Response to Coindesk Article “Steem Provokes Doubt of Market Observers”
![](https://steemitimages.com/640x0/https://media.coindesk.com/uploads/2016/07/shutterstock_51817135.jpg)
A couple days ago, Charles Bovaird published an article on CoinDesk. In this article there were numerous quotes which I feel should be addressed because they demonstrate the clear cognitive dissonance of many Bitcoin and/or Ethereum maximalists.
Skeptical About App Coins
. “I’m skeptical about 'appcoins'/'appchains,' and Steem is very much one,” stated algorithmic trader Jacob Eliosoff. …. Past that, he asked why the platform needs a new currency, instead of using an existing digital currency like bitcoin or ether.
The interesting thing about this “Doubt” is that he completely ignores the scalability issues associated with using existing platforms. Each day the Steem blockchain processes almost 125K transactions. The Bitcoin network is currently maxed out on transaction volume with a mere 200K transactions per day.
The dollar value of Bitcoin fees each day is around $35,000 which puts the average fee at $0.17 per transaction. It would cost the typical active Steem users several dollars per day just to pay transaction fees before even a single cent could be awarded to authors. Do you think any social network could grow with those kind of fees?
In short, it just isn’t practical nor possible to implement a social network that uses Bitcoin as a currency.
Looking at Ethereum you will see that the network can handle about 25 transactions per second (in extensive spam tests). The current Ethereum network is effectively limited to 9 transactions per second due to the current gas limit, transaction cost, and block interval. Steem is already averaging about 1.5 transactions per second and would quickly scale beyond the ability of Ethereum to keep up. At an average of 35K transactions per day, Ethereum currently has about 25% of the transaction volume of the Steem blockchain.
What we can conclude from this is that the use of an App Coin is a necessity because no other cryptocurrency is technologically capable of scaling their capacity. Even Steem with its Graphene technology, which has the publicly demonstrated the ability to handle 86 million transactions per day, will have difficulty keeping ahead of the growth curve of a viral social network.
Skeptical about Dollar Peg
"Real dollar pegs are very expensive," said Eliosoff, adding that "to my knowledge no (or next to no) cryptocoins have pulled one off."
It is true that no one has pulled this off at scale, but BitShares has had a relatively functional peg for years. Pulling it off doesn’t even need to be expensive in terms of real capital. Steem simply makes the Steem Dollars convertible to Steem at an average price feed. The implementation is simple, straight forward, and the economics are obvious. Aside from a catastrophic collapse of Steem’s market cap (which hasn’t happened to any major crypto) the Steem Dollar will hold. The Steem Dollar is easily converted to Steem by the printing press.
Overall the Steem Dollar keeps more people / capital on the platform which reduces sell pressure. Steem and Steem Power holders are effectively insuring Steem Dollar holders against the loss of value of the Steem token. They can do this so long as the Steem Dollar supply remains a relatively small percentage of the market cap. Currently Steem dollars make up less than 0.5% of the market cap. Worst case Steem Dollars are converted to Steem. This makes it no different than holding Bitcoin which could become worthless in the “worst case”.
Bitcoin Maximalists
Bitcoin and Ethereum maximalists will insist that using any other currency but their “blessed currency” is an unsustainable ponzi while completely ignoring the fact that their own currencies are “app coins” and depend upon new investors to buy in so that existing investors can cash out.
Steem is the first currency that allows anyone to work their way in (not just technologically savvy, capital intensive miners). It is the only currency that doesn’t ask people for money. People buy and sell all crypto-currencies for speculative reasons, but unlike other platforms, Steem doesn’t require people to buy in and actually gives people something of value (influence).
Using the Skeptic’s own reasoning, Steem is one of the only platforms that isn’t a Ponzi Scam. Their own favorites are much better fits for their own criticism.
Circular Logic of Skeptics
The Skeptics employ a kind of circular logic when they argue for Bitcoin and Ethereum while calling almost everything else a pump-and-dump scam. The only objective difference between Bitcoin and Ethereum is the market acceptance of the currency. The market is what gives a currency legitimacy. In principle any currency can be adopted by the market if enough people use it.
There comes a point in every currency’s life where it goes from being a “scam” to being a “legitimate currency” and that point has nothing to do with technology and everything to do with users. Does this mean that Bitcoin was a “scam” when it first launched, but now is “legitimate”?
The Real Scam
So the question remains, is “scam” an objective property intrinsic to a coin or is it something that is a property of someones opinion or statement?
scam: a dishonest scheme; a fraud
The property of a “scam” is not something intrinsic to a platform such as Bitcoin, Ethereum, or Steem. A platform is merely a set of software rules and a community of users who perceive value in those rules. Software keeps things honest.
Only people can be dishonest. Intentionally misrepresenting and slandering other platforms while spreading FUD is the biggest scam being perpetrated by in the cryptocurrency industry. It is time that people stop spreading fear, uncertainty, and doubt and instead stick to the facts and reason.
It is perfectly reasonable to speculate that the price will go up or down in the future. It is also reasonable to question the economic game theory and stability behind a platform. What is not reasonable is to speculate on the intentions of others or to imply that there is something dishonest or fraudulent when everything is open and transparent
Steem is a Social Networking Game
Steem is just a points system like those used in many games (Second Life, World of Warcraft, etc). These points may or many not have value depending upon whether market participants are willing to buy and sell them. Everyone must make their own decision and ultimately the market will decide.
I understand you addressing these concerns completely from the view of crypto land. Isn't Steemit far more than crypto land? It almost feels like you've been backed into a corner.
The implications of a stable currency, the implications of mass adoption, the implications of building a community that entirely focuses on adding value to one another. You've addressed the concerns of an article but I almost feel like you've failed to mention what your solutions to those concerns really mean.
With a stable currency people use, you can potentially replace existing economic systems with crypto currencies first and then in the fiat world.
With mass adoption... through something as trivial as a 'social network' Steemit has the ability to potentially gain enough traction to replace the current economic models of capitalism, socialism etc... with some kind of virtual social capitalism.
When people continually look to add value to each other we start to see the 'reverse crab analogy' where the more we help others the better we do, @rok-sivante has expressed this point brilliantly in a few articles recently. Notably where he describes his transition from a 'scrooge' to a 'value servant'.
So... well… screw crypto land... if I'm not just being brainwashed into the validation of an up vote that's worth money, then what I'm seeing is the potential to truly change the world for the better.
I definitely agree with you. Because of Steemit's upvote system, we are developing a mindset to add value to each other in this community and stop crab mentality.
Any thoughts on this? https://steemit.com/steemit/@timcliff/steemit-lifetime-recruitment-bonus-how-rewarding-recruitment-can-help-grow-the-steemit-community
This is actually a good idea, but either way, I think Steemit is going to the same direction even without the recruitment incentive bonus.
Yes, I agree :)
That would make Steemit grow exponential but if it's already growing like that then why rush that?
Most likely if they did decide to implement this, it would not be something that would happen right away. It would probably take 6 months to a year for them to develop/implement. It is a well known goal that the community wants this to take off and become the next Facebook, reddit, etc. The current growth is amazing as it is, but something like this would help take it to the next level.
I totally agree :) I wanted to write something similar, but you did it better!
Thank you @dan Thank you @wingz
I really enjoyed your post @dan ! It's awesome!
And in the article, I want to know why they think it's illegal. They give no explanation to their opinion.
Great post !
The scam is in the eye of the beholder :)
The criticism regarding the peg is purely based on lack of knowledge by the critic.
As stated in the whitepaper I believe, all Steem does is take a tried and proven technique from the finance/start up world - convertible Notes - and codes it into a blockchain. The simplicity of it all is genius. No need to reinvent the wheel here. In fact, its a simplified version of the Convertible Note since their aren't any discount rates, valuation caps, etc.
https://www.seedinvest.com/blog/startup-investing/how-convertible-notes-work
Also, as far as maintaining the peg with the USD, the fact that Steem doesn't have transaction fees will help immensely in that endeavor.
I can remember a time when ethereum was considered vaporware because it took them so long to launch after the crowdsale. The same circular logic FUD was spread and its "sole purpose" was to make its devs rich.
Then it did come out, dApps were created, and it shot up to $20 a coin. Silenced many critics.
Skeptics come and go, and as you said, the free market will decide. Steem will keep doing its thing, and hopefully give some folks more things to consider. People like to oversimplify and fear what they don't understand completely at first.
Totally agree, people tend to fear something that is unfamiliar to them. Instead of doing some research about how things work, they tend to criticize it first. Anyway, as @dan said, "ultimately the market will decide." if this will be a pump and dump system
Long story short, Steem needs a someone, or company to step up and setup Steem/USD conversion. Steem needs another gateway to get off the Bitcoin teet! If this happens... I'll be the FIRST to do this....
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People have been saying that since protoshares...
I can't disagree with your statement. Here's hoping Steem changes that paradigm!
You mean the ability to buy steem with PayPal or credit card?
Damn straight. I think it already is deciding... in real time. How many new users are joining each day? :)
#RealAdoption
Where to see the actual number of users, and active users ?
Edit: Found https://steemd.com/distribution
The other day @stellabelle linked to your blog in a comment, and I looked through the recommended reading section. Some very good, familiar titles and authors. If those are the inputs you're operating under, I have a high level of confidence in the future of this platform. This reply is no different. Well done sir. Thank you for building something amazing we all get to share in.
Dear @dan
@steemdrive stands behind your public statement; this kind of negative media will fade but more may sprout up again, unfortunately that is the nature of things to come as Steemit garners more attention.
What the crypto community fails to understand is it that if one major project suffers, they all suffer and the only thing their FUD media would have achieved is delayed public adoption of blockchain initiatives in general.
Take for example the DOA saga, the Ethereum index prices took a tumble and so did bitcoin and a few others to the best of my knowledge. I know that in the realm of fiat, when there is alarming news about a particular emerging market country, all other emerging market currency indices suffer as a result of them being classified in a similar risk category.
The top Digital Assets shouldn't be competing with one another, but rather jointly spreading the message of blockchain and supporting each other to achieve greatness and increased public adoption.
Rest assured @steemdrive is in support of you and Steemit, we have created a private "war room" channel in Slack dedicated to planning and brainstorming positive, mass visibility projects for Steemit.com which will help negate the negative media.
We already have liaison operatives willing to commence the campaign in countries such as New Zealand, Portugal, Netherlands and the US states of Alabama, Chicago, Michigan and Virginia, to name a few. An official list will be compiled in the days to follow.
I will now vote for your public address post with all the posting keys I hold and will vote with @steemdrive at the end of my campaign when its voting power would have increased.
"Amandla! Ngawethu!" .... "The Power! Is ours!"
@steemdrive DOA?? Typo or Freudian slip? Inquiring minds want to know :D
Best name EVAR!
Actually I can't remember but I like the way it turned out!:) DOA is epic name!
Sorry thecryptodrive is my main account, im on my mobile now.
We're allowed to have alts? I've avoided it thinking it was against the rules. Come to think of it, other than the whitepaper are there any official rules anywhere?
This response has also cleared my doubts. :)