Speculation demand, transaction demand and Steem
Steem has seen lows not seen since before the December bubble. Relative to the dollar, Steem and SBD are still near lows that few could expect after the run-up in pricing back in December. And the new lows, with SBD touching a dollar and Steem not terribly far behind, have depressed morale on Steemit.
I think it bears repeating again that the problem is that when Bitcoin falls, so does every other cryptocurrency. There is no reason why every other currency should be dependent on bitcoin for price support, unless the only support for all cryptocurrencies is speculation demand. The solution to that problem is transaction demand. It is with transaction demand that we can finally break that dependence on bitcoin for price support.
What makes currency valuable is consensus. We use Dollars, Euros and Yen because so many people have agreed to use them as a medium of exchange. That so many people agree upon this point, is the basis for transaction demand of any currency, even if that currency is a commodity like gold. Gold is valuable only because there is a consensus of people to use gold as a medium of exchange. To put this consensus idea in perspective, when potable water becomes scarce, gold can't hold a candle to water in any market.
Bitcoin is priced very high relative to the dollar because of transaction demand. I've also noticed that when bitcoin falls relative to the dollar, bitcoin dominance increases. Bitcoin is seen by many, to be a sort of safe haven, like a reserve currency. This is all despite the lack of capacity for Bitcoin to actually be used as a currency, since Bitcoin can only manage a few transactions a second. A cursory review of the most popular cryptocurrencies shows that most of the top currencies are lucky to manage more than 5 or 6 transactions per second, with a few standouts doing better than 50 transactions per second.
If we truly want to break free of this dynamic, where when bitcoin falls, Steem falls, there is really only way to do it: transaction demand.
It is clear that when Steem was built, the engineers knew that real value for the Steem blockchain will arise from applications built on top of it. They knew that the only way to break free of the bitcoin price lever is to build transaction demand. They understood in the design phase, that it is transaction demand that will make Steem valuable, in the same way that that the engineers who built the Federal Reserve Note did.
Steem engineers built an interface on the blockchain that allows applications to be built and run on top of it for the express purpose of creating transaction demand. It is this application interface that can make or break a cryptocurrency, for that is not just how people will send and receive money. An application interface for a blockchain is how people can earn money, by building a business that runs an application that reads and writes to the blockchain.
Steem, Bitshares, EOS and many others are keen on this point. Early cryptocurrencies didn't seem to have this in mind, so their carrying capacity looks like they were designed more to be a proof of concept rather than a currency that can handle real world transaction demand. "Modern" cryptocurrencies can manage real world demand with room to spare by design.
If we ever want to break free of dependence on bitcoin for value in the currency of our choice, in this case on the Steem blockchain, we must use the currency as a medium of exchange and use every application interface available to earn Steem in order to create transaction demand. It is when we use Steem that we create the consensus of value in the Steem currency. The more people use Steem, the greater the consensus in the value of Steem.
I believe that it is only a matter of time before people see that at best, bitcoin is a store of value, nothing more. Bitcoin is not likely to manage anything even approaching real world transaction demand due to limitations in design. Yes, bitcoin has the first mover advantage, and no, I don't expect bitcoin to go away anytime soon. But with more than 1500 cryptocurrencies in competition, more than a few of them will demonstrate the capacity to outrun Visa, Mastercard and Discover, with security and reliability, before bitcoin.
I believe that Steem is one of those currencies. That's why I'm making an effort to post every day. Every day, as time permits, I do some curating, posting, commenting, following and reading. I do only manual curation. I write what I want to write. I am thinking not just of the first million users, I am thinking of the next 100 million users on Steem. That is real transaction demand. That is consensus that can build market share. And that is how value will be perceived in Steem.
Write on.
Slogan by @tecnosgirl
Plan B for Humanity
A basic guaranteed income in the context of Maslow's Hierarchy of Needs
A sort of political movie review: Star Wars: Rogue One
Happiness isn't getting everything you want - happiness is a skill
The opposite of love is not hate, it is apathy
A short but growing list of people I admire, who have helped me, and/or influenced me, my thinking and/or my posts:
- @taskmaster4450 - The Age of Abundance is here
- @scottsantens - The Age of Universal Basic Income is here
- @gric - A very cool artist with some interesting perspectives
- @gringalicious - great writing, cooking and photography
WARNING! The comment below by @shovon51 leads to a known phishing site that could steal your account.
Do not open links from users you do not trust. Do not provide your private keys to any third party websites.
For those feeling depressed that the price is down, I say stop focusing on the dollars and focus on the content. Yes payouts maybe down some right now, but it means we actually earn more steem. When we post here we are earning something, where other sites don't reward you at all. So what if it is worth $1 or $10 long term the value will rise again. If I have a post that is going to pay out $10 I would rather it be $10 now than when it is trading at $5 the reason why is that means at 50/50 pay out I would get approx. $2.50 in sp, 1.25 in steem and 1.25 in sbd when it is trading at current levels when steem is trading at $5 for instance that same $10 payout would be $1 sp, .50 in steem and $2.50 in sbd.
Personally I like to earn when it is down, I build up my VP that way a lot quicker. And crytpo is a long term game. Predictions suggest STEEM will reach $1,000 by 2022. Shoot even if it gets to a fraction of that anyone with a couple thousand SP in their accounts will be sitting pretty. Some people only think in the short term. You think long term like me, I can tell from your posts.
Sigh. 4 more years to retirement. ;)
It will go by faster than you think it will.
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