(credit Mrs Maybe @ WordPress, wren feeding cuckoo chick)
@dan, although you don't know me under this handle, I've been a Bitshares holder since PTS days. I see the same mistake being made in Steem as was made in Bitshares: paid witnesses is ruining the system. The very same thing is happening here. It's very obvious in your video interview with @dollarvigilante that you are asking for Steem users to have more faith and dare to invest in Steem. But as you know, Steem users account only for 50% of the daily reward being paid. Another 50% is witness pay. Just look at what witnesses are doing. Look at steemdown.com. The view is flabbergasting. Almost every single witness is powering down. And since almost every witness is also a whale, the amount they powerdown is very high, and in some cases as high or higher than their witness pay. So basically 50% of the daily payout, although paid to witnesses as SP, in fact ends up being sold as liquid steem on the market and crashing the price.
Now why are witnesses doing that? Tragedy of the common of course. But also because they have nothing to lose. They aren't really being challenged on this. Plus the witness pay is so gorgeous that it more than compensates for the powering down. This has to stop. If you stop the hemorrhage of Steem via witnesses, you remove 50% of the sale pressure. This should be enough to stop the current downtrend in its tracks, and give back some well needed faith to everyone else, which would help curb the other 50% of daily reward sell off.
Now, as a former Bitshares participant, I know the political aspect of things. Witnesses are (for the most part) earlier Bitshares contributors, including many former or current Bitshares witnesses. They have a lot of influence on you and Cryptonomex. And they are your friends. And they will complain loudly and try to lobby to prevent their vested interests (including their ongoing have-your-cake-and-eat-it-too cashout) being threatened. But if you sincerely mean what you say in this video that individual efforts have to be made to protect the platform and ensure its long term sustainability, you have to start from the top.
Here is a list of simple measures you can take quickly that would solve the hemorraghe very effectively.
Cut down witnesses salaries
This is a no brainer. At current rate, witnesses are awarded around 1500 Steems per day. Around the ATH this was more than the most successful wallstreet traders are doing in a day. For a long while, this was as much as the average quant trader is doing per day. Even now at these depressed prices, 1500 Steem per day is still worth USD 200 per day, or USD 6k per month. Why do witnesses have to be paid that much? Most of the added value is brought by steemians, not witnesses. Projects are being funded daily via the regular voting mechanism. And witnesses themselves still get awseomely rewarded via the regular voting mechanism for their projects they should be doing for free given that they are already paid via the witness salary. This witness pay is a gigantic mistake. Witnesses just don't bring added value in proportion of the money they take. The solution is to reduce witness pay to what it takes to run a good quality node, plus a small compensation for the effort and maintenance. Witnesses who wish to do more can be paid using the regular voting mechanism. Let's call a fair witness compensation USD 1k per month. For the service of running a daemon on a dedicated server and keeping up with occasional upgrades, this is still very well paid, and the supply of high quality volunteers even at this price is plenty. You can ensure things remain at this level by indexing witness pay in SBD, pay half as SBD to cover server costs, and half as SP (exactly like everyone else on the platform).
Remove witness voting power to people who power down
There is a strong correlation between being witness and being a whale. This is because witnesses agree with each other to exchange votes. Since they are showered with SP at the rate of 1500 SP per day, they can also enjoy powering down continuously without losing stake in VESTS. That's basically a have-your-cake-and-eat-it-too kind of deal. If you remove to users who are powering down the ability to vote for witnesses, witnesses will be in a situation where if they power down, they can't keep voting for their buddies. Since a lot of witness voting is based on reciprocal exchange of votes, a witness who owes his seat to this kind of agreements stands to lose a lot of support when she stops voting for other witnesses as other witnesses will likely reciprocate by removing their vote too. This creates a dilemma for witnesses: either stay vested in to maintain the influence that voting for other witnesses give them. Or cash out. This is a powerful deterrent for witnesses who owe their seat only to the power of their stake, and not to their merit and popularity as witnesses.
Give a multiplier to curating rewards by stake that isn't powering down
It was already proposed to remove post voting rights to people who power down. This was pushed back very strongly as "taking away" something that was part of the deal people agreed to by powering up some steem. That's true. But if you change this into a softer version where stake that isn't powering down gets a small curation bonus, this is much more likely to be accepted without much fuss, in particular if you stress that this is necessary to keep the system sustainable. We have all seen the price decline, we will all be more receptive now.
Consider changing your votes to encourage people who have shown to be instrumental to the growth of the Steem community rather than old Bitshares witnesses
I see that you have already started doing so as I now see that @anyx, @roelandp, @charlieshrem and @pfunk are now full time witnesses. This is very good. But there are many more slots still hogged by witnesses who aren't showing much results for their income and many more actual community leaders who spend a lot of time and effort and/or have much external influence and would be a much better fit as witnesses.
Change the proof of work to Equihash
By now it's clear that your current PoW is GPU friendly and that someone has developed a GPU miner that they have kept private and are using to collect all the mining rewards. Only two users are getting the entire PoW reward, and these could be the same person. It wouldn't take much effort to change the PoW to equishah. This is the PoW used by Zcash, a project that is arguably developed by top crypto talent including well regarded cypherpunks like Zooko and one of the researchers behind lambda authentication, Andrew Miller. So far, Equihash has proven to be incredibly GPU resistant. As of now, CPUs are doing way better at mining it than any known GPU. I think it would be a safe bet as a new PoW algorithm.
Be a leader
Let's be clear, all of the above will be highly unpopular with current witnesses. You will get a lot of complains. Some will try to use their status as friends to lobby against the decision. Or they will oppose to the change by refusing to upgrade their witness nodes... These should be pushed out of the witness list (you still hold enough power to do that). This isn't going to be pretty. But you have to do it if you want Steem to go anywhere.
Look at things from investors perspective
As a mark of good faith in making this statement, know that I for one have stopped powering down and even started buying back Steem and powering up (24k Steem for the last week alone). In doing so, I am wearing again my investor hat, and what I'm seeing from that perspective isn't pretty. What I'm seeing is that there are 19 insiders who essentially are only required to run a good quality node (which I'm doing anyway), maintaining it (which I'm doing anyway) and are receiving so much stake that they are guaranteed of remaining top stakeholders in the system all the while powering down and depressing the price. From my investor perspective, why should I invest? Why are investors investing in anything? They invest because they expect 1) to increase their influence on the direction of the project, 2) future capital gains. But in the case of Steem, 1) isn't guaranteed because, no matter how much money one throws at Steem to purchase Steem Power, there will always be 19 insiders who keep growing their stake without as much as lifting a finger. 2) is also badly compromised due to the same 19 insiders who are dumping day and night all the Steem that they get from powering down their ever increasing stake. Let's call a spade a spade: from an investor perspective, witnesses in their current form are a huge turn down. This has weight down a lot on the amount of money I'm willing to invest in Steem. Even at these low prices, I still feel incredibly reluctant to invest in what I perceive as ongoing capital embezzlement and ficticious jobs.
I have been telling the above at countless occasions over the last six months, but never managed to have my voice heard or getting a feedback on that matter from you or @ned. I hope that this time around, my voice will be heard.