Why Steemit isn't Ponzi scheme. [3 minutes read]

in #steemit4 years ago (edited)


Many people is wondering why some account on Steemit has more than one million Steem Power, while we just start with ten.

Will it be possible for a user registering today, or the next year, to reach 1 million Steem Power ? 

If it is not possible, this would sound pretty unfair for a service that aspires to revolution the social networks and the world economy.

As a poker player, I would never sit in a game where my opponent has an opportunity to collude, or to know my cards. Because such a game can't be beaten.

Instead, I would probably sit in a game where my opponent is likely to be a tougher player than me. Because I know this is the only way to improve my game, and to get precious informations about the best players in my game.

Also if the founders of Steemit have reserved for themeselves a big part of the cake, we can be optimistic about the future, because if they try to transform this site in a speculation, they will just sit with a ton of Steem in their hands... but Steem will be worth nothing!


Let's see better how a Ponzi scheme works:


A guy, let's call him Charles Ponzi, offer the chance to make a very interesting investment, offering a very big interest rate. For example 5% every month. People start investing small amounts of money, and Ponzi repays their investment. As the market start believing in this investment, people start committing an esponential amount of money. Mr Ponzi pays the interest with the money of new subscribers. At a certain point, he runs away with the money.


Why Steemit can't be like a Ponzi Scheme ?


the answer is simple: 

because doing a similar thing with Steem would just decrease the value of Steem. So mr Ponsteem... would not gain millions of dollars, but millions of a currency worth just nothing!!!


For sure the reward system will need some fix to avoid that only the most powerful accounts control all the system: we aren't here to enrich a new Mark Zuckerberg with our own work. But  we can be optimistic regarding this changes, because they will be profitable also for the accounts with more Steem Power.

Sort:  
Loading...

I wondered for a while whether it was a complicated ponzi. Though if one dives into the dynamics of the system, they'll find it doesn't meet the criteria.

I still don't fully understand the details and am curious to really grasp it all.

however one major thing to consider:

  1. didn't invest any money.
  2. I spent a month writing every day all day
  3. I was compensated directly proportional to the value voters found in my writing.

that side of the venture is unquestionably NOT a ponzi, and is a piece that is missing from most of the ponzi arguments.

also interesting is the foundational premise - I can't recall how it was worded at the moment - of how the rewards system is setup to incentivize participation on the platform, whether content creation or curation, NOT create ROI for sitting on the sidelines...

I am curious with how Steemit ultimately make money, beyond getting more and more investment to buy steem.

Will a marketplace garner that much revenue? Adverts? Or maybe once Steemit get influential enough, large entities (corporate or commerical) will muscle in and hoard in loads of SP so that can sway the opinions of the collective.

Until there is real value generated AND sold then what is it?

depends on how big the marketplace is grown or what time of advertising model. there's been many a startup in the tech space that raised billions in value before having a clear value proposition - and Steemit DOES have some significant strengths and potential over them.

MANY potential applications could be built on the blockchain. 'tis up to the creativity of the community as to what will be built.

so there will come a point, yes, where that potential needs to be actualized and more streams of revenue generated...

totally agree :) congrats for your work here on Steem!

For sure the reward system will need some fix to avoid that only the most powerful accounts control all the system: we aren't here to enrich a new Mark Zuckerberg with our own work. But we can be optimistic regarding this changes, because they will be profitable also for the accounts with more Steem Power.

This is a very true and important statement.

@cabi5boh can you tell me why you down voted my comment? Thank you.

At first I was quite skeptical about steemit especially because the use of the word power also much used in ponzi cloud minning sites. after I read more about steem and steemit I am now relieved. I will definitely recommend this new kind of social network to friends in brazil and switzerland.

Loving all this education around this idea, thanks a bunch, namaste :)

because doing a similar thing with Steem would just decrease the value of Steem. So mr Ponsteem... would not gain millions of dollars, but millions of a currency worth just nothing!!!

Unless he cashes out at the right point.

All the effort and love that's built this project going to waste to a cashout. We wouldn't be the scammed ones. The creators would be scamming themselves the most.

I don't believe for one second these guys are the type to take a quick buck. They would've taken it two weeks ago, if they were.

Strong hands make strong walls and foundations for this place to flourish for years to come. Think big; the sky is the limit!

Great appreciation @spookypooky but remember that the sky isn't the limit, neither is the universe...the limits are in our mind we have to be limitless!

Greetings!

I think if they cashed out so many eyes would be watching them that they would get their reputation destroyed and due to the fact that scams are usually punishable by law, and a recent btc theft case had the man tried and convicted and sentenced to jail.
Probably pretty safe to assume that we're all safe from the Ponzi scheme fear, also @freiheit I mean anyone can get to 1m SP if they want to invest a ton of money lol. #whalelife.

I totally agree!

they are selling like mad dogs, look at their accounts... In 2 years you will realise that it was all a big scam! Nothing on steemit is fair... look at what is trending! the all system is a big joke

If he cashes out at the right time what will happen is that the network is going to growth in a democratic manner, without a few accounts holding most of the steem power.

This would mean that the "Steemit Project" has produced a new social network, a new cryptocurrency and a new market. In this case it would be absolutely fair for all the people who worked to startup this project , to gain a decent amount of money, dont you think ?

I don't think you understood my post. In your example, where it is already assumed and established that a ponzi scheme has taken place, you allege that the fellow responsible would stand nothing to gain by running off with the cryptocurrency because it would become worthless.

This is nonsense, as "Running off" with cryptocurrency entails converting a large amount suddenly to USD. It is then devalued for everybody else, but that's not his problem as his wealth is now in US dollars. This has in fact happened a number of times with cryptocurrencies and is more commonly called "hype n' dump".

Ty for your better explaination. I believe that in this case an "hype n' dump" will not happen thanks to the Steem Power downpowering system, that requires 104 weeks, and thanks to the fact that there is a real value at the base: this same tool me and you are using to communicate.

Also if someone runs away with dollars, selling steem to someone else, the social network, and the Steem currency will continue to exist.

In other words, we could even hope that at a certain point some user with 2.000.000+ Steem Power will "run/give away" at least with a part of his Steem Power, if he thinks that in this way the network would be more balanced

perhaps.. but there are probably over 100million steem power in the hands of the largest accounts. Even a two week power down could produce a windfall worth several million. I'm not saying i think steemit is a ponzi scheme. Just that your "proof" that isnt real proof.

From what I understand... Both the founders, ned & dan, have virtually all of their STEEM vested as Steem Power. It takes 2 years (104 weekly payments) to convert Steam Power into STEEM, the tokens which can be sold on an exchange. So they could only cash out 1/104 of their STEEM per week. And since it's a transparent public blockchain, everyone would notice if they started cashing out. Kind of like if Satoshi Nakamoto were to spend his bitcoins.

Lol great explanation this is my dailey struggle trying to explain "where the money comes from"..

Is Steemit a Ponzi?

I think there is a flaw in your analysis: The founders are not heavily invested, because they insta-mined the tokens. For them, any value strictly larger than zero is a net gain. They are powering down and cashing out millions.

Try to answer this: Is Steemit sustainable once no new users come in? No, because the monetary base would keep expanding as the user base would stagnate.

We could see the effect sooner even, once the influx of new users slows down.

The bagholders are those who bought high, not necessarily the largest stakeholders.

They have invested with their work and sharing their knowledge. They are powering down and cashing out, because many people is willing to "buy" steem to invest in Steem Power.

I will try to answer to your question: interesting contents are increasing on Steemit, and every person that uses some social network has an advantage in starting using Steemit. So why no new user should come in? the only explaination could be that Steemit has 1 billion users. In that case we will see a world very different from the world we are living in, because our society is influenced in terrific why by the money creation based on debt!

I explored this topic deeper in this post:
https://steemit.com/steemit/@freiheit/is-steemit-our-occasion-to-save-the-world-of-course-and-we-ll-have-to-enrich-ourselves-while-we-do

Sorry if my engligh may have a couple of mistakes, I hope to improve right here :)

I think it may take a little luck in the shorterm because while it is not a ponzi scheme it does certainly get influenced by some big players. In the long run I think most of us will have to https://steemit.com/steemit/@iamwne/persistence-approach-to-steemit-a-practical-guide

this is absolutely true. But the big players, if they want to give real value to what they are doing, must be very careful in their upvotes.

Moreover, if a post is decent and has 50+ upvotes from "small accounts" it is very likely to be noticed in the "hot section".

I expect many kind of business types are going to grow, for example "talent scouting" to find original content :)

And I hope I will be able to start an italian steem community, so that I will be also able to write in a more proper language, as my english needs a lot of improvement :P

Your English see s pretty good. I think it is a great idea to help bring in more users that speak your language.

sharing is caring my friend

God damnit.
Everyone needs to read this. Every time I hear the word Ponzi in relation to Steemit, I go out and find a little kitten and kill it.
Srsly.. We need to stop the madness.

If someone needs to buy into the reward system, it is a semi-ponzi. It however still has potential, and I see it going really far in the future. Just think about the bigger picture.

"So mr Ponsteem... would not gain millions of dollars, but millions of a currency worth just nothing!!!"

So of those $2,782.29 that this post has supposedly made, how much can you turn into USD today? Or are you getting a bunch of tokens that are worth nothing while more people get sucked into investing into this?

I never thought of it being a ponzi scheme, cos when you see the use case and how poeple can incentivice them self unvealing the fabooks and other platform , you will se that is here to alstat

The devaluation of steem is the biggest you can imagine at 0.19% per day. Your 30K USD posts will be worth nothing after a while.

nonononononono... thats not how it works.

so you are just here to waste your time because you don't have anything better to do.

Sick life bro :P

Btw, steem is not going to devaluate, until all the world will use steem. Then we will realize that an increased quantity of money circulating, if distributed in a fair way, will not develop inflation, but an increased quality of products.

Suggested read:

Steem Whitepaper :)

Steem whitepaper is one big abstract and no techincal info.
More like a blog post than a whitepaper.

interesting thoughts, thank you

They are cashing out now stupid, and they dont have to wait to get the steem out like everyone else. There is zero proof what the founders are doing with the steem that they control. They are manipuating everything here, you live in a hologram full of steem hope that will be broken into peices, enjoy.

so you are here to waste your time.

Sick life bro :)

As the only thing can improve the world situation is a free money based on human interaction (because the ones based just on computation don't have the change to become mainstream), if you think that Steem is an imperfect solution i suggest you to:

a) make a similar thing, but without the things you don't like.

b) help improving Steem.

I upvoted you for having done the effort of making a nice article. I don't agree with your explanation. I am not saying Steemit is a Ponzi scheme, it is just that your way to explain it isn't, doesn't match up. I am talking about this part:

because doing a similar thing with Steem would just decrease the value of Steem. So mr Ponsteem... would not gain millions of dollars, but millions of a currency worth just nothing!!!

It is very easy to convert Steem into Bitcoin. So mister Ponzi can still convert all this Steem into Bitcoin and then mister Ponzi doesn't have to care anymore if Steem gets crushed or not.

if one start converting a lot of Steem in Bitcoins right now he would cause the Steem to lose value in the short term.

If this project is going to have success (becoming a competitor of Facebook, Reddit, Twitter), those people who sold out their steem power would have just made a bad business, while the ones who bought it would have made a nice deal :)

This happens thanks to the steem/steemdollars/steempower system.

We also have to keep in mind that it's our interaction that is producing value. We produce this value everyday but google/facebook/amazon etc literally steal us this value. And they have to do this because of the economy based on debt, that forces the economic actors to maximize their value in the short term, because there is always a debt to repay somewhere.

Ok. But now you gave another explanation. And this one does make sense ;-).

"if they try to transform this site in a speculation, they will just sit with a ton of Steem in their hands... but Steem will be worth nothing!"
Well they don't have to sit on it, they can sell the steem dollars before the whole thing crashes.
Anyway, I agree it's not a ponzi, my own post on this: https://steemit.com/steemit-ideas/@sictransitgloria/steem-is-not-a-ponzi-scheme-but-it-relies-strongly-on-co-option-and-we-can-hope-it-will-get-better-in-the-future

It's funny that you posted twice the same post just changing the picture. the first got you a few cents the second a 1000$.

A lot of times, you hear about cryptocoins with fixed supply and/or small inflation, that they are pyramids because the late entry has to pay for their coins to the early adopter.

The situation here is reversed, in the sense that we have a lot inflation and dilution for non-SP locked money. So the same argument can't be used with the reverse rationale.

Ponzi are somewhat different than pyramids, but there is something that is slightly unsettling regarding the 10% interest of steem dollars as it drains a closed-loop economy - in case external investors want to buy steem dollars for their 10% annual rate (which is rare in terms of performance)...

Best First Sentence in a Blog Post Award goes to you my friend!
Loved it!

I live in hope to have loads of Steam one day, I have to start posting first but trying to learn as much as i can about Steemit

@dan upvoted, it must be true then!

totally agree steem is not a ponzi

I think that at this stage even founders cannot be sure, is it Ponzi scheme or not. They (and we) hope, not

> Also if the founders of Steemit have reserved for themeselves a big part of the cake, we can be optimistic about the future, because if they try to transform this site in a speculation, they will just sit with a ton of Steem in their hands... but Steem will be worth nothing!

There are so many ways that assumption can be incorrect.

it's a ponzi steem.

at this point the system is sadly run by only a few people...i hope this will change but if you look at steemstats.com i am a little bit pessimistic...

If you are a steemit millionaire you can just make another account upvote all your posts and you make a fortune... Steemit is BIG SCAM