Learning from History: One of Steem's "Grand Challenges"

Introduction

One of the interesting things about working on Thoth is that I have been reviewing a lot of content from the entirety of Steem's lifetime.

Two or three weeks ago, I came across the 7-year old post, History is a great teacher from @snowflake. In fact, it was that account's last post. I don't remember if I read that article in 2018, but it's interesting to look at in 2025. It almost could've been written yesterday.

In the post, @snowflake quoted from @trafalgar, a whale account that is still active on this platform now. I'll copy a few paragraphs from that quote:

I'm guessing many whales are in the very same position as myself: we don't want this to continue. Unfortunately, we also can't trust other large stakeholders to refrain from the allure of profit maximization, so we all protect our own stake by partaking in the very activity that's deteriorating our investment. It's tragedy of the commons in full swing.

The issue isn't that bots or individual actors are malicious or greedy; very few people invest in crypto for altruistic reasons. When designing an economic system, you must assume everyone will attempt to maximize profits. When individual efforts to maximizing profits contribute to the value of the whole, then it's a successful system. But when the optimal profit maximization strategy under your system undermines the value of the whole, then you have a flawed rewards structure, that is to say misaligned economic incentives.

The entire economic system cannot be designed to depend on the selfless sacrifice of moral saints paying a high price in order to just keep in check the perfectly rational actions of individual profit maximizers, which is where we are now and why the battle is failing.

One thing that @trafalgar left out there, however, was that better ideas win in the long term. If the dominant strategy is counterproductive, as he describes, then (by definition) it's not optimal. The dominant players get punished with declining prices, which will only go up (sustainably) when a better strategy emerges. The economic aspect that @trafalgar discussed is only one variable. The innovation of the stakeholders can also be brought to bear.

The solutions that @snowflake proposed to this problem were to implement a payout cap on each post and revert the hard-fork that had increased the max percentage per vote from ¹/₂% (40 votes per day) to 2% (10 votes per day). In this case, @snowflake argued that people wouldn't be able to self-vote 40 times per day, so they'd go back to discovering higher-value content.

Here we sit, 7 years later, and the problem remains. I don't spend any significant time on Hive or Blurt, but since STEEM and HIVE prices have been moving almost in parallel, I'd bet that those platforms haven't cracked the problem yet, either.

Over the years, I've seen many proposals of ways to change the reward system in order to eliminate this perceived tragedy of the commons. I have not usually been a fan of these proposals because I think it's impossible to predict how they would play out, and I'm not a fan of blind experimentation with the platform's fundamental infrastructure. Regardless, it's safe to assume that there will be no development on the rewards mechanism any time soon, so we should defer discussion of those sorts of solutions for the time being.

Instead, my long-held theory is that the Steem community must come up with ways for investors to deploy their stake in a way that lets them beat the returns of the self-destructive tragedy of the commons. Among other places, I wrote about this, here, and that is the impetus behind the Thoth initiative.

Observations:

1. Steem is a play on two economic sectors: the crypto economy and the attention economy.
2. The proxied self-vote architecture is maximizing Steem's returns as a blockchain-only play, but those gains are partially or completely offset by losses from the attention economy.
   • specifically, the proxied self-vote pits the interests of content creators (attention-attractors) against the interests of proxied self-voters (attention-repellers).
3. The only realistic way to move investors from the proxied self-vote architecture is to give them an alternative that is more profitable. That should be the goal, and by ingesting value from the attention economy it should be possible.
4. More than 99.9% of Steem's value in the attention economy is hidden behind the payout horizon.
5. Through the use of beneficiary rewards, investors and content creators can be served by projects that harvest that hidden value.

Put simply: When someone visits a Steem front-end, we'd prefer to have their eyes on something that will hold their attention, regardless of its payout status.

Opportunities

If we start with the assumption that no magic change to the reward system is coming to rescue us, what are the options that remain to us as a community?

The trending page

This should probably be the highest priority, because it is the most visible manifestation of the problem. Possible tools to address the trending page include:

1. Alternative trending scores, like @moecki is exploring.
2. Use of downvotes by large stakeholders for posts that are egregiously overvalued. (Even a 5 or 10% downvote, can move a post down in the ranking. A post doesn't need to be reduced to zero.)

Post promotion and advertising

• Give authors other ways to profit from visibility in their articles (Steem once had @dclick, for example).
• Value-Curators should prioritize review of posts that make use of the blockchain's burn beneficiaries and/or post promotion.
• Should Steemit turn (non-Tron) advertising back on for steemit.com, so they can increase their own revenue by finding ways to enhance the visibility of the authors who draw eyeballs?

Aligning incentives for content creators and investors

• Voting services should make use of beneficiary rewards in ways that encourage production of content with lasting value and also reward investors - in the same posts.
  • This could be done, for example, with a whitelisted team of authors who set beneficiary rewards for sponsor/investors (In addition to #lifetime-rewards, this is something else that Thoth will make possible).

Harvesting hidden value

• The Thoth project and EverSteem by @etainclub are both plays in this direction.
• Authors have requested a lifetime payout stream for as long as I've been here, and we now see that it's possible.
  • If 99% of value is hidden behind the payout horizon, what percentage of a curator's voting power should be targeted towards historical posts?
• Another way to build this capability would be to establish and support communities where authors are expected to build on each others' ideas and to share a percentage of rewards with the authors of the earlier posts. (i.e. like YouTube's "reply videos", but augmented by rewards-sharing.)

Conclusion

Obviously, a problem which has been with us for years isn't going to be solved overnight. It's long persistence tells me that it should be considered a sort of a "grand challenge" level of problem for this ecosystem.

But, that doesn't mean we should stop seeking solutions. My recent work with Thoth has strengthened my belief that there are competitive solutions to this problem that don't involve white knights or magic-bullet reward-system fixes.

In addition to the ideas above, what tools do you see that the community can bring to bear?

---

Thank you for your time and attention.

As a general rule, I up-vote comments that demonstrate "proof of reading".

---

^{Steve Palmer is an IT professional with three decades of professional experience in data communications and information systems. He holds a bachelor's degree in mathematics, a master's degree in computer science, and a master's degree in information systems and technology management. He has been awarded 3 US patents.}

---

Visit the /promoted page and #burnsteem25 to support the inflation-fighters who are helping to enable decentralized regulation of Steem token supply growth.