Steem 2020 - Reducing Inflation To Less Than 2% APR
With the first half of 2019 nearly behind us, I'd say it's time for us to take a look into the near future for Steem.
Steem Engine - SCOT & Nitrous
Recently, the team behind steem-engine launched their newest projects:
SCOT, which enables anyone to create their own steem-engine based SMT (aka Steem clone). Technically it's not a clone, but on the outside, it works very similarly.
Nitrous - a service that allows everyone to create their own hosted community website, like Steemit - no real technical knowledge needed.
Which essentially means: even without the real SMTs around, it's now possible to create your own little Steem & Steemit network.
What about SMTs?
Real SMTs are still crucial, as they will have the same security benefits Steem has. (SCOT tokens are less secure than Steem, no DPoS yet)
Nevertheless, SCOT is important, as it gives everyone a glimpse into what Steem will/could look like very soon: a platform (Steem) which is enabling many, many more platforms (SMTs) to exists.
What does this mean for Steem?
But what does this mean for Steem, when there are suddenly hundreds of tokens that are doing exactly the same thing Steem is doing (maybe better)? Besides bringing value to the underlying infrastructure (Steem), they are also making a few things redundant.
Is the currency distribution of Steem still required or even desirable, if an SMT could do the same thing, in addition to being much easier customizable? (curation-%, author-%, inflation, etc.)
Inflation / Currency Distribution | 👍 or 👎
One of the biggest turn-offs for people wanting to invest in Steem is the high inflation rate (currently ~8% APR, narrowing to 1% APR over the next 16 years), meaning the rate in which new tokens are being created/distributed.
For example: If there are 1000 tokens in existence and you own 100 of them, you essentially own 10%. However, if every year 1000 more tokens are added (via inflation), that is not being distributed to you percentage-wise, then in a year, you'd have lost 50% of your value.
Usually, this inflation is being redirected to stakeholders, those owning the tokens. In the case of Steem though, more than 50% of the inflation is going to people who not necessarily have a stake in Steem (authors) via voting. Stakeholders do get a small part of the inflation; 15%, but which is still not a lot.
However, it does shine a light on the problem of inflation. Would you rather have the majority of your stake in a currency like STEEM, which is losing a guaranteed amount of ~7.5% in 2020? Or, would you rather own BTC, which will have less than 2% inflation in 2020.
What if ...
So, what if we'd remove the inflation nearly completely?
We can't remove everything, as this blockchain is running via DPoS, which essentially means that witnesses are being paid to run the software to keep the blockchain secure. (and security is N°1 priority!)
I would also argue that stakeholders should have an incentive to keep Steem powered up (we could talk about removing the 13 weeks downtime, or making it more dynamic => higher downtime => more APR), meaning the interest for stakeholders is for our best interest as well.
But besides that, we could scrape away ~75% of the total inflation. Essentially, bringing the inflation rate down to under 2%. Which would be a phenomenal fundament for people to build their own tokens on.
But why?
Steem had the number one purpose after its launch of distributing the currency. And while this job wasn't done perfectly, the currency has been distributed pretty well. However, after nearly 4 years, we've reached a point where sub-tokens of Steem can be distributed as well, probably even better.
Will this mean that voting (& bid-bots) will be gone as we know it? Probably yes. But that's a good thing because it means that Steem is changing and improving.
In my opinion, Steem has to be a strong & solid fundament for people wanting to build their own tokens/communities/businesses on - and you need a some-what stable currency for that; one without much inflation.
Let me know your thoughts in the comments below.
Wolf
Do you believe that my work is valuable for Steem? Then please vote for me as witness.
Not sure how I missed this post, but it looks like we are thinking along similar lines.
https://steemit.com/steem/@jrcornel/steem-what-if-we-turned-off-the-inflation
I think this is a really good idea and where we need to go if we want to make steem sustainable. It claims it wants to be a social media base layer where everything else is built upon it, well it's time to actually make it one then.
This idea would have my support and a lot of the people I talk to as well.
If we could get that inflation number to 1%, even better. ;)
I think this is a presumption that is not valid and is far from being proven. The fact that Steem is not well known could have a lot more to do with the lack of investment than the inflation rate.
You are trying to draw conclusions about what markets do which is impossible. They are their own animal. And it is very dangerous for one to initiate fundamental changes in the ecosystem based upon market action.
Once again, you are saying the barometer people are using in buying these tokens is the inflation rate. It might be in a few instances but most buyers do not know what the inflation rate is. Do you think most Ethereum buyers realize the inflation rate there is potentially unlimited? Yet it is a top 5 token.
In you scenario, if one thought BTC was going to 100X and STEEM 500X, which do you think would be preferred? Do you think the inflation rate would even matter in that instance?
Steem has been the TOP 3 ranked cryptocurrency at one point. Clearly, Steem should be very well known by now. And I would even argue that most people heard about it. (at least those that were around in that timeframe)
I didn't say that inflation rate is everything that matters, but it's clearly one thing investors look at if a specific coin has investment potential. I could give you the example of BNB, which has a deflationary model. Let me quote:
To achieve scarcity, Binance uses 20% of its quarterly profits to buy back and destroy (“burn”) BNB tokens up until 100 million BNB tokens have been burned. This deflationary supply mechanism naturally increases the value of the token. Source
What kind of question is that? The chance of STEEM going to 1 cent is far higher than BTC going to 250$. So even if I would think STEEM could go higher, the risk is far bigger to invest in STEEM than in BTC.
That is not an inflation problem but a marketing one. That has nothing to do with the inflation rate.
You want to point to that as one of the causes, I think it means little. Perhaps the slow sign up time, Whales acting like children, and a distribution that man consider unfair has more to do with it.
Risk is something that certainly investors look at. In fact, it is a more crucial level than the inflation rate.
Of course this is all off topic:
Answer me two thingL
A) Do you think that an inflation rate of 2% would have STEEM in the top 10?
B) Why are you concerned with it?
Feel free to concern yourself with marketing Steem. This post is about the future of Steem, once SMTs are around.
And it seems you're not getting the point of this post. Reducing the inflation rate to 2% won't be the cause for Steem to get into a better ranking, but actually, the combination of everything combined; SMTs & reduced inflation. And having a base currency, which is handing out tokens, instead of focusing and supporting the sub-tokens (SMTs), isn't effective. There is actually no need to have inflation to non-stakeholders (besides witnesses) on STEEM, once SMTs are there.
If you don't think that, give me reasons & evidence why not.
I agree with @taskmaster4450 and I personally think the original post offers bad ideas but I will not dig too deep into it since I am spending most of my time on other things.
@taskmaster4450 has done a good job at pointing out the flaws and blinds spots in your arguments @therealwolf.
When I told a serious investor about Steem he barely knew about it and asked his cousin who invested heavily in crypto and ETH about Steem who replied that Steem was bad based on it's inflation rate of 100% 😂 (this coming from a big investor).
You might want to check your sources in regards to the market's perception of Steem @therealwolf.
You have not given any evidence that inflation is not needed. So, how do SMTs fund each dapp? Do a simulation of cause and effect and feedback.
Yup, inflation isnt our problem, its just a klack of marketing and onboarding thats all. inflation based rewards is what makes steem fun ... people were buying at $8 and peopel WILl keep buying we just have to have steems users themselves get rewarded to promo
Can’t wait to eliminate them bit-bots to make STEEM great
Also In my opinion, Steem has to be a strong & solid fundament for people wanting to build their own tokens/communities/businesses on - and you need a some-what stable currency for that; one without much inflation
Inflation of token mass is completely OK as long as steem userbase grows higher
My first instinct is telling me we should keep the inflation for the reasons of RC distribution.
The SCOT or SMT token won't be doing what STEEM is doing. STEEM dictates how much Rc's you can use on the network and neither SMT or SCOT tokens can provide that.
I think it's wise to keep that distribution going even though people might not know they are earning a little bit of STEEM on top of their SMT or SCOT token.
RC pools can help new users operate on Steem without having RC's but I think through earning STEEM in the background on top of their SMT or SCOT token they will we able to become independent of these pools and that is very beneficial for the user as well as the pool.
Example:
Let's say you are a new user and get 1000RC's from the pool and start posting and doing your thing. Once you reached a 1000RC's on your own account you are cut off from the pool and on your own. Now the pool can use the RC's to help someone else.
I'll think about it more but this is my first thought. I have to go to a party now. I'll check later tonight.
I think I understand the point you're trying to make. My opinion on that is the following:
RCs are a reason for people to buy STEEM, which is good! Author inflation isn't necessary, nor desirable for people to gain enough resource credits. Inflation will always result in selling pressure, but we need the opposite - buying pressure. Now, if you want people to gain more RCs over time, then increasing the inflation for stakeholders is the way to go, because it incentivizes people to buy Steem and hold Steem.
I'm still trying to get my head around what benefit having tokens on STEEM provides, especially the current iteration of 'SMT workaround' tokens. So far I have no interest in what these tokens represent, and I certainly wouldn't trade my STEEM for them. If I could earn them organically and trade them for STEEM I would though. But that also means someone is giving me STEEM for this token. I can't relate to that at all if my goal is to retain and power up STEEM. Perhaps later I'll have an a-ha moment if I find a DApp I can't live without. But so far I'm not seeing it.
Check out Actifit and weedcash
Thanks. Already tried Actifit, and not a fan at all. The concept is okay, but the execution is lacking on the app itself IMO, and the curation is a bit aggressive for my taste. Will check out Weedcash though.
Weedcash is a SCOT I believe they're called. Any cannabis related content posted there gets paid in WEED plus it pays in SBD/SP
That's cool. Basically a steem clone that rewards in WEED. That's not really my subject area, but hopefully there are others that crop up in future.
There will be. I pretty sure the @ssg community will make one soon.
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I think this is an amazing idea. I'm not really technical and don't have a full understanding of how these things work but I do trust your knowledge as I have followed and read your posts for years. I think what you are saying and the conviction you say it with make a lot of sense.
The problem is not the inflation, and it will go down anyways. If you want a better steem price, then we should get people to invest.
Correct, we need people to invest. But this requires incentives. Having a currency which has a ~8% inflation - not really appealing in comparison to ~2% BTC.
Low inflation is btc’s speciality. What steem needs is not to compete with that. We have ways for investor to earn steem passively and beat inflation. But you know this already, you created smarsteem. I think that to get them, we need some great dapps. Steemit has to look and be better, as well as dtube. Steemmonsters is great.
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Most STEEM inflation does not come from author rewards, but from Steem Dollars being converted to STEEM in a bear market.
No. This is just extra sugar on the cake.