RE: Fixing a Problem in the Economics of Steemit
Couldn't agree more. People aren't interested in Steem Power, and we are seeing more SP being liquidated everyday. Liquid Steem on the exchanges is up nearly 500% since Hardfork 16. Those who are sticking with SP is because of the influence it brings and not the paltry, insignificant interest rate.
But allow me to rant on a tangent.
Personally, I don't see the point of Steem Power. It's a peculiar artifact from the hyperinflation days that today does nothing but bad PR and make the system unnecessarily complicated. I suppose one purpose was offering security, but without the ridiculous interest, that is certainly not the case. The next was saving stakeholders from panic dumps, but that has proven to not be the case either. Indeed, the price was tumbling during the 104 week power down period, and that caused many to assume that the price would crash to 1 cent or so when the 13 week power down went live. That never happened, and the price has been much more stable during the 13 week power down era.
Indeed, there are many successful cryptocurrencies worth hundreds of millions if not billions of dollars out there, which didn't need a lock in period of any kind. Crypto markets are self correcting, and prices correct very rapidly on pumps or dumps. By drawing out the dump cycle, the price can drop gradually over time, whereas a flash dump is quickly corrected. This will be a controversial opinion, but I'm willing to suggest a completely hypothetical scenario that the Steem price would be a lot higher were there no 104 week power down period to begin with. Sure, the price would never have hit $4, but on the other hand, there would never have been a gradual bleed to 95% of the peak value.
The current interest is very unattractive, too. The "3 month lock in" period is still bad PR and reeks of "scam" to ignorant traders. It's obvious seeing the Poloniex trollbox - the FUD is still strong.
Of course, there needs to be a way to determine influence, and there are many simpler ways of doing that. I like snowflake's suggestion the best. The liquid STEEM holding of a certain account will "mature" to voting influence after 7 days. This solves the 7 days re-voting problem (in fact better than the current model, where it's possible to re-vote with the 1/13th of the same SP) and allows for a more elegant wallet with just two components - STEEM and SBD. No power down headaches to worry about - a frictionless network for investors and users alike.
Many investment vehicles have long term holding requirements. I don't see that as scammy at all (bonds, CDs, IRAs, 401Ks). I also think that steem power's 90 day power down window is useful to encourage voters to take a long(ish)-term view towards the content that they vote for. A compromise might be to pay rewards in steem. People could always power-up, but no one would be forced to lock up their gains.
The question we have to ask is what is the purpose of the lock in period? and does it really encourage people to hold steem?
My answer to that is that it doesn't. It does the opposite actually.
Throw someone in a cage and ask him how eager he is to get out.
Now throw someone in a cage with the key and ask the same question. The one with the key will not be as eager as the one without the key because he knows he can get out anytime he wants.
If steem power is removed entirely there won't be more people cashing out, this is a misconception. What makes people hold long term is their belief in the project. Using force ( lock in period) to achieve something is never a working strategy because users will always get around it. People who want to get out will do so regardless of any power down period anyway. The lock in period just slows down the price discovery process.
It's not a cage and it's not using force if it's a voluntary agreement and no one is being imprisoned. Those analogies fail.
The purpose of the power down period is not just to keep people from cashing out. It's also (perhaps moreso) to encourage voters to vote in ways that promote the platform's long term interests instead of focusing exclusively on their own short term interests. i.e. Vote for the article that will attract users and raise the price of steem, instead of the article that will attract whale votes. Traders and investors who are not interested in voting on content have no need to ever even learn that steem power exists. They can remain exactly as liquid as they choose.
And you're right that someone who wants to get out will find a way. They can just sell their whole account. It happened with the steve-walscot (or something like that) account. So that's even less of a reason to worry about friction.
Wouldn't allocating 3% more to authors and witnesses achieve the same but keep the functionality of Steem Power? Steem Power has uses which aren't trivial.
@steemit Inc has stopped powering down. This indicates to me that 1.5% interest isn't negligible even for the richest Steemian.
@demotruk's comment on the 1.5% interest and its implications for Steem's economy should also be keep in mind when discussing this issue.
Also can we really revote with 1/13th of the Steem? This means payout period can be longer than 7 days? Or am I missing something else?
I hope the comment that you replied to made it clear that I'm not in favor of eliminating steem power?
As to reallocating the interest, the more I think about it, the more ambivalent I become. As far as I'm concerned, at best it's a low priority to make any changes at all to the block chain economics at this point. Steemit can already get revenue for development from reward splitting from HF17/18, so they don't need a separate development fund. The developers need to focus on improving the user interface and supporting entrepreneurs. The antifragility that comes with numerous entrepreneurs driving their own growth on the blockchain is where the explosive growth will come from.
Not sure about this. I seem to remember reading something that said that we lose our voting power at the beginning of the power-down week and we get the withdrawal at the end. If that's right, then we wouldn't be able to double vote because the steem power would be "offline" for 7 days - an entire payout cycle - before we could transfer it to someone else or power it up again. I can't find where I read that now, though, so I might be misremembering.
I understood you weren't in favor of eliminating Steem Power.
I also think as you said that it's not possible to vote twice with the same stake or 1/13 of it but it would be nice if this could be confirm.
An agreement that most people don't want to sign up for.
Good because it doesn't.
You assume that if we remove steem power people won't be invested long term anymore, this is where my analogy doesn't fail :-)
I don't think that's what liberosist meant by friction. There is friction because the barrier to entry is high due to lock in period. The majority of users don't want to lock their money which means many users are excluded from participating.
Steem power also adds a lot of wallet complexity which is bad for mainstream adoption.
Authors don't need steem power to participate. Long and short term traders don't need steem power to participate.
If someone wants the privilege of voting to shape the nature of the content on the blockchain and the distribution of rewards, then I think it's fair and prudent for the content community to demand a demonstration of long term commitment to the platform. It's sort of like "proof of stake" at the content layer.
Possible compromises: Early withdrawal with penalty, distribute rewards as steem instead of steem power.
I know what you mean but i think the benefits of eliminating steem power outweight the benefits of keeping it.
It's also going to be more and more difficult to own a large piece of the pie as more users use steem and as the price increases, so the problem you mentionned is going to dissipate with time.
belief is not enough to keep me in any cryptocurrency, I trade them all day for profit, and I am only dedicated to steem because it has steem power, a great way to lock in my trading profits is with steem power. Locking up tokens is good for the token value. Dash has masternodes, Ether has ICOs, and steem has steem power.
The steem power harvester!
From what I've seen you are trading a lot with your emotions and jumping on every hyped crypto. So I understand how locking your crypto may help you in that regards, however long term holder trade rationally.
AFAIK users are not required to lock any funds to become a dash masternode, so it would be exactly like steem without steem power. If masternodes had to lock their funds for 3 months there would be a lot less of it.
if user sells their 100 DASH and only have 900 DASH left, that user no longer has a masternode, so it's locked up for sure. There are far more traders who trade on emotions and jump on bandwagons than there are long term holders(rich people). STEEM needs steem power to protect it's market against FUD and emotional trading.
If the user sells 100 dash then his masternode automatically goes offline, the money is not locked and can be withdrawn at any time.
That's incorrect and long term holders are not necessarily rich people.
if steem power lock was removed today, steem price would crash today
That's FUD, only emotional traders fall for this.
Exactly +++
Sure, but those are backed by known and stable institutions. The crypto world is a different matter altogether.
Well, I think the goal is for steem and steemit to become known and stable institutions. They are incorporated, there are names and faces associated with the corporate officers, the code is open to inspection, and they've been around for over a year. I can see how a holding requirement might appear scammy if they were operating in the shadows, but they're not.
And at this point, anyone who was spooked by scam fears and wants to power down has done so. The only friction that remains in the system is friction that people have chosen to accept. I see no clear benefit to disrupting the current architecture.
Sure, but you're being logical. That's not how the crypto world works. It's all about perception and emotions rather than facts and logic. There was a massive FUD campaign against Steem last year, and many still believe Steem has failed, is a scam etc. As the price increases lately suggests, more people are coming round to the facts, but Steem still has a perception problem.
Of course, I agree with you about not disrupting the current system. This is merely discussion, and I'd only agree to this change if we're sure the benefits greatly outweigh the risks.
100% agree, a few of us have discussed the possibility of getting rid of SP altogether and just let liquid Steem vest automatically after 7 days to avoid double voting.
Of course, there are issues like security (which is non trivial) and the instant gratification of buying voting power might be attractive to users. However, I think they can still be remedied in other ways.
I also have a few other suggestions but I didn't want to cram them into 1 post, and I feel that this one would be less controversial.
I look forward to a follow up post then :)
haha I dunno, I sort of want to just stick to my comedy/satire pieces and stay away from crypto/steemit topics that scare away new users. I feel that this suggestion was somewhat important so I broke my own rule and pushed it out.
I feel the same way, I much prefer writing about stuff I'm into. But I feel it's important that our voices are heard on some important matters. It's a short term problem, of course, it's still early days. Once we head out of Beta, we'll go back to ranting about our interests and penchants :)
with no 3 month lock I would have already sold all my steem and forgot about steemit, the steem power lock keeps me here, and I like that
I agree! I feel like the same thing would of happened to me to. The lock, And the Steem power holds me here. Because I have something "invested" . But at the same time I see the potential issues outlined in the post.
Don't kid yourself, the money keeps you here!
if you are talking about posting rewards. you are wrong, my average earning per blog post is about $1 since I joined in May 2016, steem power locked up keeps me here, and keeps me interested in cryptocurrency as a whole
I've been thinking about this lately as well. I asked myself "would I include SP if I were designing Steem from scratch?" My answer is that I'd only do it if I thought it was the simplest way to prevent the re-vote problem. And if I did do it, I wouldn't offer interest. SP would very simply be a way to commit some of your funds to count towards voting influence.
Without Steem Power the platform has no way to generate demand for Steem and revenue.
The utility of Steem Power will remain. There will be more demand because there will be less friction. Especially in the maddeningly volatile crypto markets, 3 months is a deal breaker. There have been a lot of Steem buys on the exchanges in the last month and a half, yet precious little of that has been powered up. Net transfers to exchanges remain largely negative. A majority of the demand has thus come from market speculation rather than buying influence on the platform. Just to clarify again, that utility will remain, just in a different form.
There is no reason to power up. I'm not even doing it anymore.
The "3 months lock in" period also takes away a lot of the utility of steem power. Most users don't want to lock their money for so long. Some users may want to curate only for a week and then do something else with their money but they can't because their money is automatically locked for 3 months. Removing steem power is a no brainer to me.
I see what your getting at. I feel like we have to accommodate 2 mindsets. The people who would absolutely need their money right away, And other people who can wait.
I personally am okay waiting for 3 months. I see why people on the outside see it as a scam though. Maybe we can find a way to satisfy both parties.
Why would people want their money be locked in for 3 months? There is no benefits in that, like OP said 1.5% per year certainely do not warrant wanting to lock your money for 3 months.
@leesunmoo suggested similar but more innovative one. When power-up it takes 7 days from STEEM to SP (slow power-up), and can be cancelled if they want during the 7-days. Instead, power down can be done immediately (instant power-down).
That was my suggestion too, but I prefer snowflake's idea because it does exactly the same thing with the added benefit of simplifying the wallet. Instead of slow power-up it can just be STEEM that matures after 7 days to offer influence. It is of course liquid at all times, so you can transfer it immediately etc.
So don't need a second Steem Power component that needs powering up or down, even if it's instant. Just have STEEM - gains influence after 7 days.
I think many disagree with you here. Other projects like Augur REP and DAOs have time-lock contracts for the very same reasons steemit has one.
Others are right to point out that steem has a crazy inflation rate and that Steem Power is important to avoid some of that influence. Liquid steem is still the valuation point of the network.
Steem's inflation rate is ~9%, not crazy at all.
Without lock-in the reputability of an account becomes as fluid as the token. The network loses its resistance against manipulation. Vesting is necessary to shiw that the author is in it for the 'long haul.'
This argument and many arguments like it make a common mistake, they look at STEEM inly as a cryptocurrency and not a social network with a native cryptocurrency backed by content. While some comparisons between STEEM and other cryptoa translate, the majorty are false analogies.