#BurnSteem25: A Solution to Inflation or an Unnecessary Sacrifice?

in #steemit2 months ago (edited)

Over the last week, I've spent a lot of time making my way across Steemit as @steemcurator09, searching out content worthy of rewarding. In my search, I've found several things I plan on talking about over the next few weeks, but one thing that has stood out has been the #burnsteem25 movement.

I believe I first heard of the movement from @remlaps, but at the time, I had no clue that certain groups within the STEEM ecosystem require users to burn 25% of their earnings to win their contests—which I view as a bit extreme. To be clear, that's the act of making the @null account a 25% beneficiary of the post you're looking to join the movement with.

"The concept of token burningis rooted in basic supply-and-demand economics. When a portion of the circulating supply is permanently removed, the remaining tokens can theoretically become more valuable due to their increased scarcity, provided that demand remains constant or grows."

Why Burn STEEM?

The unique aspects of STEEM's reward policy mean the Steemit community will forever have access to the token even if they don't actually purchase it from an exchange. That also opens the door for an inflationary situation that could seriously devalue STEEM. One answer to that has been the #BurnSTEEM25 movement. But that movement is not without fault, as the overall act of burning a reward-based token not only seems a bit trivial but also wasteful to sections of the world where that 25% might make a difference collectively in years to come. Not to mention, a surge of new users coming to the platform, mixed with a loaded amount of rewards coming into play, could also drive the price of STEEM down into inflation hell, no matter how many people burn STEEM or not. It's one of the biggest dynamics of dealing with a rewards-based blockchain environment.

The Act of Burning Tokens

The actual process of burning STEEM reduces the circulating supply. Once you reduce the supply and add in a situation that has increased the demand, you hope it will lead to that price going up.

Burning STEEM and consistently powering up your account are long-term commitments that help reduce short-term profit-taking from the chain. On the other end of the spectrum, the #burnsteem25 movement could lead to whale accounts increasing their profile size while refusing to burn STEEM as the movement grows. Steemit’s governance model already allows users with more SP (STEEM Power) to have disproportionate control in terms of voting power/influence. Not only is it a potential catch-22, it's also no 'silver bullet' that will solve every issue, but it’s a step worth considering.

My major issue is that there are individuals on this site who participate in the contests because they're looking to improve their situation and maybe even learn some social/internet skills. Having them burn 25% of those earnings when they already don't get the TRX they're supposed to can be a recipe for disaster/mass power-downs if the users don't get their accounts where they want them to be within a certain amount of time.

In other words, there really are just as many good things about the program as there are potential setbacks. Potential in that there's also no guarantee that burning a reward-based token that automatically prints on demand, even in small increments, will offset the overall potential issue of inflation. In the end, it really comes down to what each user believes will improve the ecosystem versus users who don't want to lose their rewards in any situation.

While I continue to evaluate its long-term impact, I've decided that from now on, on the 25th of every month, I'll send 25% of one post to @null to participate in the #burnsteem25 movement and further signal my belief in Steemit’s long-term sustainability. After all, each of us is an investor here, and the overall goal is to inspire confidence from future investors in the blockchain.

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In general (obviously), I support the initiatives to burn Steem, but I also agree with some of your points from above. For example, 25% seems very high, and it can be a big sacrifice for people with limited means. OTOH, as @the-gorilla pointed out, here, 75% of a big number can be better than 100% of a small number.

My opinion has always been that burning tokens should be done in exchange for some service, not just as a way to influence prices. In the #burnsteem25 implementation, that service is basically attention from the Steemit curators. It's not a guaranteed upvote, but I think it makes your post more likely to get attention.

I would prefer, though, if it were purely an audience-building play where rewards and scarcity are side-effects. Burning tokens should put your post in front of a lot of eyes, not just the eyes of a few curators. A lot of development still needs to happen for that to become possible.

One effort in that direction is the Steem Curation Extension that I built a couple years ago. The idea here was to draw attention to promoted posts and/or posts with null beneficiaries by highlighting them in the feed, instead of requiring the reader/voter to go to a special tag. Here's what it looks like:

The top post has a @null beneficiary set, the second one has both a @null beneficiary and a post promotion, and the bottom one is promoted without a beneficiary (it probably had a beneficiary, but they disappear after payout). The shades are also adjusted, depending on the size of the beneficiary or the promotion amounts.

Another initiative has been the post pinning by mod-bot, and I have others in mind, too.

By itself, the #burnsteem25 initiative barely makes a dent in the overall Steem supply, so if it's ever going to be significant, I think that the payoff to people who burn tokens needs to be higher in terms of audience size. Burning tokens to get tokens is just marginally better than spinning a metaphoric gerbil wheel.

OTOH, you can see what is possible with Tron, where the blockchain has been deflationary for a couple years. I don't think it's a coincidence that the price has risen from like $0.03 to about $0.15. But, (IMO) those tokens are being burned because someone gets value out of it, not because they're trying to boost the price.

GitHub is one #rabbithole I haven't visited yet in terms of learning. I think I should, though, after hearing all of the good things that can be had from the site.

Here's a question: Would giving that same 25% to a person/cause in need here on Steemit be a better use of that "burnt" crypto? Technically, it doesn't pull the coin out of circulation, but it does go to good use. I guess the 'end-cause' is good, but once I look at it typed out, it doesn't quite click the same boxes. There has to be some medium ground on that somewhere where the coin doesn't get "wasted."

By itself, the #burnsteem25 initiative barely makes a dent in the overall Steem supply, so if it's ever going to be significant, I think that the payoff to people who burn tokens needs to be higher in terms of audience size. Burning tokens to get tokens is just marginally better than spinning a metaphoric gerbil wheel.

Would giving that same 25% to a person/cause in need here on Steemit be a better use of that "burnt" crypto? Technically, it doesn't pull the coin out of circulation, but it does go to good use...There has to be some medium ground on that somewhere where the coin doesn't get "wasted."

Theoretically, nothing is wasted. The value from the burned tokens gets spread out among all the other STEEM/SP/SBD, in the form of higher prices, so the value doesn't go away. Just as much value would still be available for charitable causes.

In practice, of course, there are many other factors in play - so it might or might not work out that way.

I'm generally suspicious of Steem's charitable initiatives, though, except in a few cases where the organizer has established a reputation and provides strong transparency. I've seen too many "fly by night" initiatives over the years, where people took advantage of peoples' empathy.

GitHub is one #rabbithole I haven't visited yet in terms of learning.

On github, I wasn't really expecting you to install it. Just demonstrating that it exists. One of these days, maybe I'll learn how to package these up for the chrome extension store. The way I have the extensions now, some technical background is needed. It's less than ideal.

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