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RE: [Steem] The Reward Pool and the Parable of the Token
Very nice explanation.
While you're at it: Why is the SBD pegging broken, and how does it work in the first place? Cheers :-)
Very nice explanation.
While you're at it: Why is the SBD pegging broken, and how does it work in the first place? Cheers :-)
Oh, this one is easy:
"Broken as designed."
That's not entirely fair. SBD pegging is perfectly functional on the bottom end; the pressures which exist to push it up beyond and above one dollar of USD work just fine. But there is no bounding on the top end. There is no pressure to push it back down toward one dollar USD – which is fine, really. If SBD rides higher than the peg, it can be traded out advantageously. If SBD drops lower than the bottom end peg, less of it gets made and more people choose to take their payouts in SP at 100% rather than 50/50, which reduces the rate at which SBD enters the pool, theoretically increasing its value by making it more rare.
In practice, things are always more complicated.
I'm not so sure if SBD without an upper bound is really fine. Sure, you can trade it advantageously, but it also causes a lot of confusion.
This makes explaining the whole concept of Steemit to others even more complicated. "So you know, the platform is based on this Cryptocurrency, STEEM, whose inflation pays for original content. But to make it more appealing to everyone, so you don't have to think constantly about the exchange rate of STEEM, and to make your life easier, everything is rewarded in Dollar. Well, in fact it's not real $, but it's called Steem Backed Dollar, and it's worth more than 3 $..."
To my mind this kind of defeats the whole purpose of SBD.
I absolutely agree that SPD not being upper bounded makes describing what's going on in the steem blockchain a lot more complicated. There are three commodities that can be traded and have direct effect on your experience of Steemit: STEEM, SPD, and SP (even though trading the last is a terrible idea). There is another commodity which cannot be traded: Reputation. It can only be accumulated. But it still counts as a commodity because it affects how your interaction with the Steemit interface (and some portions of the blockchain) go off.
If you're trying to describe how things work here to someone new – this puts you in a terrible hole already.
So don't do it while referring to any kind of cryptocurrency. Instead, in your head and in your mouth, refer to steem as purely a points system. A way to keep score. Leave aside entirely the idea that it can be traded off platform for some kind of valuation. Avoid that for the same reason that if you were talking about World of Warcraft to a new player, you would mention that you can buy and sell gold to Chinese gold farmers.
Get them on board with the idea that they can blog and interact socially and that the quality of their interactions may be rated by their peers using this point system that is based on up votes and flags. Get them to understand this sort of internal economy first.
You're going to have a hard enough time just doing that.
Avoid using the word "dollar" at any point during this description. Refer to it only and purely as SBD. If specifically asked, waved them off and tell them that you will define it specifically better later.
Once you have someone on board with the idea that their interactions can be rated by other users and rewarded by a token that's exchanged on the platform itself, then the and only then can you talk about the fact that such a token can be bought and sold for real money.
SBD has a lower bound and no upper bound because it was originally conceived of as the actual trade good of the steem blockchain. Originally, way back in history (about a year), it seems that the original intent was for STEEM itself to not be traded off platform but for SBD to be the one currency interface for the outer world. That was thrown aside almost immediately. Now we have to currencies which can be traded for individual value outside the context of the platform, and as such they vary in exo-value because of the ratio of exchange found on the internal market. The ratio gives rise to arbitrage pressure, which pushes the values for both sides of the exchange around… Basically, it's a big mess.
You can imagine what things would be like if you could only trade SBD off platform. STEEM would vary in value only based on how much people wanted to keep in escrow with the platform or how much people wanted to trade between one another for goods and services on the platform, and SPD would be driven generally upwards by people who wanted to get into that market and downwards by people cashing out the profits that they've made inside the market.
The moment that SPD and SP were allowed to be traded off the platform, all of that complicated pegging (and all of my BDSM peeps just perked up) went out the window, SPD and STEEM now take economic pressure to keep the ratio very close to 1:1 for trading purposes because arbitrage makes it that way, and my suspicion is that it only distributes volatility across both currencies rather than isolates it in one external currency.
But hey, it's not the only way that Steemit has shot itself in the foot in terms of design, and I'm sure it won't be the last.
This makes it sound incredibly horrible. Besides, at this point the conversation drifts to "Uh, yeah, that sounds like in the Black Mirror episode..."
Still, I'm quite amazed by the platform and how simply rewarding people with some tokens can lead to incredibly complex behavior and engagement (myself included). Sure, there's tons and tons (aaand tons) of crap, but also incredibly interesting and sophisticated stuff, take the SteemStem ecosystem, for example.
Sure. You're absolutely correct. And if you want to be honest with yourself and me – we both have to say, "yes, it's incredibly horrible."
This is why I have so many posts and comments which talk about the authoritarian impulse of assuming quality by largest mass applause. That's what the assumption which underlies Steemit as a reward architecture is all about. It doesn't care about what you like, or what I like, it only cares about what the most people like. And it divvies up rewards accordingly.
Though I prefer to point to the Orville episode rather than the Black Mirror episode because I find BM to be a fine descriptor of the kind of writing I find in that show.
But this isn't new information. People have been pointing out that rewarding people for producing something that they like is a system that generally gets you more of what you like. Classically, it's been referred to as "free-market capitalism" and is largely responsible for the decrease of poverty worldwide from near omnipresent 60 years ago to actually quite rare today.
I find it interesting that so many people involved in cryptocurrencies are very hard fiscal liberals who just don't seem to have ever been exposed to the dynamics of how everyday economics around them actually function. It's fascinating. It's like driving slow by a bunch of kids on the side of the road poking at a discarded tire and wondering how it came to be there, and assuming that they are the first ones to have ever discovered round things made out of rubber. It's amazing.
Sturgeon's Law holds true of all things. 90% of everything is crap. It doesn't matter what motivates the creation, 90% of everything is crap.
People self defining communities and creating to serve a purpose and interest within those communities? That at least provides the most opportunity for things not to be crap. Being rewarded for things which are the kind of crap other people like, that provides the most opportunity for things not to be crap.
Like I said, these are not new ideas. They have nothing to do with cryptocurrencies or Steemit as a platform. We know these are true things. We've observed these true things. It's just that the people who generally talk about steem and blockchain technology don't seem to have even had a basic education in understanding how games work, how people interact with other people, how creators make things and why.
It's like they're touring an alien world and everything is new, but in reality they've been dropped out the back of a truck in Paducah, Kentucky, and there boggling at how everyday people live in rural areas.
I never have a real idea how seriously to take them, because in my experience I've never really met people who have so little knowledge and experience of life. It's really impressive.
I wouldn't exclude myself from the poking kids. In fact, your short interlude was quite eye opening. Thanks :-)
Still, I'd say there's something special about Steemit; in terms of what and how stuff is rewarded. Indeed the way to obtain the tokens is rather limited in comparison to full free market capitalism. In the latter, some people do not hesitate to wage war or slaughter other folks just to get some of the tokens. Here you rather have to convince others to like your stuff so that they spend other people's money (!) on it. I mean, since the reward pool is basically a weird way of taxation, everybody kind of plays government and it kinda works.
This actually got me thinking: Could a state or government exist without any direct taxation, but all expenses from security over education to infrastructure would only be paid by inflation? Probably not, instead of your actual currency, everything would be traded in cigarettes (maybe the tobacco industry is not doomed after all?). Yet, strangely enough, here it works. It even creates some kind of feeling that everyone is sitting in the same boat, and a lot of the users are honestly trying hard to improve the platform for everyone.
IMO this is quite different to the rest of the Cryptosphere. On Bitcointalk, for example, there's more the us against them attitude (and much, much less respect for grammar, orthography, or human life in general). I got my weird altcoin I believe in, so I shill it to the moon and spread FUD about all the others. While we're at it, can I convince you of my own currency? You might actually enjoy it, just google for a smart contract that allows you to sell your soul on the Blockchain :-D. Believe me, this is the one and only currency that will rule'm all, but I digress...