Open letter to Dan - how witness pay is ruining the economy, and how this can easily be addressed

in steemit •  2 years ago


(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.

(this is a repost of my earlier comment to Dan's interview with @dollarvigilante)

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My original intent was for 10% of the rewards to go to witnesses, 90% to go to content / curation. At some point we changed the rewards issued to maintain the desired inflation rate, but it appears we did overlook what happened to the scale when liquidity rewards were removed.

Our short-term roadmap includes making witness pay a parameter and I will be very vocal in supporting the concept that block producers should collectively get at most 10% of the daily rewards.

I also support the idea of having votes decay unless the opinions are actively re-asserted. Incumbents have too much power.

Lastly I support increasing the pay of the time-shared witness slot relative to the top 19. This would allow more people to be involved.

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would it make sense to payout witness pay partly in liquid steem? (for example 50% liquid steeem and 50% SP)

If witnesses won't have to power down it would look much better to new investors.
Although having the 2 founders powering down sends a total wrong sign to investors. My friend who runs a VC firm was considering putting 500K into Steem. While researching they saw you and Ned powering down.
As founders you should not power down or at least if there is a reason for power down than the reasons have to be openly explained to everybody (Diversifying is not a reason an investor will accept from you guys as founders)

If you are employed by Steemit Inc. your salaries should be set high enough that you don't need to power down. I talked to many people on Steemit and everybody says, well the founders are powering down so am I.

Maybe my idea doesn't make sense at all, but this way

Witnesses won't have to power-down
Witnesses who were not powering down will power-up the Liquid Steem (looks good to investors)
Investors and users are encouraged to invest long-term into Steem Power

And for god's sake everybody working for Steemit Inc should stop powering down. I never heard of a startup where you can start cashing out your shares after 3 Month of initial launch.

If you are not able to pay yourself a 6figure salary which will cover all your costs go fundraising with Steemit Inc but please stop selling your STEEM and discouraging Investors from putting money into your baby.

I truly believe in your idea of token based economies and Steem will disrupt social media or other fields for ever if done right.

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We need competition between witnesses.
Witnesses should bid block reward to steem power holders, and steem power holders should choose best bidder among witnesses.

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This strikes me as partially implausible. When the liquidity rewards were disabled, witness pay increased from 25% to 33% (rough numbers) as a share of rewards, but its amount did not change. It was not 10% previously, and I find it difficult to believe you intended this given the obvious numbers of 1 STEEM each for content, curation, witness and liquidity in the original design (later some of curation was shifted to content). That this is 25% each, and not 10%, is blatantly obvious.

What was and is 10% in the white paper (and I assume the code?) is the long term portion of rewards allocated to witnesses (after the minimums are reached) at 0.75% of market cap per year. Long term, this seems fine, if possibly a bit low, but I see no merit in slashing funding currently going to witnesses considering that most if not all of this funding is currently being used to fund valuable work that is helping to develop and fill gaps in the platform, both of which are sorely needed at this early stage. I do not agree that posting rewards, being designed as a lottery and shared with social media users, are generally suitable for funding platform initiatives. What is your proposed substitute for funding the valuable work that witness pay currently supports?

The myth that @recursive and a few others have been disseminating about witnesses being primarily embezzlement and fictitious jobs is just plain false trolling, and you should should not be influenced by it (and if it were true, 10% would be too much)

I support decaying/expiring votes and increased backup witness pay. The latter has been a concern of mine all along (given the expected increases in operating costs I did not see how backups could be viable at all with such low pay), and I'm happy to see it addressed.

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Thanks for taking the time to address some of the concerns Dan, appreciated.

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Thanks Dan, these changes would greatly improve the situation. I'm looking forward to seeing them implemented. Any plan to upgrade the proof of work to make the 20th slot useful again?

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Those 3 proposals are game changers and I really love them.

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Ooh, I like voting decay. I like that a lot.

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When can we expect to see these changes voted on, or implemented?

Aside from reducing witness pay significantly, I think we also need to adjust the inflation rate of Steem... as evidenced by the daily 10% drops in the price of Steem, it is proving itself much too great at this stage of the project's life.

I think both of these changes need to be implemented ASAP to restore some confidence in the system.

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I'd like to thank the OP for the very genuine open letter. I think these types of letters should be saved for very important issues. (the cry wolf story). However, this time, it's not crying wolf. It is actually a sincere problem.

I have full faith in Dan and the team to make the necessary adjustments. Daily operations are better than prediction models. You can actually watch the value of steem and how it moves with every release, adjustment, change, and the way steemit society reacts.

There is a lot of greed here. However the clear winners are those that will stop selling their steem and stop contributing to the problem of its current value.

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Hear Hear!

Love & Peace & Freedom

The following reply is copied from my comment on another post.


There is some sort of myth that witness pay is a handout that serves only to enrich witnesses. Perhaps that has been the case in other coins but it is absolutely and utterly false in the case of Steem. Those funds are used to support extremely valuable and important development and community initiatives.

In my case I'm currently running a deficit of about $1200/week continuing to fund these initiatives above and beyond the entire $800/week I'm getting from witness power down (yes I am in the process of rationalizing the budget, but I also don't want to cut off good projects abruptly). My time is volunteered and nodes are paid for out of my own pocket. In other cases there are witnesses who have left their regular jobs and gone full time on Steem-related work, supported in part or whole (though the latter is getting harder by the week) by witness pay. These witnesses are developing and supporting services that you may very well use every single day.

Secondarily, hosting is only a small part of the core job of a top 19 witness in Steem. Witnesses also have very important responsibilities in evaluating updates and deciding whether they are in the best interests of the stakeholders, serving as stakeholder representation in offering feedback to developers on direction (in part since developing updates that won't be accepted is foolish), maintaining the SBD peg, planning for scaling of the infrastructure, and other management and leadership roles. Recently there has been discussion of adding more witness parameters aside from the SBD peg. If this occurs, then the responsibilities of witnesses in deciding on and maintaining these parameters will increase.

The Steem ecosystem benefits greatly from both the work of the witnesses and the witnesses' use of funding to support decentralized development and community initiatives. Top 19 witnesses have critical decision-making and leadership responsibilities and not only should be compensated accordingly but failing to do so increases security risks since the primary incentive for honesty and diligence on the part of witnesses is the threat of being voted out. If the pay is peanuts, getting voted out becomes a blessing, not a threat.

Cutting witness pay by 7/8 is extremely short-sighted and harmful ... [rest of reply not relevant here]


In addition two factual corrections, and one strong difference of opinion.

Factually: 1) about 34% of daily rewards go to witnesses and miners, not 50% (and it would be 25% if liquidity rewards were turned on); 2) daily reward to a top 19 witness is 1371, not 1500, and it is SP, not STEEM, which means none of it can be used for expenses nor investments in the ecosystem of any kind other than by powering down, something you inexplicably suggest is some sort of sin (and BTW, as a newly-elected witness, the power down is initially tiny; one is required to work as a witness -- and cover expenses -- essentially for free until the accrued vests reach the point of producing a significant value of weekly-power down, which takes months).

As a matter of opinion, I could not disagree any more strongly that there are "many more slots still hogged by witnesses who aren't showing much results for their income". That is absolutely false as I just went through the list and I identified 14 of the 19 who clearly based on my personal knowledge and experience have made and continue to make huge contributions that easily justify the amount of pay based on their skill set and effort level, time and money spending on valuable development efforts, etc. (And that does not mean the other 5 aren't carrying their weight, and from what I've seen they probably are; it means I'm less familiar with the specifics.) Frankly you are slandering the work and character of some very good people by calling it "embezzlement and ficticious jobs" and also demonstrating that you are horribly out of touch with what is actually going on here. What you describe may have happened in Bitshares (I don't know, I wasn't there), but that is another project and you should leave that baggage where you got it. I've seen very little if any of that here.

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@smooth What initiatives are you running? You haven't reported any project you're doing now so I am curious of them.

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Smooth continues to be the largest benefactor to @steemcleaners, still giving thousands a month ($700 this week, which in turn goes to other community members via the steemcleaners reward).

I am also witnessing first hand the effect smooth talks about, of the 'ramp up to powerdown' ability. As much as I would love to be able to solely support my project with my witness pay, despite that every single steem I power down I transfer, it's still such a small amount compared to the whales. I am incredibly thankful that @smooth and @nextgencrypto have been donating so much.

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I consider attempting to personalize this discussion to be off topic and inappropriate here, when the discussion should be about the role and performance of witnesses generally. I'm one of, if not the most, accessible witness on steemit.chat every day. I'm happy to discuss or answer any questions there about the initiatives I have supported and/or continue to support both financially and with my time and talents.

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Smooth, you are one of the rare witnesses, together with the new four witnesses I named in the post, who are actually doing a lot for the network, and providing full transparency. I totally agree that the projects you have been supporting are important and useful, and that these projects should be funded by the community.

What I don't agree with, however, is that witness pay is the right mechanism for that. Witness pay is an old and inadequate artifact inherited from Bitshares' DPoS at the time where there was no alternative way for the network to fund development, marketing and outreach efforts. DPoS, at the core, is exclusively concerned with securing the network, and posits that the blockchain should be validated by a quorum of delegates elected by proof-of-stake as being the most trustworthy and the most unlikely to collude. Optionally said delegates would receive an indemnity from the network to compensate for their cost running a node. But there was no assumptions grounded in game theory that would justify any form of causal link between delegates receiving a compensation and their being trustworhty. Thinking about that objectively, who would trust someone whose trustworthiness would be a function of income?

The reason the larger delegate pay was introduced as a way to pay for developments, marketing etc is entirely orthogonal to trust and to the original role of delegates as required by DPoS / federated consensus. Back then at the time it was introduced in Bitshares, there was no real way for the blockchain to "hire" people, so it was proposed that, since delegates would receive an indemnity for running a node, it would be possible to bump up that indemnity to a more significant sum and use it to hire useful people who could contribute to developing the network. This was a hack. Nothing more than a hack. And a dirty hack by all standards. First, it was actually defeating the security model by making it less important to hire delegates based on trust and integrity, and more important to hire delegates based on technical or marketing skills. Secondly it was completely broken from a practical and economic perspective because since every delegate had to be paid the same amount to avoid a complicated decision process at consensus level, paying people the right salary for the job was near impossible and led to even hackier system with people taking several delegates (hereby weakening further decentralization) and/or foregoing a part of their witness pay etc. Another way this was broken was that there were far fewer delegate slots than contributors to the community, so whereas the most politically apt or largest contributors managed to get one or several delegate positions, smaller or less politically apt but none the less sincere and valuable contributors were entirely left out of the scheme and expected to contribute for free when their peers were being paid by the network. This in turn created some recent in the community, as it always turns out to be the case when introducing money and favoritism in a community of volunteers. The end result was terrible and we all know how things ended. Even paid delegates got a massive dopamine crash when the price went down and their delegate pays ceased being perceived as attractive. By then the volunteering spirit had long been dead.

The mistake Bitshares made was conflating two functions that had no business being conflated: that of trustee in the delegated consensus, and that of employee of the blockchain. A trustee should be voted in based on his/her trustworthiness and integrity. Being trustworthy and acting with integrity should be his/her only function. Because trust and money don't mix well together, a trustee should be a volunteer, and shouldn't receive any significant pay other than a basic indemnity for covering node management costs that should be a fixed sum decided by the network and applied equally to all trustees. Because a trustee is a volunteer, overhead should be kept at the absolute minimum. This trustee is what a delegate in Bitshares should have been, and what a witness in Steem should be. You don't want highly skilled developers for that role. You want very reliable people with a high reputation at stake, and from very different backgrounds so that the chance they would collude is minimal. You want to have organizations as Wikileaks, the FSF, the EFF, some cypherpunks, some activists, some highly trusted people from the Bitcoin community etc. Again, money is totally orthogonal to this role, because real integrity is something that no amount of money in the world will be able to buy. These are the type of people we want to be witnesses in Steem, and if they are the idealist and visionary type that we really expect in that kind of position, they will appreciate the honor and won't care that much about what you give them as a compensation for the tiny job of running a node.

Now for the role of employees of the blockchain, you want to pick people exclusively on the classic hire criteria including their technical skills, past experience, salary expectation etc. And you want to give them the right level of salary based on their market value. Even better, you want to hire them to do specific things, and pay them per project. That wasn't technically easy to achieve back then in Bitshares, but that a totally different story in Steem, because Steem has got an extremely versatile and powerful funding mechanism built in: inflation-powered vote-based funds allocation. So far, in it's very basic current form where people just upvote what they like without the possibility to set clear financial targets, this system has already allowed to finance a large number of projects, including some that you have been instrumental in pushing. This mode of funding has worked suprisingly well, and can easily be improved further by introducing kickstarter kind of features like a minimum funding threshold, multiple funding levels with different levels of achievement, and more flexible time targets.

In other words, unlike in Bitshares, there is absolutely no need in the case of Steem to try to shoe horn hiring and funding into the narrow and very restrictive model of fixed pay delegates, in particular when doing so is actually defeating the security model of DPoS. Just an example: I won't give a name, but among current witnesses, there is one witness who has been found to recklessly game the liquidity reward mechanism and derive very high profits at the expense of the network, which led core developers to removing liquidity incentives altogether. Is that a good example of integrity and trustworthiness? Can we trust this witness not to side with an attacker if this can net him a large profit? I for one would much rather have trusted community members regardless of their skill levels beyond the simple skills required to securely run a node.

So to go back to your case, and to the case of those other witnesses who may be doing some projects on the side, there is absolutely no need and in fact no justification for these projects to be funded from a fixed witness pay or to be connected at all with the function of witness.

Witnesses and hiring + project funding should be entirely separate functions, with the former sticking strictly to the DPoS requirements and voted in by PoS based on the sole criterion of trustworthiness and integrity with minimal indemnity meant to cover the costs of running a node, and the later being funded directly, on a case by case basis, by the community. Since the funds currently allocated to paying fixed gorgeous salaries to 19 witnesses would be reallocated to the reward pool, this wouldn't change the funding level enjoyed by those witnesses who are sincere and honest in their desire of serving the community and furthering the reach of Steem. On the contrary, because all the free riders will be off the tap, I expect funding level of deserving projects to be actually much better, and the overall confidence in Steem to recover promptly which would help the price and further help funding projects.

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My real world experience directly observing and interacting with the other witlessness, and being a close and careful (and at least as often as anyone else critical) observer of what is going on with the platform as a whole over the past six months trumps your bogus (and offensive to those who have and continue to pour their heart and soul, and wallets, into building out the Steem ecosystem supported by witness funding) theories about witness pay being 'embezzlement' or 'fake jobs'.

Secondly, the "powerful and versatile" funding mechanism that you claim exists in Steem is totally unsuitable for the task of funding development and initiatives. First of all the system is designed to have the properties of a lottery, already making it unsuitable for any sort of consistent funding less deliberately manipulated. Secondly, as curation guilds have developed with a mission to reward a larger amount of quality original content, the ability of posts to serve as a funding vehicle has been numerically reduced. It may have worked early-on when whales could easily vote large (even if deserved and justified) rewards for development posts, but that isn't the case any more. The only initiative currently able to be consistently funded in this manner is Curie, which self-votes its own daily posts with whale accounts to which it is given access for content curation purposes. Not only is this consuming too-large a portion of the reward pool to be even remotely scaleable or suitable for something not directly tied to rewarding content (if it is suitable in this case, which is questionable) but it is a practice that many (including the head of Curie itself) are not comfortable with and will probably not survive indefinitely even in this case.

It is clear from the erroneous statementa and baseless assumptions you keep making, along with a generally hostile and trollish tone (especially in the OP), that you have some sort of personal vendetta or agenda against the concept of well-paid witness slots and based apparently on that agenda you have made a number of statements and proposals which directly contradict the facts on the ground. Rather than continuing the blindly push the agenda, you should instead learn what is actually going on, which witnesses (hint: nearly all of them, if not all) are actively involved in supporting or directly working on important and expensive initiatives (since you are apparently unaware of at least the 14/19 where this is completely clear and unambiguous) and then, perhaps, your suggestions would appear better informed.

Finally I disagree with you entirely that there is no game theory supporting the trustworthiness high level of qualifications and good performance of witnesses. There absolutely is, but it requires that witnesses be well paid so they compete for the position and self-regulate to avoid being voted out. I've seen personally how the system is working well, the cream is indeed rising to the top, and poorly performing, less qualified, or less-available witnesses have been voted out or voluntarily dropped out. Your proposal, if adopted, would directly damage this mechanism, and in doing so directly damage the operating, governance, and development of the entire Steem platform. Only short-sighted investors would support this in order to keep a little extra money in their own wallets rather than spend it on something that so clearly to me adds tremendous value and safety to the network. You've been on the wrong side of this issue as you have relentlessly, almost blindly, pushed it for months without any consideration for what is or is not actually working.

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Smooth, you are overreacting. Calm down, read again my post, and try to be objective. I'm not asking you to concur given your personal position in the matter, but don't jump the gun and start calling me names, all the while ignoring many of the points I took the time to develop. I'm not attacking anyone personally. I'm just pointing the finger at the absurdity of the witness pay system, that essentially consists in handing over half of the budget of the network to a small group of mutually appointed folks to share among themselves and use at their entire discretion, hope that they'll make good use of it, forego all control over the outcome and generally end up with little to no transparency about how the funds have been used, what has been done and who works on what. Even private companies and governments, for all their defaults, are more transparent and accountable than that. Is that the best that blockchain technology can achieve in terms of transparent and decentralized governance? You seem to think so. I beg to differ. Shouldn't that be open to debate?

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I'm sorry recursive, but when you refer to "embezzlement and fictitious jobs" you are attacking people. You are the one who needs to be more objective about things.

Frankly I found your original post to be trolling (i.e. abuse) and considered flagging it. That was not based on the content or ideas at all; I upvoted @fyrstikken's post where he also proposed cutting witness pay despite not agreeing on that point. Steem has thus far largely been a platform where people are most often respectful and don't engage in the sort of hostile trolling or name calling that is common elsewhere on the internet, and which is present in your post. Please consider adopting a more respectful tone.

You again repeat your error that it is half the budget, when it is not (it is currently about 1/3). At least please study and understand the system first before proposing changes to it.

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Like @recursive said, it's not a good idea to mix witnesses with development. It didn't work very well in Bitshares 0.x. In Bitshares 2.0 witnesses were invented to separate block producers from other workers. The job of the witness is to witness all transactions that users make and record them into a block.

The governance model of Bitshares 2.0 is pretty good. Block producers (witnesses), blockchain parameter adjustment (committee members) and development (workers who are paid by the blockchain) are separated roles. I was a little bit disappointed when it wasn't copied to Steem.

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I don't particularly care what did or didn't work in Bitshares. what we have here is working here (at least this part of it is). That's what matters to me. As I suggested to @recursive, you should leave your Bitshares baggage there and approach Steem as its own platform with its own strengths and weaknesses, which it is.

The job of the witness is to witness all transactions that users make and record them into a block

This is absolutely incorrect as I noted in my comment. The job of witnesses certainly and inherently includes other functions and while it isn't necessarily inherent that it also include funding of initiatives, development, and personal contributions of time by high qualified individuals, that role is also working well in Steem.

While I do not have personal experience with Bitshares, I do know that Dan has written a few things about his experiences with Bitshares and how things that did not work well there informed his design for Steem. Apparently stakeholder voting on individual funding tasks did not work very well there given apathy, lack-of-expertise, and lack of coherent vision on the part of many stakeholders. By vesting a group of well-qualified, reliable, and trustworthy well-paid witnesses in Steem to personally perform or hire-out/delegate these functions in Steem, these and other well-recognized problems with direct democracy are avoided.

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I think this is the meat of the argument here:

Being trustworthy and acting with integrity should be his/her only function.

And to illustrate the point:

there is one witness who has been found to recklessly game the liquidity reward mechanism and derive very high profits at the expense of the network, which led core developers to removing liquidity incentives altogether. Is that a good example of integrity and trustworthiness? Can we trust this witness not to side with an attacker if this can net him a large profit? I for one would much rather have trusted community members regardless of their skill levels beyond the simple skills required to securely run a node.

We may be taking for granted that witnesses are honest and acting in integrity and ideology for the site, hence the title. Any witness NOT in accordance with this should be nixed. And I agree that mixing witnesses pay with development may be hazardous for this very reason.

HOWEVER, in @smooth's defense, many of the operations a witness manages in effort to protect the integrity of the site are also the qualities that make them witness-worthy. Meaning, we vote for witnesses because they are doing things like this. A lot of the "witness" functions are simply inseparable from the dev functions, at least at this early point in the game.

But in the end, I agree with @recursive. It may not be a good idea to mix witnesses with development. If witnesses are doing things to progress the platform full time, including donating their own money, perhaps they should be getting paid a lot more than $6,000 a month--but not as witnesses.

The problem is, who has spare time to be a volunteer witness with all of the projects they're running?

Sure, it's an honor. Bla bla bla. But when it comes down to it, if these witnesses are getting nothing for running a node, then that node should be a pretty simple thing to run. Or we're taking the WITNESS for granted. They have a lot of work to do, and they have influence with which to do it. This needs to be rewarded.

Thanks for posting this @recursive - I agree, there needs to be a re-balancing between witness pay and daily rewards.

The whole raison d'etre of STEEM is to turn blogging/ social engagement into the new mining. The cost paid to those that maintain the network should reflect this and be as competitive as possible. Investors looking into would rightly question why we are paying so much for (what they would deem as being) IT support! They would also question the disproportion influence garnered by virtue of mining early. Particularly as this influence re-enforces their position as witnesses. I can see this aspect of STEEM as being a big turn off to many investors.

I absolutely get that a lot of witnesses are also people that provide value to STEEM/ Steemit beyond running a node however as mentioned these activities and initiatives can be rewarded via voting on posts and updates.

Even at these low prices, I still feel incredibly reluctant to invest in what I perceive as ongoing capital embezzlement and ficticious jobs.

Exactly. Inside jerk circle waiting for victims to step in. The distribution based on work done is ridiculous. Everyday it looks more and more like a bitshare bailout project. The new witnesses are just dust in people's eyes.

Not much difference with the current system in the outside world where close favouritism runs things, not competency. I guess this is why TDV and other celebrities are shilled. Tinfoil-tier followers are essential for Steemit. It requires a certain kind of blind sheeple to support the current path as it is currently layed out and they seem to be perfect for the task.

I guess the game in cryptos is still much like the outside world. You just need to lay out a scheme to take advantage of the ignorant masses. Not many people read white papers and they shouldn't have to considering how steemit aspires to become similar to other social media sites where it attacts "common folk".

We will see how it goes. So far no whale or witness seems to have faith in the project but the common folk are required to support their masters. Now where have I seen this before?

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"I guess this is why TDV and other celebrities are shilled. Tinfoil-tier followers are essential for Steemit. It requires a certain kind of blind sheeple to support the current path as it is currently layed out and they seem to be perfect for the task."

The following reply is also copied from my comment on another post.


I think it is healthy and good to look into changing things like this, although we do have to be careful not to "throw the baby out with the bathwater" just because we are panicking that the price is going down.

One thing that I think a lot of people loose track of because we have been on a steady decline since the "July pump" is that the value of a vest is actually higher today than it was just before the pump. If you look at what happened as a temporary artificially/overly inflated hype, then it paints a lot different picture.

On 7/6, 1M VESTS = 197.368 STEEM = $45.987
On 7/20, 1 MV = 1M VESTS = 229.192 STEEM = $804.005
On 10/29, 1 MV = 1M VESTS = 410.581 STEEM = $65.412

(new for this post)

If you make the assumption that the top 19 witnesses are using 100% of their witness funds to line their own pockets, then I agree with you. The current 'pay' is quite high for the amount of work that the witnesses do.

The part that doesn't seem to be very well addressed though (which I know you are well aware of) is that witnesses are not using the money just for their own pay. The idea is that the witnesses are using a large portion of their pay to fund other projects that will benefit the platform. In a way, they are the board of directors that is deciding on where to allocate a large percentage of the STEEM budget.

I would argue that the system is not flawed, although the current choice of who some of the top 19 witnesses are may be. If a witness is using a large enough share of their funds to benefit the community - then the current system is actually not a problem.

I think what needs to be the focus instead of changing the formula is to have more scrutiny over who holds those positions, and if they are not making good decisions with what to do with their witness fund - vote them out and put in someone who will.

The last thing to add too though, is for an "average user" there may be more value being added behind the scenes that may not be very apparent to a lot of people. For example, the witness may be a hardcore blockchain programmer who is doing extensive code reviews of every hardfork - but they may never post or comment on Steemit.com, so other users might think the person is "useless".

If you think there are top 19 witnesses that are dragging the community down though, then it might be better to bring up those particular witnesses and open up a discussion about what value they are adding. Generally I am not a fan of "witch hunts", but I think this would at least be a better approach than casting the entire witness lot as witches.

1500 per day, is not needed. I understand it's this way in anticipation of the future. But we are not at the point where this much needs to be paid to witness machines to handle the current block size.

The rate of witness coins can be adjusted depending on block size requirements to pay for server costs they are using to host and handle the node.

It should be variable, adjustable, dynamic, not fixed, static, unchanging payment for being a witness.

Thanks. Peace. Reblogged.

I still have no earthy idea what a witness even is. I just blog here.

Cut down witnesses salaries

Yeah, this is no brainer. Witnesses should be paid well because they are doing essential job, but the current rate is too much.

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It should be half of what it currently is.

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Best way would be probably to let SP owners vote how much witnesses are paid.

Thanks @recursive up voted and re-steemed

You have raised excellent points and I pray you are heard.

You may be the smartest person on Steemit.

Everyone who reads this should resteem it. !!!

Thanks for great points and suggestions. I strongly agree with them (except Bitshares witness part; dan and danthemans's witness voting is almost half and half, 53% for witnesses from BTS and 47% for non-BTS)

I largely agree with what you've said. I think paying witnesses half of what they are currently paid would be a good idea.
OH, and you know the people who are completely ignored? The real humans, not the bots, who are keeping this site alive. People like @mindhunter who provide real, breathing, human value to this site. Without people like him here, this site would die so fast. I guess people like him being ignored and de-valued is the result of having programmers who don't really do or understand the real human mechanisms of social media design a social media site. This is not a rub, it's just reality.

Hey mate. I think you bring lots of issues here. I do believe it would have been better to divide, but none the less...

I absolutely agree that witnesses should be picked judged upon their deeds. I can't say I completely agree with the pay cut, and here is why...
The main problem today is that users upvote witnesses without understanding as to why they do it.
Without going deep into the philosophy behind things, I believe that every 3 months all votes should be reset and something like an election campaign should be held for a week or so (at this time maybe there should still be the old witnesses in place in order to maintain the system).

This would allow for a fairer vote distribution and witnesses would have a chance to prove why they deserve to do so.

Apart from that I think that the money they earn (is rightfully theirs) but each witness should use a portion of his power down to develop the platform / community - hence the large pay.

I cannot comment the part about POW as I am really unsure what would be better atm.

In order for the Steem price to get fixed, I think that for one we should disable the option to trade steem anywhere apart from the internal market (thats for the time bieng, until we can introduce ((this has to happen very quickly)) a more stable use for steem, like smart contracts that will allow us to use it for other purposes than just enetereing and exiting the platfrom).

BR

Good post and replies. I think we need to have this conversation. Resteemed.

"Just look at what witnesses are doing. Look at steemdown.com. The view is flabbergasting. Almost every single witness is powering down."

Being more accurate would help your post to look more credible. Truth is that 12 are powering down, 7 are not. That is 63% vs 37%, far from "almost every single witness".

It is not that I am defending their actions. I do not think that it needs defending. Personally I do not think it is a best idea to cash out with current prices. I have never powered down, but I can support my witness infrastructure out of my pocket.
Anyway, most of witnesses invested a lot of their time, effort and money in Steem. It is fine that they want to be compensated.
If you do not agree. Unapprove those that are powering down in hard times.

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I think he makes some good points though and I can see both sides of view. I for one would be annoyed if I was a witness and my rewards were suddenly cut. I can also see it from the side of the ordinary user to whom this looks like an "old boys club" type of situation. It is a matter of having these discussions and settling on a good balance which works best. We need to keep iterating and find what is best for the whole community.

I would also make the point that another way of looking at witnesses powering down is as a form of rapid redistribution. I suspect that the witnesses will be criticised no matter what they do. If they refuse to power down they will be accused of hogging Steem and trying to prevent redistribution. If they do they are accused of profiteering and collapsing the price.

If any changes are made they need to be considered carefully and discussed openly. Rapid, poorly discussed changes are suicide for any market based platform and Steem is no exception.

Let's continue the discussion and look at gradual, reasoned evolution.

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"Gradual, reasoned evolution" is exactly what we need - and are seeing - despite all of those who seem willing to push the panic button while this platform remains in its infancy. Also, the temporary cost of Steemfest has been a meaningful contributor to the downward pressure on the price of STEEM for the last few weeks. As this pressure eases off, the marketing benefits of this event will begin to show up. Because of this, I do not think anyone will have a clear enough picture of the currency to make an informed decision about whether or not to make big changes to anything as fundamental as witness pay for at least a month or two.

When I put my investor hat on, the perception of instability - arising from messing with anything related to the currency or the core network that supports it - looks like a far more serious threat to the future of STEEM than whale (mis)behavior or witness compensation.

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the perception of instability - arising from messing with anything related to the currency or the core network that supports it - looks like a far more serious threat to the future of STEEM than whale (mis)behavior or witness compensation.

True.

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Excellent points. I have not seen the role of Steemfest in selling pressure discussed much but you are absolutely right. Not only is there significant selling directly to fund the budget of the event but people attending are also cashing out to cover expenses.

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Right. Even back-of-the-envelope calculations suggest that an event costing some $100K to host in combination with 160+ people paying (in many cases) $thousands each to attend will put downward pressure on the price of the currency in proportion to the extent that these expenses are funded by the sale of STEEM.

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Your last statement is ridiculous. Steemit is an untested and unproven experiment in crypto, even Dan clearly said this. Do you really expect the first iteration of this system to be perfect ?
Investors don't care if the code is forked ( messing is the wrong word btw, code is never perfect and always tweaked ) what they care is if the project is going to make them a return, that's all investors care, and if you think being passive and not adaptive to problems shows stability then you probably also think steem power gives you interests. lol
Seriously though, when the price goes from 4$ back to lower pre launch level the perception of stability doesn't matter much, the reality of stability does.

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Funny take on my comment. You seem to have quite missed the point.

Obviously, most investors are uninterested in the specifics of the code on which a project like this runs. Obviously, bugs will need to be fixed - and other minor corrections made - on an ongoing basis. And the return on investment is naturally an investor's main (and usually only) priority.

And yet, a serious investor estimates the potential for this investment return, and the risks associated with it, in different ways than you seem to imagine. A real investor looks at business fundamentals and upside potential. Perceived stability (of the core team, of the cost structure which includes witness pay in Steemit's case, etc), strong leadership (like staying the course to see plans through even if some poorly informed minor stakeholders get scared and start making trouble), and the revenue model's perceived viability (Steemit's revenue model is an advertising model which attempts to disintermediate the attention economy. It is experimental and thus inherently risky) are what I mean by business fundamentals.

A low token price alongside strong business fundamentals will be read by many serious investors as a good opportunity. The business fundamentals of this venture currently appear strong, and just having a workable MVP like Steemit BETA so early on in an ambitious project like this is extremely impressive. But if we start messing around with these fundamentals because of noise that idiots misread as signal, the project is in trouble.

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Funny take on my comment. You seem to have quite missed the point.

What is your point then? Why did you say this?

the perception of instability - arising from messing with anything related to the currency or the core network that supports it - looks like a far more serious threat to the future of STEEM than whale (mis)behavior or witness compensation.

A low token price alongside strong business fundamentals will be read by many serious investors as a good opportunity.

Yeah, because fundamentals must be really strong if the price is low duh..Investors will first ask themselves why the free fall, a low price is not necessarily a good opportunity and in steemit's case it's definetely not.( Read my latest posts if you are curious to know why)

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It's not ridiculous. I'm personally an investor having voluntarily powered back up a large amount of my stake (I dont have a number off hand but I suspect hundreds of thousands of STEEM, certainly >100K). I do not like tinkering generally as I find it to often be counterproductive as the law of unintended consequences is a strong consideration. I'm less inclined to invest in a platform that engages in it. I want my decision as an investor to choose to invest in a platform with certain properties to be respected, especially when my investment is locked-in for two years. I also don't want to discourage participation by future investors who won't know what they are buying (and expected to lock-into) when the platform has a reputation for changing out from under them.

This does not rule out any changes (rarely) if an excellent case can be made for them, but damaging stability and undermining my investment decisions retroactively mean that they start out with two strikes against them always.

The question of price doesn't really imply much. I recently saw a list of some cryptos that have had >90% declines (including some multiple times) and it isn't uncommon at all. Add to that more specific observation of the fact that very limited supply (due to locking) meant that the pump in Steem was probably much higher and less sustainable than even other crypto pumps and the whole "decline from $4" story doesn't hold much water with me.

If you do not like this platform you are absolutely free to not invest in it. One of the great thing about mostly-unregulated markets is that competition thrives. There are thousands of blockchains to choose from if you don't like how this one works.

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Steem has had many forks already and most investors on the platform have no say to decide whether a fork will be implemented or not, only a handful of people can decide. Has this damaged the stability perception of steem ?

Add to that more specific observation of the fact that very limited supply (due to locking) meant that the pump in Steem was probably much higher and less sustainable than even other crypto pumps and the whole "decline from $4" story doesn't hold much water with me.

There is probably some truth to it, but the fact that the price went back to even lower than pre-launch levels is concerning for most investors.

If you do not like this platform you are absolutely free to not invest in it

Why would you assume that? lol read my posts please

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[answering your question from below]

Yes, I believe some of the forks have damaged Steems reputation for stability and investors being able to make an informed buy-in decision. For example, early vesting decisions were made on the basis of 50% of the reward fund going to curation rewards, which accrue to VEST/SP holders as a class. That this was slashed by 50% and the difference shifted to bloggers, directly hurt the interests of investors, and raises red flags for me as an investor to be wary of risking (term locked) capital here. This was a very serious reputational negative from the perspective of those considering an investment (apart from whether this turned out to be good for the blogging platform as intended-- I don't think it did)

Numerically by far most of the many (14?) forks have been code fixes (which nobody opposes) and not design or economic changes. Most of the rest have been minor changes, so the damage is so far limited, but that is not a reason to make it worse.

Also, I'm told that the price of VESTS (which is the "investor" token in the platform) is not lower than pre-launch nor even lower than pre- July pump. STEEM is an entry/exit token not intended to be held long term so comparing its value over a period of months is meaningless. I have not checked the numbers on this claim myself, so if it is incorrect I apologize in advance for the misinformation.

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Cost per VESTs is still higher but the supply of steem have more than doubled since then so the cost per vest should actually be a lot more higher.
If the supply didn't move and the cost per VESTs was higher then you could say a share in the platform is more expensive but with 100% inflation the price should have been at least twice higher but its only 0.20$ more expensive.

STEEM is an entry/exit token not intended to be held long term so comparing its value over a period of months is meaningless

Steem's value is always meaningfull because it represents the rewards on the platform, the lower the price the less interests and investments you will get.

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[answering your question from below]

Cost per VESTs is still higher but the supply of steem have more than doubled since then so the cost per vest should actually be a lot more higher.

What? You're the one explaining (correctly) that rapidly inflating the number of STEEM doesn't actually do anything. VESTS is not particularly an inflationary unit. The number of VESTS has only increased slightly since July. What the price of VESTS having increased (slightly) tells us is that the market cap has increased (slightly).

I think we'd probably all be better off seeing prices quoted and charts made on the basis of VESTS.

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I would also make the point that another way of looking at witnesses powering down is as a form of rapid redistribution. I suspect that the witnesses will be criticised no matter what they do. If they refuse to power down they will be accused of hogging Steem and trying to prevent redistribution. If they do they are accused of profiteering and collapsing the price.

The point of my post is not about the fact they are powering down. Many other people are powering down and that's their right. The point of my post is that they are currently being incentivized to powerdown because anyway the witness compensation if so high that it more than covers the powerdown and they actually increase their stake all the while cashing out at maximum rate. Cut down the witness pay to something reasonable, and witnesses will suddenly stop seeing stake as a cheap renewable resource.

I'm just going to add a few thoughts here. I am not a witness. I really do not know a lot about the inner cogs and what's all necessary to keep Steemit running. What you wrote makes perfect sense in a lot of ways. And anyone, like me, who reads your post may get up in arms and rattle their pitchforks about how unfair it all seems.

That being said

I have been personally vetting the people I've voted for witness. I want to be an informed member of the community, and I want to know what my witnesses are doing for the good of us all. Many of my witness selections are not in the top 19 - but they have one very important thing in common - their community participation and engagement. They keep us apprised of their current and future initiatives. Many of the witnesses I follow regularly opt out of payout posts. Many of them use their power to help curation and pay-it-forward measures. No one is twisting anyone's thumbs to become a witness - those who have the knowledge and wherewithal "volunteer" to do so, hopefully with a good mix of philanthropy and investment strategy. There should be compensation. But I personally don't think their compensation is at the detriment to us (Steemit & our community). Maybe I'm being naive, but I am trying to learn.

Reading many of these comments, there is a certain amount of disagreement with your post. I expect a certain amount of healthy debate. I'm also glad to see that Dan responded. Here's the thing - I may be a rookie here, but I do not get a sense of nepotism and good ol' boy arrangements. Good witness candidates are climbing the ranks and the ones in the top 19 are not guaranteed their positions.

Well, I'm coming in late in the game, but here's my proposal I'll write up later. I think the witnesses should put in a bid for what they will take. Let's let the free market decide what's best. Smooth, you're awesome. You need a ton of shit to do you shit. Great. Some other person who is less awesome may not do the same, but if they put in a bid way lower that might work for us too. The witness bid shouldn't be at a flat rate is what I'm saying. Tell us what you need and why you need it and let the community support it or not.

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We need only 19 witnesses, not 500. I don't want any less-than-awesome witnesses in that small group just because they offer a low bid. I think we can easily find 19 awesome witnesses each of whom can receive -- and put to good use -- 5% of the budget to operate the infrastructure, sponsor development of the wider platform (including supporting services and alternate clients), and provided needed gap-filling ecosystem services such as abuse-control.

If there are witnesses you think suck, vote them out. The OP suggests that its all rigged and witnesses can't be voted out, which is flat wrong. The stakeholders voting witnesses in or out are not stupid or suicidal, and in the most cases it is not the witnesses themselves. The whole premise of the post is just poorly researched and wrong. The OP itself points out some new (good) witnesses who have been voted in. By definition someone being voted in means someone else is voted out.

If more need to go out, then support some more new good ones in. We can find 19 awesome witnesses if we don't have them already. Take care though, not to assume that witnesses are "not awesome" just because you, personally, happen to be not be fully aware their contributions. I fully admit that their are 5 witnesses that I'm not sure what they do, but I don't immediately assume they are dead weight. OP apparently makes this mistake as well.

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Where do you get 5% from? I thought it was 25% from the white paper. Also, don't you get a 1 steem per block? Once you have that steem don't you get a shit ton just from inflation?

5% seems totally reasonable for a developer team paid by the system to do work. I agree it's more than we should be paying for hosting a node, but fair if you guys are doing a lot more than hosting a node. That said I was under the impression it's much higher than 5% so can you help me understand the actual amount?

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5% each of the total witness reward budget. Technically it is 1/21 (4.76%) but 5% was a round number.

The total witness rewards (for all) goes to 0.75% of market cap per year in the white paper (and I assume code altough I haven't checked it). That strikes me as a very reasonable amount to pay not only for the literal infrastructure but also ongoing secondary services and investment, if possibly low. There is no other source of funding for any of these things, so long term all must be included or they won't be paid for.

Once you have that steem don't you get a shit ton just from inflation?

Not really. Inflation is both a gain (in nominal units) and a loss (in value per unit). You don't make a pie any bigger (nor the value of a portion, say 2%, of the pie) by making the slices smaller and smaller.

I would like to restructure things a bit so this massive inflation no longer exists, as I don't think it is really necessary, but doing so won't change the fundamental economics much if at all, just the numbers (perception).

@recursive I have only been with steemit for 11 days and entering my 12th day and this is a learning phase on the steep curve.

Can you tell me where this effort is now as June 2017 come to a close?
8 months span was any action taken?

Please post an update for us minnows that recently spawned here on steemit.

I'll read this one later @recursive! You finally got back to posting! That's awesome! This is such a important matter your posting on and @dantheman posted such an inspiring comment. Thank you!

Wow! nice post , i am impressed, it makes so much sense, hope Dan will listen to this!

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A great post recursive...good work.thank you.greets from germany

First off.. This doesn't take into account witnesses that ACTUALLY deserve that sort of pay for developing STEEM network apps and services.

The very fact you're implying we should be taking voting people from people is absurd. Do you get penalized for offloading company shares by not being able to use that company? No, Because that would be f**kin' absurd.

Every time you post, reply or send / receive SBD or STEEM one of our witness servers picks up that transaction... You're saying I don't deserve to be compensated for keeping the network running? lol

Attacking those who are running the very network you're posting on by taking the money their paid to compensate them for ensuring your STEEM network runs is short sighted. :/