Critical Analysis of Steem and Why I'm Invested

in #steemit6 years ago

Steem is one of the only cryptoassets I am holding for the long-term (not trading). That likely sets alarms off for many of you (as I promote Steemit in all my videos), so fair disclosure that there IS an economic incentive for me to boost the price of Steem so I get paid more for posting my content on Steemit. However, I am NOT being paid by Steemit or anyone else to make this video - I am doing it of my own accord.

First, this video explores some of the many flaws associated with Steem and its biggest application, Steemit. In summary, we discuss:

  1. The "instamine" by developers and relaunch of Steem blockchain at beginning so that developers received 80% of Steem supply in beginning for "development purposes"
  2. The issues associated with trending posts on Steemit - The lack of integrity in buying votes or whales colluding to upvote posts for reasons other than curation (e.g: a friend made the post)
  3. The fact that all of the money comes from investors, which makes payouts extremely volatile and, in a way, makes the business model seem Ponzi Scheme-like as money is created from 'thin air' (wish I explored this more - one of the downsides of not writing a script is not spending enough time on certain topics)
  4. Reward Pool Abuse
  5. Whether or not delegated Proof of Stake is corruptible (briefly, don't go into detail here)
  6. The quality of most posts (at least in trending) is rather poor. In my opinion, which I didn't share in the video, payments should be proportionate to quality and # of views which at this time, there is a massive disconnect which means tons of value is being destroyed.

Flaws I Didn't Discuss (Mostly due to constraints or forgetting while recording):

  1. Inadequate policing tools or incentives available for reducing the frequency of low quality submissions
  2. How complex Steemit feels to a new user
  3. How frustrating the account creation process can be (although this is being worked on)

After we go through the flaws, I discuss why I hold Steem for the long-term:

  1. It's the only cryptoasset with an application that sees real use, as verifiable through Alexa & SimilarWeb
  2. There is a culture in Steemit, as you can easily see with community discussions and "wars" over particular topics (e.g: Haejin, voting bots, etc.)
  3. It "feels" active - A lot of crypto projects "feel" dead due to low number of overall users. While trending may not be filled with high quality posts, it certainly has a lot of interaction which brings people back to the platform
  4. There is a team actively working on improving the platform and the witnesses are generally doing their best to make it a better place as well (a fact I forgot to mention in video)
  5. There are community members who are actively hard at work to improve the platform and Steem ecosystem (forgot to mention in video)

Overall, while Steem & the application Steemit have many concerns, it is my opinion that Steem is the closest to achieving its goal among almost all cryptoassets. I am hoping that the issues I have discussed will be addressable in the long-term and am willing to take the risk personally.

In the future, I might write an article that goes more in-depth on my opinions of Steem - this is more of an overview. Thanks for watching / reading.

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I see you are not using any Steemit improvement addons like SteemPlus (Highly recommended)

You haven't covered much of how large the ecosystem actually is. There are many dozens of alternative front-ends like D.tube and utopian.io. If you have a quick look at https://steemprojects.com/ there are apparently 337 apps and tools for Steem. (sadly I noticed a few of very important one are not listed there)

I fully agree that a lot of the reward is being indirectly "Staked" (self-votes/bots) and that affect negatively the content discovery that makes Steem valuable. On the other hand there is also a whole lot of the reward that is shared away to contributions like code or good content and that create a ton of real economic activity.

Raw staking is frown upon by many whales and is often neutralized via flag attacks, so for now promotion bots are the simplest way to earn a passive income from Steem investments.

All voting bots have their own terms of service, for example @promobot try to solve the abuse problem by never turning a profit to the vote purchasers.

While the cost paid might be equal to the value of the received votes payouts, since the money it is at risk of getting flagged during the 7 days leading to payout and half of it is being paid out as vested Steem, (SteemPower requiring 13 week cool-down) the customers have to promote content that is likely to earn them more than they risked on promotion.

My opinion is that as it become simpler and simpler for normal people to access these promotion services the competition will move from bidding skills/gambling toward creating extra value from the earned exposure on your content. The quality of the front-page will then increase along with demand for landing on it. (Trust me, very smart peoples are working towards that)

I believe Steem can easily scale as it relate to achieving world-class stake based content discovery but Steem's technology cannot currently scale as a way for billions of people to interact with their close friend like they do on Facebook, almost none of that is transactional and rarely benefit from being on a censorship resistant Blockchain.

I see Steem as a very active reactor of economic activity with a social component that makes it's future applications at a high risk of going viral and attracting a lot of external interest.

Steem is the blockchain that taps the most into the many various skills of people that are not crypto geeks.

Considering the many possible outcomes from rewarding these contributors via proof of brain, while it's users are operating within a very smooth and convenient value transfer system that's using recognizable account names and free transactions, I believe Steem is somewhat backed by real world value creation and is thus a good hedge to Bitcoin during a bear market.

I could speak a lot about the upcoming Steem core development that will greatly improve the building of various views on content and makes it easy to build subject based sub-communities like Sub-reddits but that'd be worthy of a full post, so I'll just drop this here : https://steemit.com/steem/@steemitblog/update-communities-hivemind

Shameless plug; Delegating SteemPower to @promobot will automatically set you up to receiving 100% of your share of what @promobot receives. For more information we can contacted here : https://discord.gg/reZ84FC

Transisto,

I have looked at that site a few times (which is reason for my 5th point on there on benefits side), but at this point it is predominantly Steemit in terms of usage (or depends on Steemit), although naturally one hopes that improves over time. I still don't know how I feel about vote bots - even "good" ones that only vote for content deemed 'worthy.' In my opinion, organic growth is far more valuable than artificial for both Steem and the content creators in the long-term: That is evident in most other existing social media sites (yes you can pay for exposure, but it is nowhere near as effective).

You'll note that because my growth has been relatively organic on Steem (you can never be entirely), the quality of comments on my posts has exceeded that of most posts (at least in my opinion). This is part of why organic growth is so superior - it also builds a more organic community (for which I am grateful comment, even if I am not always the best at responding). There are a few other regulars on here that have built that type of audience as well (which isn't entirely self-serving, sub4sub type deal), which I think is the right "image" for the site.

I hope over time, applications built on Steem (but particularly Steemit) can develop to a point where high quality content (which I have a pretty high bar for that - less than 5 of my videos reach the minimum for that in my opinion) is highlighted above all else and discussion is far healthier than it is on most other competing platforms.

I looked at the Hivemind post earlier this week - it is exciting. Again, my hope over the long-term is that because there is so much passion in this community, that will help address some of the serious concerns and issues the platform currently has. The alternative is it dies / fades to obscurity, which I've already accepted as a possibility (admittedly, that's how I feel about EVERY crypto-related project). We'll see how it unfolds in the long-term. Thank you for the post and support as always.

The problem with that too much idealistic thinking of high quality content is you would need 100s of dolphin accounts and have proper value flow if you want people to not use promotion services. Organic growth is a lie. Do you think Coca-Cola or McDonalds became huge because organic growth? I give you a hint... Capital... Cash Flow... Value needs to Flow...

agreed, steem has had a meaningful journey and is absolutely a great product primed for a big breakout.

utopian.io […] via proof-of-brain

Proof-of-brain which I see is also mentioned on the Utopian website, is as I had explained in 2016 a very corrupt and flawed design that can never be fixed because the problem is not in the code but in the vested interests structure that requires the various non-objective aspects of Steem that enable the perpetrators to hoodwink everyone here.

Also the term proof-of-brain is by implication conflating the consortium DPoS blockchain design with the algorithm employed for minting rewards out-of-thin-air. Steem has delegated proof-of-stake consensus, not proof-of-brain. It’s technobabble employed for embellishment marketing to put lipstick on a pig, i.e. it is dishonest marketing babble that confuses n00b users and makes them excited to support something which is actually highly flawed.

You haven't covered much of how large the ecosystem actually is.

I am wondering how large is it?

utopian.io. If you have a quick look at https://steemprojects.com/ there are apparently 337 apps and tools for Steem

I perused many of them and they seem not that compelling. Utopian will not be useful until the upvote buttons can be embedded into the Github Issues threads and such so more eyeballs can vote. Ditto most everything else there doesn’t really have am effective adoption model. I don’t think Steem has enough adoption to drive Dtube, but I might be mistaken. Video and music is very problematic because of copyrighted material that can be embedded (such as a jingle tune in the middle of the video which was sampled from some copyrighted audio). Doesn’t seem like a low hanging fruit use case to chase, at least not until ledger servers are not run by elected witnesses that can be targeted by the authorities for hosting copyrighted content. Yet another one of the reasons that I think consortium blockchains are not sustainable.

My opinion is that as it become simpler and simpler for normal people to access these promotion services the competition will move from bidding skills/gambling toward creating extra value from the earned exposure on your content. The quality of the front-page will then increase along with demand for landing on it. (Trust me, very smart peoples are working towards that)

I agree with @cryptovestor that organic growth is what builds community and stickiness. And I amplify his skepticism further more towards the cynical w.r.t. to your non-sober embellishment and hyperbole. Lots of very smart people have been thinking about this and realized the voting from a collective pool can never work. It is a fundamentally insolubly flawed game theory structure.

OTOH, I recognize that @cryptovestor is correct in making the point that Steem is the only crypto project with a significant and enthusiast community (but I don’t how large?). One thing I am concerned about is if Steem fails and all these enthusiast people become jaded and disillusioned. I hope we can do something so they will not leave crypto forever if Steem flames out.

I see Steem as a very active reactor of economic activity with a social component that makes it's future applications at a high risk of going viral and attracting a lot of external interest.

Not if new users can’t signup.

Disclaimer: I have a vested interest in competing against Steem with the project I am working on.

I hope the communities will eventually replace tags by usability or make a nice combo with it. Maybe the trending page problem solves itself.

I hope so too, and in the meantime, I don't ever look at the trending page. Everyone complains about it, but why not just make it irrelevant by not using it?

Teach people to engage on here using other ways of navigation, which for me has been search and to some extent tags then hot. (I'm not entirely sure how hot is chosen, but it's better content than trending).

i think your commentary here is remarkably intelligent and insightful. i think you ought to be posting words/ideas thoughts like these as posts of your own! ~thank you!

You really tore the information apart.
For many of us joining the band not long ago, your kind of posts broadens our horizon.

My opinion is that as it become simpler and simpler for normal people to access these promotion services the competition will move from bidding skills/gambling toward creating extra value from the earned exposure on your content. The quality of the front-page will then increase along with demand for landing on it. (Trust me, very smart peoples are working towards that)

well said, it just needs to play it's course.

Exactly. Then when it's all loss ROI on bidding then only the real players can stay involved.

GREATE. THANKS FOR YOUR INFO

Good coverage of what happen to Steem in very early days, at least from they others people point of view. I think it would be good to actually mention that it was (in my opinion) thought through, because they didn't want to or they can't do an ICO in a USA:

This is article wrote by Dan Larimer a month before Steem was launched:

This is the reason why @dan created EOS :)

You mentioned that all the value comes from investors. That is not strictly true. The money comes from new currency supply via inflation. So that means everyone in the community pays via a slight decrease in purchasing power.

Also if you visit the 'Promoted' section you'll find people who have paid Steem Dollars to promote their posts (click on their rewards amount to see how much they paid to boost their post):
https://steemit.com/promoted/

That currency is burned and taken out of supply. This advertising feature is the key to the ecosystem and is being grossly neglected by the developers IMO.

Full details at: https://steemit.com/steemit/@steemitblog/introducing-promoted-content

What a good read about promoted tab.

*..The more people that read, vote, and follow users who promote their content the more people will be willing to spend to promote content. The more people spend, then more Steem grows in value. In other words, simply visiting the promoted content page and reading promoted articles helps boost capital flowing into the platform...

OFC when you know your content doesn't worth to be on trending or such, you'll go for bots.

So that means everyone pays via a slight decrease in purchasing power.

Same as fiat basically.

To add to your point, steemit wouldn't need investors if the money stayed in the ecosystem which highlighs the importance of having commerce integrated within our social profils.

I would not have any sense of being like that, I agree with you @peaceandlove

Social Commerce-Steemit
@peaceandlove I concur it that this eco-system has ability to sustain without investors due to integration. but to add again, its commerce tool i.e bots will still have an edge on real user which will severly disturbs its balance in steemit and will affect its popularity drastically. In generic, yes it dont need investors but counting factors, it does need it.

Recently on a platform bots reign. People pay money to promote their low-quality posts. And thus, the interest in the platform disappears from those who are ready to work honestly, to do interesting and kachestvennye work. But now the voices of the bots have overshadowed all other posts. It is very difficult to compete with those who come here to milk the system without making a significant contribution. Profit is quickly withdrawn, cashed out, and therefore the rate is unstable.

I'm very interested in your publication @marketingmonk and it gives me a little light to understand some things about the behavior of the platform

Actually I would argue that the value does come from investors. If you wish to sell the STEEM/SBD you have earned here then they are the ones who will be buying it from you. Without willing buyers the tokens no longer have value.

Re: Ninja Mine

Would your rather have a group of people with vision and competence to deliver have the early stake, or some random shitcoin miner on bitcointalk?

It seems like having a highly motivated party (Steemit) with a long term stake yielded a better outcome.

Steem simply rocks! Its platform is so unique and so many cryptonians were jumping in the steemit wagon 😊

Upvoted and followed! Love your positive outlook!

Just do a premine in that case - Why pretend you're not premined (as they advertised), yet realistically your distribution has the exact same concerns as a premine? The only reason I can think of is that there is a negative connotation with premines, so might as well do a stealth mine which has the exact same effect (skewed distribution towards founders), but less PR concerns. The technical semantics they went for were just a lame tactic overall and even though they were transparent about how much they had, it was still handled poorly (in my opinion).

It's not clear to me that an organized premine doesn't have the same legal liability than an ICO that's keeping a % of the supply for itself. Unfortunately setting up a skewed start risk giving too much stakes to many other early people along the main originators of the project (steemit), which is what I believe happened. The good thing is that as time goes and these people cash out the influence of these people diminishes.

I think the oligarchy control never diminishes. While they’re dumping, the game theory I warned about in 2016 says they should also be using their alleged 8000 daily sockpuppet signups (awarding themselves presumably 120,000 SP daily) to upvote themselves and take a disproportionate share of the rewards and thus replenishing or even increasing their share of the token supply over time. It’s the perpetual dump for as long as the users are hoodwinked to go along with it and enough new greater fools are willing to buy STEEM tokens and power-up (which is probably another reason for making faucet sign-ups so difficult).

What amazes me is how many people would hope and assume anything other than the outcome I predicted and which is happening. Humans are so trusting of the power vacuums that rape them every time over and over throughout human history.

It's not clear to me that an organized premine doesn't have the same legal liability than an ICO that's keeping a % of the supply for itself

I also think the securities problem may (not certainly) also whack Steem upside the head with exchange delistings.

It was for this exact reason that intelligent individuals steered well clear of steemit and rightfully talked mad shit on it in places like bitcointalk, and considering how much dumping went on at the very start and how there hasn't been a steem boom cycle independent of other factors that buoyed other coins and led to steem/sbd being convenient pump and dump tools on upbit they were mostly not wrong. Good investors question projects that have dev shares much, much less than what steem had, and it has hurt the project and its investment potential from the very start.

Yes, and instead of acknowledging and attempting to fix these investor concerns and criticisms, STINC simply announced that they would go forward with their “multi-year divestment plan” - A.K.A., “long-term dump.”

Not only are they doing that, but they have also delegated large amounts of stake to their favored people and projects from this ninja-mined sum, which further dilutes investors’ stake-weight on the platform.

So would-be investors are taking on more risk (from planned multi-year dumping of a large percentage stakeholder) and getting less reward (in the form of lower returns when putting their stake to use). And we wonder why STEEM can’t sustain any price rises and the platform doesn’t attract many people other than poor, talentless bums and scammers.

But despite all of that, Dan actually created a phenomenal blockchain that can possibly survive the ninja-mine and the continued incompetence of his former colleagues. Possibly.

LOL

You know, I feel like a poor, talentless bum.

At least I'm not a scammer ;)

The creators worked hard and came up with something not only amazing but a paradigm shift - which is all the harder. I mean look how hard it is for general users to get a handle on this new paradigm. To be the ones that came up with it - that's in the vein of Einstein - in terms of the creative capacity required.

They also took a lot of risk in terms of time investment.

And because of that I don't have a problem with them holding so much from a premine style activity. What's more important is the long term viability.

I have invested in the future of steam and have primarily been using it as a source of information, as opposed to youtube (when possible).

I do find it strange how always the same people get a large number of votes or at least rewards irrelevant of the quality of the uploaders work or the posts being commented on.

With time I am sure this will be addressed but in the interim I certainly intend on keep using the Steemit platform. In fact in July I am moving for 6 months to South Korea and intend on posting my first ever photo blog here.

I really appreciate your thoughts on steem and the way you deliver the message, Thanks

I agree with your analysis, both the good and the bad, the challenges facing us all, and the prospects for a positive future - further bolstered by the upvotes and quality comments received by this very post!

Thanks for your overview. I look forward to your in depth analysis. I always enjoy hearing why others invested in Steem. Real use was a big reason why I invested as well. I'm surprised you didn't mention SMT's at all.

Well said my friend. It's too bad that good content creators are discouraged to post good quality content because they don't even get a few cents worth of upvotes, wile someone gets 10$ upvote just by posting the picture of a flower.

Fair criticism, the problems are very well covered. Can't argue with that.

But the potential of steem was completely ignored in this video. Maybe it's because you like to judge a product on what it delivers TODAY.
That's fair and maybe that is how investors should think, but I like to imagine what steem can become and invest for the end vision.

The amazing feature on steem is the paid upvote. That is what fundamentally differentiate this product from everything else. It's a powerful tool and steemit.com was a good proof of concept. Yes it's not perfect and has problems as you highlighted, but it prooves that it kinda works.

Now what's important is the following: Smart Media Tokens will provide this tool (paid upvote) to everyone soon (hopefully 2018). Imagine countless entrepreneurs trying to innovate, creating websites and phone apps with a paid upvote. The ecosystem will keep growing, and the use-cases for the paid upvote will improve.

Then one day comes a student in his dorm and creates the new facebook with an SMT. Steem just needs ONE homerun. Just one. If any website using SMTs reaches the popularity of twitter or reddit, we will have massive money in steem. And the price will grow more than a hundredfold from where it is now. Just compare the market cap to those of facebook, google, snapchat and others.

I invest in steem because I believe that this technology is very empowering, and I bet on the fact that someone will hit a homerun using it.

I could compare steem to other cryptos point by point and show easily how it is far better. I could also take the problems you mentioned and argue that increased popularity and growth will naturally solve them. But I don't want to get into an argument and just want the focus of this comment to be on the fact that ONE good Smart Media Token is all we need.

The amazing feature on steem is the paid upvote.

It is. But the problem is that rewarding tokens by minting from the collective money supply has a game theory which means it is a “winner-takes-all” eventual outcome. That is what we see going on now with the 8000 signups per day probably being sockpuppets of the cartel that controls Steem.

This is a structural problem that can’t be fixed. That cartel will never willingly give up its cash cow. It will continue to siphon off as much Bitcoin value as it can from this.

I agree with your idealism. And there will come a better design and project which meets the idealism you have. But it will not be Steem nor EOS, because these groups are as corrupt as can be.

I don't agree because they have no incentive to be corrupt. The money lies into taking this product as far as it can go. we can never be 100% sure, but I believe they are clever enough to see this and I trust them because they are incentivized to behave.

The "winner-takes-all" outcome is also not a problem for me because the winner is the best content creator. People don't sign up to social media to make money. I don't care about curation rewards. But I also don't want a centralized company to make money out of my attention, and above all I hate adds. This is the value proposition that steem offers today.

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Thanks for making this video and offering your opinion. I was just discussing some of these issues today with @friendly-fenix and @bycoleman of @transparencybot. I posted last month about some answers to the price of Steem here— for newbies. Also the importance of commerce as @peaceandlove pointed out below. Although the posts are past payout, I'm very interested in your take on what I've written there. I'm deeply fascinated by this subject and how passionate people feel about it.

That aside— I agree what's been done here is magnificent. If it was done on purpose or by accident, intended or unintended; this is a worthwhile experiment in action. I'm also interested in seeing what the other platforms following suit will be doing including EOS, Sola, and others. I have a running list of 40+ blockchain social projects being developed and some are really interesting. I wonder how they might do things differently than Steem has. As someone else just stated below, it's a paradigm shift.

Something key here I believe is Steem, like it or not, is no longer solely a blogging platform. It's now transforming into a small internet of its own. Where Facebook is a single interface with its own database (which is somewhat what Steemit was at one point— and more centralized than let on); Steem blockchain is now becoming the network over which many various and different types of apps and interfaces are building their platform on top of— some with their own interface level database + blockchain. Most owning their own company and not Steemit Inc., and having not only different terms but different laws, rules, and technology. So I'm of the stance that the biggest changes that need to occur is in how we think about things— for the sake of your video Steem and Steemit are the same, but rapidly that is changing.

For instance, what if Dtube gets a license (like Youtube) to legally use copyright music but Joe Regular doesn't have said license on Steemit: will anti-plagiarism crusaders check to see if the music was posted by a dtuber before downvoting it to hell?

What if new platforms involve multiple coins, SMTs, and tokens in one?

Psychology suggests that losers feel as entitled as winners — because it's a quality of the competitive and comparative mindset. However benevolent seeming control, co-dependence, enabling, and help is: it's still over-reaching when unsolicited. Unions usually form against large capitalist monopolies to balance things out for the little guy (until the little guy becomes the big guy— then they act the same way.) I put a spotlight on the fact that many of the smaller actions taking place to fix Steem/Steemit are the same actions using to corrupt it- simply dressed better, and holding a cross of some kind.

How do we calculate for well intended ignorance?

Power does not corrupt. Power simply empowers, the incorrupt and already corrupt equally. Alas, the human condition is more the latter than the former.
Most of the flaws here are human flaws. There's no fork for that.

Power does not corrupt. Power simply empowers, the incorrupt and already corrupt equally. Alas, the human condition is more the latter than the former.

Power vacuums demand the most ruthless corruption. Voting (from a collective pool or for a collective set of leaders) is a power vacuum. Click the link if you wish to dig deeper.

ty these are interesting thoughts thank you:)

Thank you for reading it, I'm not sure who else will lol

I am reading. Not only that I also saw you over in another comment section earlier today.
I will go read your older posts as well. Being new here I am reading everything I can on the subject. Helps a lot in deciding how much or even if I want to buy some SP.
I am finding the comment section to be the best place to learn on Steemit. It is great to see a range of viewpoints in one handy spot. This line is priceless.

Most of the flaws here are human flaws. There's no fork for that.

Fascinating idea.
That should be an article itself.
Well done

The whole point of management is to develop protocols that preclude corruption, or it's bad management.

Code is law, and can preclude much of the corruption extant on Steemit. Forks can handle what flags can't, IMHO.

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