that larger stakeholders will earn a larger share of rewards, which isn’t really a negative. It’s pretty much expected. It’s how stakeholding/shares work. So you have a problem with smaller stakeholders not earning as much as larger stakeholders...but they’d still be able to earn more from curation than they can currently earn on the same investment.
How is this “worse?”
And you do realize that not all social media users are content creators, right? And that not all content creators are good, professional, or popular, right? And you understand what that means within the context of this discussion? (Content consumers greatly outnumber content creators.)
It's irrelevant to the distribution expressed in the post that you're commenting on but don't seem to have read. The same amount of SP votes the same amount of Steem from the rewards pool regardless of who buys what. (Except pumping SBDs.)
Fine, it "exacerbates the expressed distribution problems" if you like.
This goes back to your disdain for effectiveness. As a founder, I am worse off. My goal is to affect the stake distribution in a way that broadens it. I am less effective at that goal, therefore I am worse off, even though I have more money.
The way that the lower accounts are worse off is self-explanatory.
Listing assumptions clarifies the reasoning and gives you something objective to test. Some assumptions are surely off, so listing them out is important. I'd like to know what is assinine about those assumptions; this is exactly how I use Steem: post about weekly, use (almost) all votes (10/day), power everything up.
I haven't seen the assumptions made by those promoting 50/50. Before making another big change to the ecosystem, it would be a good idea to get really clear on those.
This statement:
..strikes me funny, since again you are talking in a disparaging way about behavior I consider to be my normal daily use of Steem.
Is it possible that the past you refer to was a time when you and the others you name here did not yet have >70 rep and 6 figures of SP? No one explained the history of the protocols to me, so all I have to go on are my observations that (a) I've been happy with the process of building my account from zero over the past year, even post hf20, and (b) people skeptical of this idea seem to be <70 or <60 rep, small but committed accounts while those in favor have larger stakes.
Are you sure your assumptions work for starting and growing new accounts, and not only for maximizing larger ones?
No. Reputation really has nothing to do with curating anyway.
Curation reward percentages apply to all voting accounts, regardless of size. Whales, dolphins, and minnows alike will be sharing the 50% of curation rewards, just as they currently share the 25% or less of curation rewards. So yes - growing and grown accounts that curate content will benefit from a larger pool of curation rewards.
Reputation is a quick and easy indicator of how long you've been here and/or how many interactions you've had. At your stage in development, getting a return from your stake seems to matter much more than it does for me.
When I want to grow my stake, the best way to do it (besides buying Steem, which I do when I can) is by writing a post. These usually earn about a dollar, which isn't much but it is about a 0.5% return on my stake. On occasion I get a Curie vote, so I get a quick 20-40% return. Sometimes I win a contest for another 5-10%. Curation rewards are a constant trickle in the background, like interest on a savings account. This is my experience of growing a new account.
How does the proposal affect me? If I understand it right, those higher return activities I listed get cut to 2/3 what I see now, while the curation rewards I earn on my own votes are doubled. Have I got that right?
Does that mean I'd exchange dollars (1/3 of my author rewards) for cents? (double the 10¢ I might earn on 1¢ upvotes?)
Since author rewards give me a chance to earn through votes from stronger accounts (or many, many dust accounts, I guess), but curation is always weighted on my own stake, I really cannot benefit from this without a much bigger stake. Am I wrong?
This would only be accurate if no other variable changes at all, which would be a terribly ignorant assumption to make. It might be the immediate, short-term result after the protocols are adjusted, but I would expect user behavior and post payouts to begin changing relatively quickly...probably within a couple of weeks as curators pull back delegations and/or start new ones, and as new investment comes in from users taking advantage of the new incentives.
And I know these things will occur because I’ve spoken with many people who have been advocating for higher curation rewards and would power up and get back into full-time curation if the incentives to do so were higher. I also happen to be one of those people who would regularly and manually curate again.
Any change like this will change user behavior and the platform dynamics. To assume otherwise simply ignores or rejects our observable/observed reality.
tim, you are always bringing interesting and supported discussions onto the front and i really appreciate that
my math is weak at my best days, but i would like to raise another aspect about 50/50 that i have heard from first-hand accounts from people i am actively trying to invite to grow the steemit userbase and i have had the hardest of time AS IS to convert established talents into a steemian.
the people whom I know personally who are already successful in patreon, instagram and deviantart, who DO NOT live and breathe inside the steemit ecosystem took one look at Steemit and are not compelled to join.
if steemit converts into 50/50, the average POTENTIAL joiner (them not knowing steemit's math etc) will think, simply: "i make posts and other people take half of the earning? wtf"
steemit isn't anywhere near the big hitter names in its blogging platform reputation out there, this isn't the time to discourage sign ups. this is definitely not the time to discourage retention of existing talents.
only by building up quality contents and rewarding authors, a blogging platform can grow in its infancy stage. sure, later on, once the name has been established and is a robust ecosystem, it will be able to throw its weight around a bit more since new people will naturally already be mesmerized by the existing talents and by the successful stories on the ecosystem.
but
gee golly
steemit is NO WHERE near that stage. the blog is bleeding authors and if we convert to 50/50... i believe it will actively DISCOURAGE potential new comers.
Steemit (as is).... already has a very steep learning curve for a plankton user to grow. This 'illusion' of other people taking half of a post's earning will not help Steemit's image.
I put quotation marks around illusion because I'm emphasizing the average random person's understanding of the system. Looking in from the outside, 50-50 sounds exactly like it sounds like.
's all im saying
sorry for the ramblings
This is a great point; one of the horrible things about the Steemit front end is it shows "post value" and then the user is told at the very last minute that they get 75% of that. Very newbie-unfriendly.
Not much to add, the horizon is clear enough to me.... I'm going to reach other witnesses to try to have their attention on this subject. (Not expecting much of it, but the least I can do is to try)
Well, I commented under most of the top 20 witnesses, let's pray they won't piss off and hit back a little redfish xD
One thing of concern with the 50/50 issue is that it is hiding the thoughts of a seperate downvote pool. I never got into facebook or youtube because of the trollish activity. Currently on steemit the downvoting trollish activity is somewhat limited to pretty much one individual. With a seperate pool, and possible rewards, the number of down votes will be skyrocketing and the only thing going to the moon will be people leaving in droves to follow the moonie coin and blockchain if there is one.
Just bold :)
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Ugh...
I like @pifc - it's a supurb initiative. Yr analysis looks good.
One comment undet fyrst's 50-50 proposal really caught my attention.
It simply said 'won't this improve bot returns and make their use more appealing' ? (Or something like that).
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