# Can Steemit Survive Burning \$65 Million USD in Author and Curator Rewards Every Year?

in #steemit6 years ago (edited)

Yes, you've read that right. Steemit pays \$65 Million USD in rewards to authors and curators every year.

Here is the math. The market cap of Steem is around \$1 Billion USD at the time of writing this post [1].

Every year the total supply of Steem tokens are inflated by 9.5%. That 9.5% is distributed as rewards to witnesses, Steem Power holders, and authors and curators.

Witnesses deserve their 10% of the 9.5% inflation, because someone has to power the blockchain.

I can understand the idea of paying 15% to the Steem Power holders to compensate them for holding an illiquid asset. In essence, this doesn't make much sense either, because you're taking money from one pocket of a person to put it into the other pocket of the same person.

The biggest problem as we all know is the 75% of the 9.5% yearly inflation. 9.5% inflation means 8.7% dilution every year. 75% of that makes 6.5%. That means \$65 Million USD is distributed to the authors and curators.

Sure, some of those authors and curators deserve their share of the \$65 Million USD. But can you say that the content created in a year on Steemit deserves \$65 Million USD?

If you had a billion dollars in the bank, would you pay \$65 Million USD of it to the content created in a given year on Steemit? Does that content have that kind of commercial value?

If your answer to those questions is yes, I'm sorry for having wasted your time. Please close this tab and ignore this post.

If your answer is no, then we have to do something about it. I came up with a solution proposal to this problem and it is already being discussed by other Steemians in this post.

Come and join the discussion and let your opinions be heard. Moreover, please resteem this post, if you think that something needs to be done about the Steemit reward pool abuse.

Here is my solution proposal: How to Solve the Reward Pool Abuse Problem Once and For All

If we don't act now, it's a matter of time before investors of Steemit figure out that a significant portion of their investment is thrown away each year. When that happens, a selloff will start and Steem and Steemit will implode.

# Disclosure and Disclaimer

At the moment of writing this post, I owned some Steem Power tokens. This post is for information purposes only and not intended to be business or investment advice.

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6 years ago (edited)

Dear @bbilgin, your questions about the complete Steem content being worth or not \$ 65M misses a few key elements:

• Steem is new, not mature technology. In this stage we will see very odd things that are not sustainable at all. A nice example of this is the value of 1 SBD. It deviates hugely from 1 USD.

• Rewards are in a sense the Steem way of mining (tagged Proof of Brain). Mining is an integral part in many blockchains. Blockchain technology itself is fluctuating heavily in value as well, so much here should be seen in terms of 'potential future value'.

Dear @fitzgibbon, I did not question the value of the complete Steem/Steemit ecosystem. Can you quote the sentence where you think that I question the value of the Steem/Steemit ecosystem?

I question the amount of rewards paid to authors and curators in a single year, which amounts to \$65 Million USD. Again, I did not question the amount paid to the witnesses or someone else.

That \$65 Million USD is paid to the authors and curators for the content created in a single year. Do you think that the potential future value of the content created on Steemit is \$65 Million USD? If so, can you explain me your calculations?

The exact number in USD depends on the value of 1 Steem. The value of 1 Steem is determined by the market. If the market would behave according to Metcalfe's law, it is assuming Steem has about 33000 daily active users that contribute time and content.

Metcalfe:

value = users2

Seems oddly accurate, no?

Again, I don't discuss the market cap of Steem. I assume that the ~\$1Billion USD market capitalization is accurate.

According to the current schedule, total number of Steems are inflated by 9.5% in a year. That makes 8.7% dilution in a year. 75% of 8.7% makes 6.5%. That 6.5% is allocated to the authors and curators for the content created in a single year. That amounts to \$65 Million USD a year.

Do you believe that the content created in a year on Steemit is worth \$65 Million USD?

In other words, suppose that Steemit is your own private website that you host on GoDaddy. And you have a billion USD in your bank account. You allowed all these people to create content on your website. Would you give \$65 Million USD of your billion USD to these people for the content they created on your website?

wow, i had these questions too. I am really curious about the answers of the ones that know

Thank you for your reply, @mcandceo. Please check the post How to Solve the Reward Pool Abuse Problem Once and For All for a discussion of possible solutions.

I fail to see how "Witnesses power the blockchain". From my gathering most witnesses are a net drain on it, especially with most of them running some form of bot and making bank due to that.

Or is this due to your other comment in regards to the common misconception that witnesses were the ones running the IPFS nodes and not just the average everyday joe blow with no power at all?

(I run an IPFS node and I'm a plankton)

I fail to see how "Witnesses power the blockchain".

Or is this due to your other comment in regards to the common misconception that witnesses were the ones running the IPFS nodes and not just the average everyday joe blow with no power at all?

Yes, it's due to my misconception. I thought they had a similar task as the Bitcoin miners. I had that misconception, because of the following sentence in the Steemit FAQ:

The remainder is distributed to holders of STEEM Power and the witnesses that power the blockchain.

The remainder is distributed to holders of STEEM Power and the witnesses that power the blockchain.

Steemit, vests, Steam Power and Steem Dollars are all powered by witnesses and are all part of the Steemit blockchain. IPFS is a decentralized network of nodes that anyone can spin up. IPFS is a blockchain and is a blockchain within a blockchain when taken into account of Steemit.

What's going on is that Steemit offloads it's data onto IPFS, which is in part of what keeps steemit so fast, even involving it's cryptocurrency. Offload data onto another expanding system that expands faster than Steemit itself can and receive it's hash data to reference in the IPFS system to call back to.

The witnesses do manage the "blockchain" just the Steemit Blockchain. They don't manage the IPFS system at all unless they volunteer to run an IPFS node, but again, that's shared by hundreds of thousands of websites and pages ;)

Thank you for the explanation. I had no clue about the inner workings of the underlying system. Now, I see and it makes sense. It's sad that the IFPS system doesn't get as much press as the witnesses do.

I'd argue most people have seen IPFS but just didn't realize what it was. If you want to spread awareness about IPFS, you're welcome to blog about your two cents on the subject. =3 Maybe encourage others to also spin up their own nodes.

Steemit offloads it's data onto IPFS.
IPFS... is a blockchain within a blockchain when taken into account of Steemit

Could you go into more detail about how this process works or see if I'm on the right track, please?

Are full Steemit posts the "data" being offloaded onto IPFS and then Steemit references the content's hash when calculating the rewards pool on their blockchain? I've never seen IPFS mentioned in any of Steemit's papers but find this very interesting.

Just to go a little deeper regarding the Inception of a blockchain withing a blockchain - do you see any value integrating a blockchain like Po.et? For example, someone publishes content on Steemit, IPFS generates a hash value and stores the content, the hash value is stored on the Steemit blockchain so the author receives their payout, and the hash value is also stored on the Po.et blockchain to record metadate and ownership information. Would there be any value in this, or that type of informtion already contained in the existing Steemit and IPFS model?

How this functions by and large is that large content (namely videos and images) are sent to IPFS, text data can also be sent and stored in IPFS as well. So the content gets sent to IPFS and IPFS gives Steemit a hash to reference. I'm not entirely sure about all of the backend of Steemit and what all is offloaded to be frank.

So when you go to a blog post or comment (with images), that content has a hash inside it that reads from the IPFS network and displays that content seamlessly for you in your browser.

I can't vouch if Steemit directly uses IPFS itself, however Steemit does benefit largely from the IPFS network in regards to the likes of dtube and dsound for sake of example.

Referencing po.et wouldn't be much benefit in and of itself here as Steemit could just replicate the same thing on their end with little extra to sacrifice towards it. It would be better to add canonical linkage for those of us who post offsite from WordPress for example.

So in short, it's basically referencing a series of hashes to provide you the content that you consume, namely the larger content.

So Steemit is a cross-platform client for the IPFS protocol similar to what qBittorrent is to the BitTorrent protocol?

It looks like Steemit already has canonical tags for posts. I've only just learned of them 44 minutes ago so I could be wrong but in essence isn't Po.et just a canonical tag put on a blockchain?

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