Where Does Steem Fit In With the Numerous Altcoin Scams?

in #steemit6 years ago (edited)

As I said in my introductory post, I have been apprehensive about Steemit--and quite frankly, most altcoins--since I first learned about digital currencies. And as I've watched new coins launch left and right, new "projects" that are going to be the future, I watch in disappointment as people lose so much money. That's why I've always stayed on the sidelines and held my bitcoin.

But people were saying the same thing about bitcoin early on and it has proven otherwise. 

If anyone has ever found my writing about the stock market, one thing that becomes pretty clear is that I'm not really a fan of gold. As Warren Buffett once said, "gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

He also said: " Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn't produce anything."

That, fundamentally, has been my problem with gold. We dig it up, turn it into bars, and then put it in another hole. And, unless people are more afraid in the future and are buying gold, the price isn't going to do anything. Along the way, it does nothing for you. It doesn't generate income, it doesn't become a business, it doesn't innovate; it just sits there. 

But bitcoin is different ... Because it possesses the traits of a store of value (limited supply, etc.) while also being a fantastic method of value transfer, suddenly you have an asset that has utility. And once something has utility, its growth is not based on an emotion, such as fear, but rather, it is based on how much demand there is for that particular asset. 

My bitcoin is one part hedge against economic calamity and one part investment in that value transfer tool. Therefore, because there is utility behind bitcoin while it also has fundamental traits of a store of value, bitcoin has a bright future. 

What About Steem?

Back to my original point, though, we're left talking about altcoins. Let's talk about some of the top coins on the market and what their use cases are:

  • Bitcoin: Store of value and, essentially, decentralized wire transfers
  • Ethereum: Smart contracts, but which ones currently exist?
  • Steem: I'll get to this in a second.
  • Ripple: Wire transfers, but not much adoption
  • Litecoin: The silver to Bitcoin's gold. 

For the most part, Bitcoin is the only coin that is production ready. Ethereum is interesting, but is about to bastardize itself by initiating this hard fork. And really, other than proofs of concept, what scalable products have launched? Ripple is interesting, but I still don't see much going on there. And then Litecoin, which is the silver to Bitcoin's gold. 

Now we talk about Steemit. 

The use case of rewarding people for creating high quality content, curating content, and voting on whether that content is valuable is impressive. And when a coin has utility, suddenly, my interest is slightly more focused. 

The value of Steem is derived from the level of activity on this site. If there are more people that are looking to become whales on the site, there's the potential that they'll buy steem to give themselves a head start, thus increasing the value of said steem. That boosts the strength of the platform, which results in more people participating. Hell, this is my third post in a week, so clearly the rapid rise in value piqued my interest.

Further, as the utility becomes more pronounced and more people realize its existence, it creates liquidity, which is necessary for any coin survival. Many of the little ones can't provide that, which results in a slow, painless death. 

Creating an environment whereby people are rewarded for contributing to that community is a viable one and, presently, is not one that exists in bitcoin. That could change one day, but for now, this self-funding machine seems to have some room to stretch its legs. 

Steem Will be Volatile

That doesn't mean that it won't be volatile. The price of steem was 0.00052BTC/steem on July 9th. By July 14th, it was 0.006BTC/steem. And by July 18th, it had dipped hard to 0.003BTC/steem before jumping up again today. 

If you've been trading steem, initiating shorts and longs based on these rapid rises and falls, you've made a lot of money. Anytime a coin goes from 0.00052BTC/steem to 0.006BTC/steem in five days, you're going to have people who are very happy and very excited. 

But that volatility makes it a risky asset to hold. I've seen many articles where people suggest you should not take any of your steem out, instead just reupping it into more SteemPower, continuing to boost your ranking on the site. And that makes sense if your ultimate goal is to accumulate more steem. 

However ... Steem doesn't have real world applications yet. While it's true there is someone on the site trying to survive 30 days only on Steem, I am skeptical of this. Bitcoin is still looked down upon and that's seven years old; I don't expect people to warm up to Steem as an offline asset. 

Because of this, it's important to take some chips off the table to use a popular poker analogy. Could it result in less long-term earnings? Possibly. But because of how volatile Steem is, it's hard to know whether it will succeed long-term. And for all those people that are putting in hours and days of their lives to create this great content, it's important that they get compensated. 

It's important to hold onto something that can be used outside of the world of Steemit: bitcoin & dollars. 

And then you have to ask yourself ... Why is a post worth money? Presently, the value of said posts are increasing because the value of steem is increasing. But is any single post worth $20,000? Why should it be? Sometimes when you're thinking about whether something is too good to be true, you have to ground it in reality: who makes $20,000 for an article?

So during this insanely volatile time, my recommendation is you try to cash out when you can. Sure, keep some of it on SteemIt, but make it tangible. Use that money to pay bills, go on a vacation, or invest in bitcoin. And then use the rest to create an even stronger account so that your content goes that much farther. 

I could be wrong ...

What makes Steemit great is that average people who have never been exposed to cryptocurrencies feel as if they are going to become truly wealthy on it. And the thing is, with all the coins in the image above, there were people who got really rich riding the wave. 

But then there were people that lost money. People that bought at the top as insiders and early adopters dumped. And why wouldn't they? Even if it didn't start out nefariously, when you see your asset increase by 1,900%, you realize that tangible assets are worth something. 

And unfortunately, the people that buy at the top are uninformed, late adopters who make it possible for all of us to get out. 

It's important to recognize that every coin--even bitcoin--has seen meteoric rises and then cataclysmic drops. But other than bitcoin (and maybe Ethereum a little), none have survived. 

So what the future holds remains to be seen. I would love if Steemit succeeded and I'm certainly writing on the platform. But the importance of having something tangible to show for your work doesn't go away. Even if I'm wrong, isn't it better to have something you can use?

That about wraps up this piece ... I'd love to engage in some conversation about this. If you have anything constructive to say, please post it below. I look forward to talking with you all. 

Sort:  

What makes Steem valuable?

I'm surprised that so few people see the answer: Steem gives you control over the conversation! If you spend any time in the "New Posts" section of steemit.com, you find very quickly that the number one question is "how do we get whales to vote on us?" This is because it's become very clear that your post will basically never climb out of double-digit territory until a whale votes for you. So far, the community is populated with friendly whales who want the system to succeed. Unfortunately, the system won't be successful for long before money starts flowing in from advertisers and politicians who realize they can purchase the power to censor their competitors. That's the paradoxical value proposition of Steem!

If you like my ideas, read my series on the game theory of steem!

You make a very good point. I think it's too early to see how this is going to pan out. You have to bear in mind that because this is really pioneering stuff happening right now , lessons will be learnt and the system will adapt over time. If we look at the lessons from Ethereum over the past month and the voyage of discovery that has happened in the whole crypto space. The one thing I am sure of is I'm glad I'm here to witness this unfold! Exciting times!

As someone with a good amount of vested Steem I want this to keep growing, but I did take ~1btc worth out because I don't if this will scale when free money isn't being thrown to every new signup.

Agree...There should be a balance with everything in life. So, if you've made money and can transfer it out, but still invest in the future of Steemit...I think that is a fair balance.

This is the approach I took yesterday. I put $0 into Steem starting out on the platform and to me if I couldn't turn that into something on here then it wasn't going to work for the masses. I took $209 of Steem Dollars and sold it for $259 on Poloniex yesterday. Shot the BTC over to Coinbase and sold that and shot it to my bank account just so I can pay some bills and say that I made money on the platform. A lot of my future activities are going to be focused on becoming more powerful on here. It is a risk I'm willing to take. I put up a post yesterday which explains why the post are earning so much and how that relates to mining other cryptocurrencies. The difficulty is really low right now compared to the price. The market will likely re-balance at some point but for right now we are the ones in the know and have an amazing opportunity! https://steemit.com/steem/@brianphobos/the-top-reasons-steemit-will-bypass-the-moon-and-will-beat-nasa-and-spacex-to-mars-not-click-bait

Constructive criticism is welcome on this site (I hope). The Steem euphoria has blinded some people to possible problems and many people here are living in a Steem bubble of sorts. Your advice to cash out (I assume you mean into Bitcoin) is very solid. Steem dollars are worth something NOW. That does not guarantee that in a week anyone will be willing to give you Bitcoin for your Steem dollars. Take advantage of the situation and don't end up wondering why you did not get Bitcoin for free when you could have. I am not saying to power down, just don't power up with your Steem dollars when they currently have value in the real Bitcoin world. With all that being said, the Steemit platform is a great way to get people into Bitcoin and cryptocurrency. I hope it succeeds and brings down Reddit and all the rest. I HOPE it is sustainable. Time will tell. My most recent post: https://steemit.com/bitcoin/@bitcoinmeister/why-you-don-t-hear-much-about-the-buy-and-hold-bitcoin-strategy-on-youtube

Steemit cannot really be equated to an Altcoin. Most Altcoins offer nothing except the chance to lose money. This is a novel blockchain implementation which is gathering steem (no pun intended) and users at an unprecedented rate. A great distribution system for tokens to people who genuinely put effort in to making this a productive and interesting platform. With its reward model it will likely make reddit obsolete.

I like its applicability, which is why I am here to begin with. And I do believe that a reward model akin to Steemit's will make reddit obsolete. And I like that it could prevent spam (though it still has work to do on that front). But new coins make me hesitant, whether there is utility or not.

Dude... you're going to get > 1500 USD's worth of a token for the few hours it took you to write this piece.

Sounds pretty much like utility to me :)

You're not wrong there. But what about longterm? Or are we all just doing as much as we can for short term gain?

Hell no. I'm long term. I earned a good deal of Steem up front from posts so this is not an investment for me. This is a career opportunity.

Looks like it could be for you as well.

Biggest gap I saw in your analysis was the effect that freezing up the liquid tokens in Steem Power does to prevent whales from crashing the markets and creating panic. That's almost necessary in something like this.

Value comes from the content. You're going to have a great head start with this article. Liquid Steem Dollars that are going for a high premium on Poloniex and ~2 BTC worth of Steem invested into your account as Steem Power. Now you're a baby tuna :)

Don't invest in the coins. Just use the system as it was intended. A big problem with the whole cryptocurrency scene is that it is almost wholly based on speculation rather than utility.

You are completely right about that. Though, if no one is investing in the coins, what's the value for me? And if there is no value for me, why use the system? The markets are such an interesting thing.

I meant that more for your average anticipated user of this platform. I think speculation and speculators will always exist and will be driven by the platforms popularity and user growth. It really is the first time that non-speculators can use the blockchain tech.

How did you get $1229.31 from 15 up-votes and a comment, in only 22 minutes? Teach! Teach! Teach! Teach!

A whale hit the upvote button, and got several hundred dollars themselves. Now that's value creation right there.

I AGREE! Thank you for posting. Hope you get this to snowball to the top!
I up-voted you too... BTW, should steemit let us steemers advertise using steem? Be sure to tell everyone you know to come vote here at: https://steemit.com/steemit/@kingtylervvs/if-steemit-ever-does-decide-to-advertise-there-is-only-1-way-it-could-work-in-my-opinion-debate

This is a democratic community decision.


Its from a Whale that has Steem Power Baby!

Look at the people that voted first - there is your answer. @dan among them.

If I knew the answer to that, I would replicate it. I have no idea.

His post is worth $1200 but his wallet says he only has $48.... wtf?

He hasn't gotten paid yet

And the whale is.... @dan.... with roughly 2.2milj. STEEMpower :)

You are paying attention to the wrong metric. Read what he writes and you will start to understand.

Would I be so clever before as my wife is after

I MIGHT KNOW WHICH WHALE DID THAT
UPVOTE ME I will reveal it 😜 The answer

bullionstackers

The system works so perfectly that similar posts are worth $1-$10 and this one worth $2,728.54.

It's called the FreeMarket™ , and the system works perfectly.

The incentives are not flawed

The free market implies that there is an exchange of currency. So if you vote up this story, you are losing something because of that vote. Instead, if you vote up this story, you'll receive something for doing that. That means you're incentivized to vote irrespective of whether the content is high quality or not.

If, instead, each vote cost a certain amount of money and there were people STILL making $2,728 per post, then I'd be sitting here completely amazed. Right now, I'm skeptical. I want to be convinced, but for now, skepticism is healthy, I believe.

Thanks for the well written article. I've been interested and investing in various cryptocurrencies for years and am always cautious when I hear about the next big thing. IMO Steemit is the 1st in a longtime that is really combining 21st century phenomena to become bigger than the sum of its parts. It provides an immediate real world strong application beyond just currency speculation. Lots of altcoins have failed because they do not provide a more convenient solution to what already exists. Steemit has an immediate USP, similar to ethereum and this will be the key to its future success. I hope.

Great article. I've bought and sold crypto for over four years now and I've seen this all before, so I'm cautious.

The voting system is broken and needs to be modified or this will turn into a Digg circlejerk.

I wouldn't dare speak for anyone else journey's I document my progress on my you tube channel and also videos posted on here, I say that to say this the volatility has been in my favor since I joined July 6th and profits from trading and converting to bitcoin has also been in my favor. I love the concept of power building a account to become a whale for me being a poker player building a bankroll it fits perfect! Thanks for this share!

steemit is a direct competitor to reddit, and has a market cap at 1/10 with 1/10000 of the users

And isn't that a little concerning to you? I'm not opposed to this site being worth more than reddit, but you have to ask: why?

I like Steemit. I just like to ask why something is worth as much as people say it's worth.

Nice one man. I upvoted. Check out my channel as well for more altcoin videos.

What percent of your portfolio you consider reasonable to hold in steem/SP?

Since I only believe that people should hold ~5% of their investment portfolio in bitcoin (more, I suppose, if you're super risky), I wouldn't hold too much steem. Though, if you equate it to an early stage stake in a startup, I guess it makes a bit more sense.

If someone should only hold 5% in bitcoin, and gold, as you say, has no utility, what should the other 95% be in?

Fantastic post, thank you! I've been through a number of epic crypto bubbles, including BTC/ETH/BTS and STEEM is... not like the others. The backend is mature, state of the art tech that has been running under the Bitshares hood for close to a year. Graphene is incredible. And the dev are some of, if not the, best in the space.

The market cap of STEEM was designed from the ground up to skyrocket in order to bootstrap/jumpstart the Steemit economy. 98% of STEEM is tied up in SP which makes is very hard to dump in any meaningful quantity. I know where you're coming from, cause I've been there too, but this time it's different. STEEM will be $10-20 before the end of the year. ;)

And if that's the case, then people on this site are going to be very rich. To be honest, I'd be happy if STEEM was worth $10-20 by the end of the year. If this created new millionaires, I'd be ecstatic for the world. That's a good thing. I'm just hesitant.

I'm married to bitcoin but cheat a little with steem!

They go together for now if you want U.S. cash.

Im currently on the same boat. I love bitcoin but steem is stealing my hart away!

It's probably scam and ponzi just like Bitcoin :)

Great post, maby you have a point. Who knows.
This is the new generation of mining. I dont know how it works 100% but, im gladly giving it a truy.

Hope it has an good future couse this is actualy a great thing.
Steemit is maby the new Facebook, but you newer know.

I wouldn't say that it's scammy since payouts have been happening, large ones too. It's not a scam but people should realize you can turn money into steem power, but it takes 2 years to get your money back. So you can buy influence, but your committed to that influence. Will Steemit take the money and run like so many scammers in the crypto world? As we have seen with ETH, if the scam works well they keep it going. And I don't think steemit is a scam. Why scrap something with seemingly so much potential just for a few quick million? As long as they make sure the fundamentals are right or tweaked when real big masses start coming. I hope to see a future in it and it's honestly one of the first times I have ventured away from Poloniex and actually used a different website that had to do with an Atl. That is promising in my opinion.

I don't think steemit is a scam , it's a great idea! but I do have concerns, is the steemit economy sustainable or not ? the risk is big but also has potential for big profits

Haha someone is earning ^^

Interesting thread. Really appreciate you bring this to our attention. Blockchain is the fututure but how are we gonna kill all those scamy cryptos out there? Does anyone know about: https://www.coincheckup.com They give great insights in the team, the product, advisors, community, the business and the business model and other techincal insights. Go to: https://www.coincheckup.com/coins/Steem#analysis To see the: Steem Detailed analysis.

Great article you share a lot of points that I agree with. Will you cash out half of your profits from this article?

I don't think that I can, right? My understanding thus far is I can withdraw 25% immediately upon distribution of the steem dollars, but after that, isn't it a tightly controlled distribution?

STEEM POWER powers down at the rate of roughly 1% each week over 104 weeks. This is a huge differentiator over other cryptos that can undergo a massive run on the market. Even if everyone powered down at the same time only 1% per week would be eligible for sale.

Half will be in steem power and in steem dolars. Steem dollars will take a week to cash out.

No you can cash out your Steem dollars immediately, for example by transferring them to Poloniex and selling them for BTC. Of course that means cashing out to a less stable asset, so if security is what you're after you're better off keeping the Steem dollars.

is this what most whales do?

i noticed on steemwhales.com that most whales don't hold STEEM dollars and am trying to understand why.

Great article.

I do have hope for WAVES though.

Ok so I am doing this all wrong, I need to deposit more STEEM into my wallet instead of letting it sit on Poloniex or bittrex and make it work here...I get it now!

Thank you for writing this. I've had similar concerns for some time related to the sustainability of the prices and, more importantly, the impact of the Steem Power Interest rate on the whale balances. I just ran some numbers this morning, and it looks like @ned is making $700k+ a week via interest. Is that sustainable? I'd love for you to add your critiques and comments here: https://steemit.com/economics/@lukestokes/ned-s-making-usd700k-every-week-is-the-steem-power-interest-rate-too-high

people where always willing to pay for good content ( newspapers, netflix, etc), why not in Steemit?

Are people actually paying for it though? What do I lose for saying that an article is great? In true commerce, I lose money. But in this, what do I lose?

A Beutiful writing- thank you.
well, jaycodon you don't seem like a big fan of Ethereum- legit.
But I would say a big, interesting project at the size it aims to be need its time to ripen.
And although i'm eager to see steemit taking off to the heights, as an crypto-world enthusiast- I am a bit worried about its rapidly growth.
We experienced a "painful" failed experiment only a few weeks ago with "the DAO". I wouldn't like to see "Steemit" inflatable like a baloon and ends up in a similar way.

I was a fan of Ethereum until the hard fork. Now it has lost its censorship resistance. How can I be sure they won't do that again?

You said: "Steem doesn't have real world applications yet."
The problem with your analysis is that you observe this phenomenon through only one single piece of the puzzle: the Steem.

Truth is this project is very different from any other digital currency.
You have one application the social network (Steemit) that provide real value to people (same way than Reddit or Medium) and Steem is the vehicule that will incentivize people to produce and curated good content.

But to understand how it is possible you have to take into account the relationship between Steem/Steem Power/Steem Dollars because indeed there is 3 not only 1 currency.

Here is a nice explanation of how those 3 currencies work together:

hope that helps,
cheers

Steem legit, is not scam. Just getting started

I think there is always skepticism with something new. I think it is human nature to wonder "is this really real". Especially in the crypto markets. There are so many coins, one tends to think "this is just another sh*t coin".
To me for the most part they are. Alt coins are basically just a bunch of algorithms. The value is just speculative value based on exchange trading. technicals and all that don't really mean much to it's value. Betamax was better than vhs but which one won out. But what will separate a shitcoin from a real value coin is adoption. Bitcoin is the defacto standard because of adoption and real world use. will it continue, idk, will we ever be able to buy a latte with steem? idk, but as more people use it and trade it and it is seen as a viable currency then it will turn from a speculative algorithm to a coin of worth.

XRP volatility is only volatile on the btc/xrp side of things - its price in USD remains relativey stable - Also you need to do more research on ripple it has started to be adopted 15/50 major banks are now signing on to ripple that's a pretty huge step for any blockchain to possibly become the staple for a real world use. That being said I like your article because well I was also apprehensive about steem, and the unrealistic aspect of its price being stable is almost nill - 10% gains per month would decrease its value fast

Banks have also adopted R3's technology and are adopting Ethereum. The problem is that they're not using it regularly.

True, I think the dao issue might have ruined that chance for eth; now XRP just needs a hard fork and we will all be using SC randomly for every purchase lol.

I think the DAO could have been great if it had been small. What Ethereum is trying to build is REALLY hard. But people got greedy. Alas, that's the cryptocurrency way. :/

Good article!

Wow what an awesome read....I'm new to Steemit and really didn't get it until reading your article...Thanks

I think you have a knack for this.

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