3 Reasons Steem Price Will Go Up - And One Reason It Will Not Reach The Moon
There is a lot of speculation about the price of Steem and I've seen predictions as high as $10 by the end of the year. While I do think Steem price will increase in the near future, I don't see it that high.
What follows is a list of reasons for the Steem price evolution medium term. It has taken basically from an interview I did this morning with @badastroza, which will probably go live on his Steemit account in a few days. I think this post could serve as well as a little teaser for that interview, in which I touched quite a lot of sensitive issues about Steem.
Without further ado, here are the reasons for the price increase:
1 Scalability issues tracked
The number one issue for Steemit these months was scalability - or how it handled an increased number of users. There are at least two levels: content and technical.
By content I understand the degradation of the posts and comments, with a wave of low quality, borderline spam activity, as a result of Steemit being perceived as "blog whatever the shit you want and make a quick buck out of think air". And by technical I understand primarily the dramatic increase in the resources needed to maintain the network, with seed nodes approaching the 100Gb RAM limit very fast.
For the content part I don't see an immediate solution, other than ignoring the garbage and being on the lookout for the gold in the dirt. In other words, supporting serious users and letting the freeloaders to use all their energy until they get bored.
For the technical part, there is a consistent block of information pointing in the good direction. The core piece is coming from this post, feel free to read more if you're interested.
In my humble opinion we may see the growth issues handled in a consistent way in about 3 to 6 months. That will certainly help with the Steem adoption as more and more users will start consuming the platform in better conditions.
2 Arbitrary split of rewards
I've been talking about this for a while and I still think this is probably the bigger growth factor for the Steem technology. It is already used in apps like busy.org, chainbb.com and the mobile app eSteem.
This feature allows anybody to create their own content ecosystem on top of the Steemit blockchain and get paid automatically by retaining a percentage of everything that's generated in that ecosystem. We're still at the pioneering level of this, when we can see a bit of resistance from people engaging in these new platforms, mainly because they don't see it "fair" for the founders to "take out 5% of my earnings".
This attitude will slowly dissolve during the next months as competition will increase in this sector and as the percentages will become more palatable for the end user.
3 User Issued Assets (UIA) on the Steem blockchain
This was announced a few months ago by @ned and I think it will be a game changer, if we can see it implemented by the end of the year.
What that means, in layman terms, is that anybody could build their own token on top of the Steemit platform, just like you can do it now on the Bitshares blockchain. I still don't know details about the implementation and I don't know if there will be more than just UIA and we will also get a virtual machine able to execute smart contracts. But even without smart contracts, the ability to generate tokens on top of the Steemit blockchain will be a key driver to the price.
All in all, I think these features will help Steem gain around $1.5-$2.5 on top of what it is right now. I may even risk to tell that I see Steem between $2.5 and $3.5 by the end of the year.
And here's the reason for a limited increase, or why Steem will never go "to the Moon":
Steem is an inflationary currency
If you don't know, each and every day approximately 43,000 Steem tokens are printed and distributed via the reward pool. That means Steem is an inflationary currency, as opposed to Bitcoin, which is deflationary. We all know that there won't be any more Bitcoin left after we reach the total mineable number (which is 21 millions if I remember well).
This specific feature of a currency, deflationary / inflationary, has a significant impact on the price. If the currency is deflationary, the price is bound to grow in time, because there will be less and less of it on the market. Scarcity creates demand.
If the currency is inflationary, the price may rise only to the "furthest leaf tolerance". This is a term I just coined, by the way. And by the "furthest leaf tolerance" I mean the person most likely to sell at the market price, knowing there will be more printed the next day. And given the demographics of Steemit, which is probably: "people from all walks of life, with basic writing and interacting skills, looking forward to make some money out of their social media activities", there will be a lot of "furthest leaves" in this tree. In other words, there will be a lot of people willing to sell "early".
So, in my understanding, because of the inflationary nature of Steem, as a currency, the incentive to sell, knowing you can get more of that tomorrow, will always be relevant. There are many caveats and edge cases to this, obviously, but the bottom line is that this "feature" may put a stop to the max value. Even inflationary currencies can have a significantly high price, but their own nature - you can get more of it tomorrow - will put a stop to that.
So while I do understand Bitcoin predictions in the thousands, I don't see Steem, as a currency, rising more than - probably - hundreds.
It's not going to be "the gold of Crypto", but it may as well be "the oxygen money" of crypto, or the token which will always be liquid, available and affordable.
I'm looking forward to being proved wrong, by the way.
Disclaimer: please be aware that this is not trading advice. I am not qualified to provide that advice and this post is not about that. If you do trade, please make your own do diligence and, at least, trade only what you can afford to lose.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
If you're new to Steemit, you may find these articles relevant (that's also part of my witness activity to support new members of the platform):
You have some incorrect information. Seed nodes (consensus/p2p, witness, and exchanges) actually run with a shared memory file size of 16GB, and that doesn't actually need to be placed in RAM even - it can be on SSD. Full RPC nodes without AH filtering can use over a 100GB file but again can be placed on fast SSD instead, the actual RAM requirement is much much lower. The misconception comes from the fact that it is the lowest latency/fastest to place the whole database in RAM if possible, but as time goes on this will become less of a standard and people will simply use fast storage instead. The RAM requirements will not explode exponentially. There has been a lot of FUD surrounding this topic lately and it should be dispelled.
I have this information from private discussions with other witnesses and also from my own experience setting up seed nodes and operating a witness node. I didn't wrote about witness nodes, only about full RPC nodes. It is not my intention to spread FUD, on the contrary.
It's the first time I hear from somebody very close to the Steemit dev team that this type of data can be stored on SSD. Can you please give me more information? Is this something that changed recently? Are there any new developments in the underlying data storage libraries? I'd love to get fresh information from reliable sources but also with some relevant tech links (I can read code so feel free to point me to the relevant GitHub files).
Most VPS providers use SAN storage that they label SSD, which is SSD but you're going out over their local network to hit their array of SSD's - this is typically high latency. If you have a physically attached fast SSD it's acceptable to place the entire shared memory file on it and run without much difficulty.
So what you're telling is that the current latency of SSD is enough for the shared memory file for a witness or RPC node? I never used VPS, just bare metal machines.
Yes, a sufficiently fast SSD is enough for the shared memory file on a full RPC node (not just witness). However, it will handle less requests than one run entirely out of RAM - but that can be mitigated using a caching layer (like jussi for example).
Here's a test you can do to 'prove' it if you want. I just tried it using a 32GB digital ocean droplet. You can spin one up there for a few hours and then kill it (although they are expensive, they bill hourly - so as long as you don't forget to kill the droplet a few hours would probably be a few dollars or so).
Install docker from get.docker.com. Run
docker run -d --env USE_WAY_TOO_MUCH_RAM=1 --env USE_FULL_WEB_NODE=1 --env USE_PUBLIC_SHARED_MEMORY=1 --env USE_NGINX_FRONTEND=1 -p 2001:2001 -p 8090:8090 --name steemd-full steemit/steem:0.19.1-p2pfix-bumpramand then to follow along usedocker logs -f steemd-full. That particular branch will have a current state file that can be pulled in at the moment (this changes regularly since it pulls from the dev environment where different branches are tested so expect it to change/become stale at any given point). NOTE: The reason that option isn't specified in the README is because we don't recommend trusting anyone else's state file for transactions. For any production setup, you should really generate your own state files. This is ok for testing though and getting a full node up a little more quickly.Anyway, that will pull in a ~24gb state file while decompressing it at the same time to shortcut getting the node started. It's pulling externally from a bucket in S3 us-east-1 WHILE decompressing it so expect it to take a while (maybe 45 minutes-ish). It will take an additional hour or so for the node to 'catch up' most likely. So in 2-3 hours and you will have a fully synced full RPC node running on a 32GB RAM droplet running just off the SSD. More RAM is better for performance because of OS disk paging but for the example I wanted to use a minimum for a full node.
The digital ocean droplets still do not have physically attached drives (afaik) but they have particularly fast disk i/o for a VPS provider and is enough as an 'example'. Results will be much better (faster syncing) on bare metal with physically attached disks for better disk i/o. tldr; I would not use a minimum VPS to run a full node. But, the example does prove the point :)
Thanks a lot for taking the time to write this, I'll try it next week. As steem.supply is getting more and more traffic I need to set up a specific node for it. I also have a couple of other Steemit projects in the pipeline so my own RPC mode is becoming a necessity. I may not set it up on bare metal earlier than mid-September but I will spin up a few instances to test the behavior. Appreciate your efforts guys, I know this is not an easy project.
That's really helpful... I'll probably try that later. How long would you expect that VPS to take to complete a full replay if I asked it to? would it be several days?
In addition, making use of technology like a caching database layer to drastically reduce the amount of requests to host a full site along with the fact that steemd will soon be multithreaded will make it easier to scale. All of the technical challenges will be overcome.
Thanks for putting this information out. I think some of the concern comes from the perceived difficulty of running the Full RPC nodes, without large amounts of RAM. I'd love to see the specifications of a sufficiently capable hardware configuration (that we could expect to be sufficient for say 6 months). I understand for example that the using the SSD for swap requires RAID too? I'm considering running one to support services I'm developing.
That's another way to do it - if you carve out a tmpfs large enough to support the shared memory file plus use swap on a less-than-fast SSD, you are basically letting the OS handle keeping the most relevant pieces in RAM. That's one way to do it. If you have fast enough disk storage already, it's unnecessary to do that. Another option is if your disk storage isn't fast enough by itself you can RAID two together (if available) to gain the performance needed.
Worth reading :) btw steem.supply very helpful
Thanks, glad you like steem.supply :)
Great and realistic analysis. It is good to hear some positives about the Steem.
You present valid points, and yes I agree, Steem will not be like Bitcoin but believe me the madness of crowd cannot be underestimated. The FOMO is illogical, once the celebrities are aware of STEEM and most recently DTUBE and they advertise Steem, I won't be surprised if we do see the moon albeit very shortly as we fall back to more realistic prices again.
Correct me if I'm wrong guys, but I believe the inflation rate is no longer 100% but somewhat much lower, close to 15% if I'm not mistaken. I'm not sure tho. Please don't quote me.
yes its right and i also vote the 3 reasons that will steem price will go up and its 3 also have some authentic thinking me and also good sir to share some about steem to more understand it
i think if exchanges give more attention towards it specially poloniex it will reach moon too they are the main cause for the downfall of this.
Nice read. And it has answered some of the questions i had. I have to counter argument the inflationary issue however. Yes, there is additional steem created each day and correct me if i am wrong it is set to increase 100% each year. But since we can already see ice hockey stick in steemit user growth number of users will double, triple, and may ten fold in one year, of hundred fold if it explodes. Thus inflation will be countered with an increased demand.
Also we will see how user issued assets will impact steem blockchain. The problem now is that steem does not have any utility as far as i know. Except Steem Power bonuses - a sole reason to hold it. But we at BeScouted started building our platform on steem to make it the first decentralized photography marketplace in the world. And we will be probably giving utility to steem. Let's say you are golding 1000 Steem Power then you have access to more advanced features, post more castings, etc... So instead paying each month a fixed membership fee you just hold your steem and maybe it's price will even rise when you do s. We also have contracts on BeScouted where you can hire freelancers for different photoshoots, we are thinking of making an option to pay freelancers in steem directly. I am not even talking about the ability to purchase full ress images from content creator directly with steem transferring all value to the seller instead paying him 20-50% as most stock photography websites do.
What i wanted to say, that the true value of steem blockchain is not Steemit itself. it's the technology and paradigm, that may scyrocket demand of steem that will neglect any inflation factor if developers add utility to the token.
I agree that the platform is an opportunity in itself, I was just drafting something for the next 3 - 6 months. In 2-3 years, provided Steemit stays afloat, the influx of new apps, like the one you're building, will totally change the game.
As for the correlation between inflation and the number of accounts, I don't think it holds. In a country where you have 100% inflation, its effects will be the same wether or not you have 1 person in that country or 1000000 persons. What you imply with the increased number of accounts is that they will burn, or otherwise find some usage for the tokens, which is just speculation.
Well 100% increase in supply is not the same as 100% inflation. Inflation is reduction in value because of price rise of reduction of purchasing power (which are sort the same actually). From August 2008 through January 2009 the U.S. money supply grew from $871B to $1,737B, a rate of over 100% per year and that did not mean US had +100% inflation. As long as there is demand (increasing number of users) and provided steem gains utility properties the price should go up as long as steem generated per user does not exceed new user count. The bigger problem here however i believe is concentration of steem because of self votes and voting other whales and lack of incentive for new users to join and commit creating the quality content. As for now creating quality content does not scale in proportion with time input at all. I could drop a pretty picture of a girl that i have shot 10 times a day and earn more with diminished rewards than making 2-4 quality posts. It just isn't what i want to do with my steemit account. Steem is an amazing blockchain, steemit still needs a lot of effort to make it work. But i totaly get is as it is in beta and i know how ling does it sometimes take to implement features that sound very simplistic verbally.
What i see at the moment that makes me worry is that many of the largest steemit accounts are Powering Down during this month. I made a related post today about it. Your approach is very logical, has many chances to be verified and hope to be like this !
There's no problem in accounts powering down. It's a problem if we see more Steem flowing up to exchanges. Otherwise is perfectly normal for large holders to add a bit of liquidity to their portfolios.
Steemit has a great potential , the price will increasing
Dtube also will encourage youtubers to participate in this community
I see that a continuing major threat is that of copyright and piracy. There are certainly many large investors who will not invest in the platform while there is the possibility of the domains and anyone associated with running the systems being attacked by government. I wrote about this in some detail here.
This is also a very good point about potential threats that might not seem direct but are very important.