The Alchemy of Steemit Will Be Its Doom
UPDATE Feb 14, 2018: The formula discussed in this post isn't used anymore in the reward distribution process. I have written another post about the current reward distribution formula and why it's superior than the old one discussed in this post.
You don't have to be a genius figure out that a business that is bleeding cash will soon implode. Steemit is bleeding cash. It is bleeding cash to people who syphon off cash from the reward pool via their vote-bot schemes.
That rewards pool is meant to compensate the users that provide value to Steemit, in the form of content and curation. That value would attract new users, which in turn would attract more investors.
Make no mistake, I don't blame anybody. It's just a flaw in the system. The flaw is that the rewards are distributed proportionally to the square of the voting and steem power.
I explained in a previous post why this results in the syphoning off of the reward pool to the vote-bot runners. If you want to read the details, you can find it here.
The Solution
The correction of this flaw is amazingly simple. Just distribute the rewards linearly proportional to the voting and steem power.
If a person has the 90% of the voting power, let them get the 90% of the rewards pool. If a person has the 10% of the voting power, give them 10% of the rewards pool. This ratio is around 99% and 1% at this moment. That's why running bots are profitable for big stakeholders while the little stake holders get almost nothing.
In this proposed system, if you take into account the witness and steem power owner payouts, reward payouts won't guarantee any profits to any user of any size. As a result, people will only promote content that they have faith in.
That way Steemit will cease to be the alchemy machine that turns mediocre content into gold. That way it will have a better chance of competing against a site like Medium, which manages to feature great content on its homepage consistently without paying anything to its writers.