All Aboard The Zero Train!
Maybe I'm grasping at straws. Maybe I'm getting a little too desperate. Who knows? Well, this is a continuation of the conversation I started a couple weeks ago and despite all the believers in the platform and the "community", nobody gave me the rebuttal I really wanted. A definitive reason why the STEEM token has some natural monetary value.
So, I propose a challenge. Let's see whether or not we can stop this train you see in the picture below. Is the token doomed to go to zero, or is there some invisible wall or superhero off in the distance that is going to save us? Explain why the current economics of STEEM favors the Steemian and for extra credit explain what tangible value the token brings to humanity.
I have argued that the equilibrium price of the token is zero as it is too easy to produce the coin while putting no tangible effort into anything. It's a money printer where different Steemians vandalize the currency with their so-called "quality" content. But I'm open to changing my opinion but you don't have to be nice. I'm on the train, but feel free to blow up the bridge.
If someone could please blow this bridge up and stop the zero train
So, what's the point? Why should people care about STEEM beyond that is it claims to be money? What makes STEEM worth anything? How do the economics support your thesis? Why should folks not get on board the zero train?
Conversely, you can concede and join be on board the train. There is plenty of room and we can have plenty of interesting conversations about things more important than ROI or profits like questions on the technology's tangibility and looking at alternative economic models that have different equilibrium points and social behavior.
Note that I don't want you to concede. If you legitimately have a better understanding of the grand scheme of things, then I want to hear it. Because people need to stop preaching and give folks the facts. The "unconverted" don't like to be bothered by religious cults and if you get high on your own hopium you risk turning sects of the community into such cults.
Is the zero train a cult? No. It's a metaphor and not a very good one at that. But maybe you're the hero of the story. Stop the train and save your stake. Or realize things too look too rosy and hop the zero train to prepare for the next stage of what the platform may become.
There is no value to STEEM, or at least very little.
As a platform with no real fees until mega scale is achieved, the only intrinsic value which can be calculated is the operational cost of a top 20 witness with solid infrastructural setup.
The rest is sentimental value.
Community is sentimental. There have been many communities over the years which were built on passionate topical preferences and had to fold. Because passion does not necessarily result in paying operational fees. What is even more important about those communities is that they revolved not around rewards (or tokens), they revolved around the niche. As many know, niche and longtail users have often a higher user value and even a higher lifespan than generalized platforms. Yet... community alone wasn’t sufficient to grow those platforms. Community... is philanthropy but not a business model.
That would leave us to compare against early stage funded platforms (A-series) still looking for a business sound business model. Of course, the obvious comparison there would be Medium but at the same time Medium’s (co-) founder does have a solid exit track record with his platforms and that leads to VC loyalty and much higher backing.
Based on what a lesser medaled founding team could achieve, completely keeping in mind “potential”, I think positioning STEEM right now somewhere around $90m-120m marketcap/valuation is realistic. At least was realistic some years ago when the economic climate was slightly less hostile to platforms focusing first on achieving hockeystick userbase growth.
That includes (massive) growth potential and doesn’t really go ostrich when it comes to milking it and too easy returns. But one could argue that it is still very overvalued because the focus on transactional returns is generally too little in the base layer.
Short term focus is misunderstanding decentralization and a distraction. Yet, many seem to aspire for APRs as high as what others pay on their credit cards, thus that is a dent in the value of the platform because not only are those returns not realistic, they can not be sustained either due to the huge inflation of the token.
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Steem might have "potential" but I'm just not seeing where it is going to be implemented. Clearly there is a market for having more control over one's content and have more personal influence over a social media network, but the mechanics aren't there to really make these things work. While an infrastructure exists, I'm not sure with the current model and the community that a pivot can occur.
Part of this discussion is to see if anyone has reasons to believe that a pivot won't be necessary, but continued discussion would continue to insinuate that a pivot (a perhaps a large one at that) to the base protocol is likely to keep the protocol alive. The incentive structures are in the way of larger adoption.
Agreed re-user incentives structure being in the way. Not sure if pivot or long planned, the real incentives are the RC. They’re the only transactional element.
The rest is, as Ned says, a UX thing. A distraction. Not even a topic. You can build your dApp just to store and for the wallet. Without any incentives.
But all that has gotten lost because all people see/saw are the rewards.
When I say potential, I mostly mean userbase growth. I think $15-20/year is a fair user value on this blockchain. That will require a lot of active users to even achieve $0.40/$TEEM.
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Things in life are relative. If the value of Steem is zero but the value of fiat is less than zero, Steem is still worth more than the current system we are using.
We live in an unsustainable debt-based bubble. More money is owed to central banks than there is money in existence. This is not a difficult system to compete with.
Steem's economic model is frustrating because it's transparent. If you could see everything going on in your local economy you would be ten times as outraged.
Speaking of comparisons, is Bitcoin going to zero? What about Ethereum, Tron, Binance, ETC? What makes these coins fundamentally better than Steem? There are arguments on both sides and the truth is somewhere in the middle.
The Steem whitepaper is marketing propaganda. We can't look to it as a template for what gives this platform value. In doing so we might find all the lies and simply assume that this platform has no value.
I believe the core value of Steem is custom JSON operations. What did I see the last time I looked at https://steemd.com/? A ton of custom JSON operations for people playing Steem Monsters. What do I see now? Same thing.
Our blockchain is going to get flooded with third party apps issuing JavaScript commands directly on the blockchain. We get to use the witnesses as a "free" server and all the developers have to do is program the client. These clients then give incentive to transact on the blockchain for "free" by buying Steem coins.
The value of our blogs is very little and overstated. Still every time a minnow or plankton gets upvoted, our decentralization increases a little bit, regardless of circle-jerking whales or bid-bot operations. Greed doesn't centralize this platform, it simply maintains the status quo. The same cannot be said for fiat.
If anything else, Steem's value is more than zero because there is plenty of speculative dumb money out there willing to bet on it.
Fiat isn't necessarily worthless. It maybe harmful, but just because it is harmful doesn't mean that it doesn't hold any value. Intrinsically fiat currency has slightly more worth than a binary string as binary strings are simply easier to create. Steem is perhaps more scarce, but other tokens do the scarcity thing better than Steem because Steem's unique use cases don't work.
Ah, but let's take a more pragmatic approach. Which am I more likely to influence and change? The one with the people willing to adjust via rational governance or the one backed by the largest organization of shooty-sticks in the world? I rather argue to change Steem as it is much more realistic and due to it transparency we can have a discussion on how to move forward. Unless you have a plan to conquer the shooty-sticks they can use force to enforce the value of their token. I don't believe anyone is forced to use Steem.
Bitcoin has a better scarcity argument than Steem. It has a defined cap (that could change but making changes on Bitcoin in increasingly hard) whereas Steem has no hard cap and it is easier to change things on Steem. Steem also has a more wasteful chain in terms of productive space. This "content" is arguably harming Steem by bloating the blockchain, but since there is little disincentive to bloat the blockchain it can be done. Also helping Bitcoin in the scarcity argument is that it is the first and oldest cryptocurrency (and more collectible because of that). You could argue that Bitcoin is more wasteful, but you could also argue that the wasteful gives Bitcoin its value. It requires burning of resources to attain, where you can essentially print money on the Steem blockchain by simply staking and posting.
As for the other tokens I haven't spend as much time researching these coins because I don't really find their use cases all that interesting. So I can't speak to them. Although Ethereum's role of being a printer to money printers has certainly backfired in the past few months.
Why? Are you building them? Do you know the folks that are building them? What are they about? And most importantly how do they fix the Steem token?
While this is true in a lot of cases, this is not a good reason to believe a coin will be more or even the same amount of money in the future. Examples: Feathercoin, Auroracoin, etc. Although Steem definitively has an innovation edge on those coins.
If you aren't going to live to see Bitcoin stop producing inflation does it really have a cap? I've never understood this cap argument. Putting a cap on Steem would actually lessen it's value because you'd be saying one day in the future upvotes will be worthless. We never want that to happen. That would be bad. There's also an argument to be made about how deflationary currencies are unsustainable.
I'm not sure why you think the Steem coin is broken from the proof-of-stake perspective. Are all proof-of-stake coins broken? People with coins are the ones who make more coins. What's the problem?
The vast majority of problems with Steem have arisen from functionality that doesn't even exist on other chains. If you add functionality to a blockchain and there are problems with it those problems have to be worse than the functionality itself for the original chain to be superior.
Lot's of people are running around saying if someone develops a way to pay gas prices on Ethereum with ERC-20 tokens that means that the value of Ethereum will go to zero because the whole point of Ethereum is to pay gas costs. Yet, a currency like Bitcoin is "a store of value" that doesn't even have smart contracts in the first place. This logic makes zero sense.
The problems with the Steem blockchain don't even require a hard-fork to fix. The problems are centered around 3rd party apps connected to the blockchain like Steemit, Busy, Steempeak, and other frontends. Bid-bots exist because our trending tabs are easily gamed. Trending tabs exist completely independently of the witnesses and the core code. They are brought to us by centralized organizations.
If you strip away our front-ends and our ability to upvote other people (everyone auto self-upvotes 10 times a day) this blockchain is still arguably better than a lot of other coins out there. The added functionality on top of that only makes us more valuable, even if that value isn't as much as people claim it to be.
The problem is that those who make those coins have nothing to risk especially if they create those coins via pre-mining or out of thin air. Where's the cost against bad actors. If there's no cost, and we treat all actors as the same, then the whole thing devolves into a pointless money printing cycle where you need more coins to print more coins without doing anything of worth to make those created coins have tangible value.
The claim with POS is that whales will fight bad actors to preserve their stake. Where are the whales fighting bad actors? This notation of value security is demonstrating that the proof in POS is rather weak and until something is truly "at-stake", then these coins will continue to wither away while Bitcoin continues to dominate while simply being a "store-of-value". Because it's mechanisms can at least secure that to some extent.
Bad features don't add to the value of certain things. If the feature is unique but causes more problems than not then is set unique feature a pro or is a con?
It is more profitable to set up a bot farm where accounts simply upvote themselves than to produce any real content. It is also less work. I do not have to put thought there. I'm doing an activity which is ROI inefficient and work inefficient. People that do work like this are the only reason Steem is relevant as a social entity. I'm willing to give the token this arbitrary value for free, but how many folks are willing to watch their stake burn before they give up?
When does the person that does worthless work get rewarded less than someone who wastes their time doing something inefficient. Where is the downside for the passive investor? Bitcoin doesn't give you free Bitcoin for passively investing. It gives you nothing. In my honest opinion, if you do nothing, you deserve nothing. Great you bought some coins, but rewarding people simply for holding them and using them in counterproductive ways. Come on. That's valuable? Where's the risk? At least in Bitcoin you have to waste a bunch of electricity to even get a shot at a block. There's plenty of risk there.
The argument here is a core philosophical one. Dapps don't matter in core philosophical arguments. Money doesn't matter either. Profit doesn't matter. Trending doesn't matter. Business opportunities don't matter. These are all symptoms. What matters is whether or not the right people are be encouraged to act in the right way in order to produce the right result. People matter. Human beings matter. Everything else is secondary and can be used to accelerate the process, but you need to have a working process first.
Oh, hmm am I aboard the zero train? Is there a near-zero train? And if so, are we near-enough-to-zero or are we about to go nearer to zero? I sounded pretty pessimistic in my last comment if I recall, but I don't think we're going to absolute zero.
But there is a bit of a gamble involved.
Firstly, we should look at what a potential steady state for token value looks like. If you ask me, it (partially) looks as follows:
The price reflects the probability that some steady state (maybe different than what I've guessed) holds.
And this will be part of the problem when it comes to the zero "cult". I would venture a significant population that believes that the probability is still high, and I am included in this population.
I mean depending on how hard the believers believe, I'm sure with a dedicated group of individuals, we can keep the price above absolute zero. So, as long as positive belief exists, there is a minimal floor even though the token itself still won't work properly (unless we make changes or adopt a flagging culture).
Actually this would encourage growth rather than a steady state. Unfortunately for STEEM unless the bear hibernates, there really isn't a reason for the audience to grow or even stay stagnant at this point.
If nothing changes, would you buy as much Steem as you could at what price?
At what price would you be willing to play for the entire Steem network?
If you have non-zero answers for both of these questions, then a steady state exists. If other people have non-zero answers to this question then it's probably a little higher than the price average of all the folks answering this question. But this begs the question:
Is there a price or event that would cause you to sell out or are you willing to ride your bags to zero?
Depending on this questions we might have to adjust the number lower from the above questions. Then we see what the network is made of. But if there are people willing to sell and nobody willing to buy we will go lower and unless the "community" has a planned buy wall, then the price can go as low as it wants even zero. Because the token itself is not working in your favor, it is working against it.
Well if you look at my current activity, I'm not willing to sell at all, and I'm buying more. I intend to have more influence, even though it's still not going to be anything compared to the whales. I do intend to ride any crypto bags I hold to zero. Maintaining long positions, it doesn't make any sense for me to time anything. I likely hold a similar position to @spectrumecons, who I believe is also in this category.
Even if nothing changes, the Dynamics of the platform change when the distribution changes, and that is at least one thing that I cling to.
And the governance too. Which is why I'm optimistic of volatility in either direction. Although we might get more positive change if the price goes down rather than up.
I just assumed it was basic supply and demand... Steem brings a crowd of people to it's blockchain (in the hopes to make money or friends). With that crowd comes opportunity for businesses, either to sell to them, or get them to do tasks for them.
Lots of people are invested in Facebook and Instagram because they can get likes of their friends, family and strangers, but the people invested in this blockchain to help it grow and keep people engaged have actual money on the line.
Simply put, while the token is easily produced, I think it's more valuable than an Instagram like or Reddit karma point and that's why I don't think Steem could ever go to zero.
What specifically about Steem makes it more valuable than likes or comments? That it has some boundaries on it's creation where those two do not? The supply and demand argument explains why Steem currently has a value, but I curious about a deeper question:
Does Steem have an instrumental or intrinsic value that arises out of properties that the token has that are unique to Steem?
Steem is more valuable than likes or upvotes because it has the potential to grow in the future. I have a wallet attached to my account that increases with my content. Whereas I can't do anything with the likes and upvotes I've recieved one social media.
Steem is basically a gamified social media... those of us that like chasing numbers, feeling like we're improving our score can (usually) see an increase in the dollar value of our Steem accounts. Once you've made the switch to Steem, it almost feels ridiculous to go back to traditional social media... unless you specifically want to share things with friends/family.
I think that the intrinsic value of Steem is that it has no direct competitors:
There's no other platform where you can express your opinions and content in exchange for magic internet money that is censorship-resistant. On Facebook, Reddit and Instagram, there's always a chance your post will be removed. On YouTube you might get a strike. The fact that there is a token is what gives value to Steem. Having 8000 Karma points on Reddit isn't going to allow me to purchase a thing. I've bought real things with the internet money that was created from my words.
On Facebook and Instagram, you can make money on those sites... but I'm sure it's mainly through sales of merch and promotions... on Steem you can make actual money, and send it anywhere, and not get censored, and have fun with various Dapps, and make decent friends.
Steem's unique here in that the content is censorship resistant. Which means that you have a place where you are store things as long as the witnesses are kept happy with new coins. But does this put positive pressure on the price of the token. Something to think about...
I've heard a lot of smaller accounts argue that this isn't true. Although it depends on what your definition of "actual" is and whether or not Steem has monetary value at the time of using it. Let's say that Steem for whatever reason is worth a fraction of a penny. Even the whales are making pennies on the dollar. Is the experience still worth it to you? Would the experience still be worth it to other folks? Or does the fact that Steem has monetary value the only reason to use it? If so, do we have an issue if the price continues to decrease?
I've thought about that a lot.
I honestly think that while interesting people are on this platform, then I'll still be here. Admittedly, I've been over the nastiness that inhabits YouTube, Facebook & Reddit comments for a long time.. and while Steem continues to be gamified (ie, I get upvotes for saying intelligent things and either nothing or flags if I act like a jerk) I think I'll be happy here... even if my account is worth pennies.
I guess we'd have to consider hope in the value of the token as well. I get $0 for my efforts on Facebook or instagram, but there is always the hope that my efforts on Steem might turn me into a multi-trillionaire in a decade.
I guess the problem is that someone has to pay for infrastructure. On Facebook, they are paying all the server costs, and get our data out of it. If Steem is worth fractions of pennies then we'll lose our witnesses and the whole system won't work... unless someone fronts up the costs because they believe in it.
People were mining Bitcoin way before it was worth anything. It wasn't actually worth anything for a long time, until someone said they pay someone in Bitcoin to bring them dinner, and someone else took them up on that. That's value.
The money side of Steem is attractive, but the real reason I log on is the friendly exchange of ideas and experiences. Traditional social media loves the extremes, where I feel that Steem can exist in the day to day.. and while there's friendly faces here, so will I be.
Great sum up my friend! Let's be friendly in 2019 too!
I'd be delighted to!
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STOPThank you for the very thoughtful piece!
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