The platform growth/rewards pie paradox: A fundamental flaw in the Steemit architecture (Part 1 - The Problem)
Like most of my fellow Steemians, since discovering the platform, I've been encouraging other creative types to get involved. Though I hadn't explicitly read it anywhere, I assumed that a larger user base would be beneficial to the community. After all, this is how traditional social media platforms work: growth in the user base means growing interest from advertisers and more advertising revenue. Of course, the users don't actually benefit from this financially - all of the financial benefit goes to the owners of the platform.
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A few days ago, I started noticing my posts that had initially done moderately well (earning 70 SBD or so on the first day), were worth substantially less when the 7 day rewards window closed - approximately half of that. It was at this point I realized a fundamental flaw in both my thinking and the Steemit architecture itself: not only do more users not equate to more rewards, there is actually an inverse correlation. There is only so much "rewards pie" to go around - the more users competing for a slice of pie, the smaller the slice per person.
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For the sake of clarity, let's break this scarcity phenomena down to the micro level and take a look at #TeamAustralia. Resident whale @ausbitbank and founder @SirKnight have truly achieved something amazing here, in just a couple of weeks they have built a community with over 200 members, where regular contributors are all earning a modest part time income. Without the efforts of SK and our masked whale friend, my posts would probably still only be netting a dollar a pop.
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The thing is though, there is only so much pie to go around. As our masked whale friend is the main driver of post earnings, ceteris paribus (all else being equal), unless his voting power is growing in line with growth in membership, pay outs per member will decline. This is equally true for similar communities such as #MinnowSupportProject - if there are more people vying for a slice of the pie, the pie itself needs to grow, or slices must get smaller.
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I'm not in any way suggesting these two great communities should stop recruiting though - as I've said from the outset - this isn't a micro problem. It's not a flaw in the design of these great community initiatives; but a fundamental flaw in the Steemit/Steem architecture. The amount of Steem minted each week is limited, it is inherently scarce, there is only so much to pie to go around. Each year, relative to the existing supply, the amount of Steem minted will decline; whilst at the same time, the user base is likely to continue to grow exponentially. With a steadily shrinking pie, and more and more hungry diners sitting down to eat, something has to give.
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This is why Hard Fork 19 has had very little effect on post payouts - though smaller players now have a larger say in who gets a slice of pie - the pie is still the same size. The problem is, scarcity is the primary driver of value, not just in the world of Crypto, but in all commodity markets. If only the solution was as simple as minting more Steem ...
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I am going to leave it there for Part 1, I want to have a serious think about potential solutions to this problem and very keen to hear other Steemians' thoughts and ideas too. Will follow up with "Part 2 - Potential Solutions" in a week's time.
Isn't part of the idea that the pie itself becomes more valuable per ounce? Even if you are getting smaller pieces, if more people want it, the value of your piece goes up? Let's say as more people join Steemit and more people find value in the content on Steemit, then more people are likely to buy Steem and SBD right?
Yes and will definitely get into this next week - if Steem can appreciate faster than user growth, then the pie gets larger. Ideally, this growth would largely come from traders and speculators though, rather than more Steemit users (mouths). I attempted to launch a campaign to get Steem listed on Bitfinex last week, though like so many posts in #Steemit, it quickly got lost in unrelated tagspam. (The 60 votes are mostly from MSP and vast majority of the dollar value from our masked whale friend in Team Aus)
Yea, in the shareholder analogy, everyone is constantly getting diluted shares; however, the pie should be growing at a faster rate to compensate.
Yep, haven't got the numbers handy, but I think user growth is far out pacing Steem appreciation. Go on a long enough time frame and it definitely is - Steem is down and User growth is up. Part two coming later today.
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Awww that self goat is cute, that won't discourage commentselfgoating
Still waiting on your bunch of selfgoats and upgoats! Don't complain, get to work 😜🐐
I am liking your probability theory but aren't we over ambitious ? Waiting for 2nd part of solutions.
Upstream vote and comment
Thanks Harish, I don't think we're being too ambitious. This whole platform is amazing and has so much potential. This is why I'm sinking a ton of effort into it, even if I'm only earning a little over $100 a week. Financially, I'd be better off focusing on my existing paid writing work and other gigs, but really think the sky's the limit with Steemit.
Good. Agree.
not sure of the solutions -- do you think having everyone seeking to find favor with a limited pool of whales is not the best method to reward content ?
Hey mate, no I think this is actually quite good - really sorts the wheat from the chaff. I'm interested in finding ways of increasing the rewards pool in line with user growth, without destroying market confidence in the tokens.
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I enjoyed this.
Thanks banjo, glad you enjoyed
Perhaps you should look at the promotions that are made by authors such as yourself. The idea behind it is to help quality grow in proportion to the quantity.
I know it is not a perfect solution, but it is something and more ideas of its elk is only going to close the gap. LOL
I appreciated your efforts in this post. Thanks.
Thanks Mason, much appreciated. This is a really good point and something I'll definitely be touching on next week. Every $1 that goes to a 'shitpost' with stolen photos etc is $1 not going to Steemians producing quality content. Also good content quickly becomes invisible if it doesn't catch on right away. There is so much tag spam and plagiarism going on it's not funny - too much for @SteemCleaners to catch all by themselves.
The last post I wrote that is on my wall right now is about plagiarism and ideas about how we can combat the problem. I just put a promotion on it, but because I do not have a great following lololololo, it most likely won't amount to anything. lol
Sometimes you just have to try to do something and hope that others will see the value in it. That is actually the proper use of faith, because faith is always about what you do and the doing is the faith. I will be reading you around. Steem on.
Thanks mate will check it out, I'm out of voting power for the day, but will swing you an upvote and a resteem tomorrow if I'm feeling it.
Re: promoting articles, I've never tried it and have heard of people spending more than $100 on promoting articles and them still going nowhere :\
Wasn't trying to spam you about my post. was only sharing and don't care about making money on it. Was only sharing what was on my mind. Never upvote, comment, resteem or even promote anything unless you see value in the post. That is how we protect each other from the scams and promote this fun steeming community. lol
This is the first time I ever tried it either. Not trying to make money only see what people think and hoping share better ideas about the problem. I am not one to wait to be saved by some central authority. lol My mommy and daddy have been dead a long time and I really am not looking to replace them. Love them though I did.
Hahaha no worries, yeah I have no problems with people linking to topical content, but yeah everyone's different I guess.
Lot of babies and stupid idea's about what we can and cannot do. Some people are trying to be momma and daddy without the clown authority of the fictional state. lol
Thanks for explaining it this way. Some get so technical I get lost in translation. Looking forward to part 2.
It's a bit of a worry about the pie not increasing along with the amount of users.
I saw something even more worrying yesterday, the pool is actually being drained faster than it's being replensished :O
See my reply to @forexbrokr for details ...
Ohh god really???!!! Thats a worry!
Mmm I think we'll be fine though - part two solutions coming today :)
Hey bulleth,
Once everything settles down and Steem becomes more established, shouldn't simple supply/demand factors of a finite pie see price stabalise?
And the more that you have accumulated at the start (now), the better off you will be in the long run?
Do you see this problem as only a short term one?
Correct - if Steem appreciates faster than user growth, there will be no problem and as demonstrated by Ether, even coins without a fixed supply cap can go sky high.
Though there really is a problem right now, when I wrote this post yesterday, I hadn't seen this chart from @elyaque:
I didn't think HF19 had an effect on the rewards pool, but it is quite obviously being drained faster than it is being replenished. Check out his post for more
Thanks for sharing your concerns, @bulleth!
I just joined Steemit a few weeks ago, but I'm concerned about the many articles I see regarding reduced payout.
I know I have zero power as a total minnow right now. But I'd like to believe that if I just put in the work and effort – like a number of successful Steemians seem to have done – by posting quality content and interacting with others, the post revenue will increase eventually.
However, posts like yours are discouraging. It makes me question if it is even worth it to start building a following on Steemit right now.
Hey mate, sorry about the delayed response. Don't get discouraged - hope you're still on board. If you do put in work to both your posts and networking, you are almost guaranteed to succeed!
I have been here for about a month now and just had my first $200+ USD post - I live in Australia so that's close to $300 local currency - not too shabby for a morning's work XD