Image from PixaBay ... if I remember right...
In this post I will suggest that unethical actions are being performed by many members of the Steem community. I am not saying that these people are bad people or that they are trying to hurt anyone. Investing can be a highly emotional experience and the more you are invested the more challenging it becomes to think rationally about what you are doing.
In this post I'll take you through a journey of education, in easy to understand terms, that will result in you seeing just how beautifully designed Steem happens to be.
We're going to hop into how Steem was designed to thrive in a bear market and how certain members of the community with whale stake are ruining the built-in survival mechanism for their personal benefit. But first, I need to help you understand an important economic concept involving SBD, the stablecoin on Steem.
Let's begin with a question. We're going to pretend that Bitcoin suddenly dropped to $2000 per coin today. At the same time, you are about to be paid for a service you provided someone, and they ask you whether you want to be paid the $500 owed to you in a US dollar stablecoin or in $500 worth of bitcoins according to today's rate. Of these two options, which one would you choose?
If you chose the stablecoin then you received exactly $500 and only $500. However, if you chose $500 worth of a bitcoin you ended up with 0.25 of a bitcoin. Maybe Bitcoin goes below $2000, but then again, maybe it goes back to $20,000 resulting in your payment being worth $5000 instead of $500.
In a bear market it is much better to receive market price payments in the commodity monies such as bitcoin, ether, BAT, and STEEM. These assets are greatly undervalued compared to what they are likely to be valued at in the following bull market. In other words, it is a great time to accumulate the real asset rather than the stablecoin backed by it, such as SBD.
The Strong SBD Myth
Why do some people put such a high emphasis on the importance of SBD's peg to the US dollar? It is not to protect the value of STEEM, but to protect their own STEEM supply. They do not want you paid in STEEM as the network is designed to do under depressed prices in STEEM/USD conversions.
SBD is below a dollar, which means that one can profit from owning it, knowing that efforts by witnesses and whales will be made to readjust the peg. But if STEEM ever goes to its All Time High and your STEEM is locked up as SBD, you will not benefit from the rapid increase in value. You get stability, while they get rich.
SBD is actually more than just a method of reducing confusion and plenty of people would argue that it adds to confusion. However, the SBD system is a wonderful way for whales to make large profits while sharing a minimal amount with the authors. As the price of STEEM goes up people increasingly receive payment in SBD, because its a method of paying them less STEEM when STEEM is highly valued.
When STEEM is undervalued by the market the SBD payouts go away as the network cannot sustain the USD conversion rates. We'll talk more on this and how this is a great time to be an author (under normal circumstances) and how it is part of the design that helps Steem survive in all markets.
The Devil Is In The Details
If you were an owner of 1,000,000 STEEM powered up. You would prefer that others receive SBD rather than STEEM, because when STEEM goes up in value you reap the benefits of your large share of the network, while others see an increase in SBD payouts. But if STEEM goes down in value a "hair-cut" mechanism is in place to make sure you can't obtain a lot of STEEM by converting your SBD in a down market.
Steem has a survival strategy as a network for bear markets. This strategy is the SBD/STEEM payout system. In a good market or highly active network you receive SBD, as STEEM is stretched and scarce. Steem whales love this market, as their asset converts into much more SBD or USD.
But what about in the bear market? The network needs to survive and it can't do that by continuing to issue SBD, so it switches to giving you the real asset, the STEEM cryptocurrency. Whales will not like this situation as the STEEM currency becomes more plentiful on the market rather than being locked up as SBD that would mint less STEEM during conversion later on.
Why does it matter if you have SBD or STEEM? When you own SBD you are actually segregated from the value of the Steem network. When Steem's network goes down in value you are still owed your $1 minus a "hair-cut" fee, but when it goes up you are not party to the profits, you will receive your $1 and nothing more.
If you're smart, you don't want to be holding a bag of SBD, especially not when STEEM is so far from its ALL Time High price. It is not in the best interest of authors to receive SBD but STEEM. Whales dislike others having STEEM rather than SBD precisely because they want you to own less of the network when STEEM's price rises.
The Beauty of Steem's Survival Mechanism
We've been discussing the idea that Steem was designed to deal with both the good times and the very bad times and now we can jump into this system.
Authors are essential to the health of the Steem network. It is true that investors create the initial value of the network by becoming curators, but it is the authors that are suppose to cause the network to grow in value. This is the reality for all social networks.
The thing about authors is that their loyalty is usually based on their ability to earn profits for their work. They're not investors by nature but performers seeking due compensation. This is why they get paid in SBD, they just want their $1s.
So, what if the price of STEEM is so low that the network can no longer afford to pay them in hard dollar values? Well, you have to offer equity. That's why the payouts go from SBD to STEEM payouts. Its a desperate bribe to authors to stay on the network and earn a share of the network for remaining a loyal and devoted worker in hopes of lucrative future profits.
This is an elegant strategy for keeping Steem alive, but its really just one part of a more elaborate system that I like to call Survival of the Steemiest. Next, let's talk about the survival mechanism baked into the Reward Pool.
The Designer of the Reward Pool Was No Fool!
I rhymed "reward pool" and "no fool" and I think that was quite clever. Did you catch that? Cool. Moving on...
Some people look at the Steem Reward Pool like its a magical fountain owned and shared by all. I see it differently. I see it as my property in a way, because my vote power was purchased or earned, and thus I have claim on my cut of that pool. Some disagree with that, and they can go to hell.
However, there is another aspect of it, which is that a certain amount of STEEM is coming out whether you like it or not. If you are not an active participant, you're screwed. The system is designed to transfer the wealth of the inactive to the active.
People that keep their STEEM liquid rather than as SP are taking the inflation hit while that inflation is going to the powered up holders, the witnesses and the authors. In other words, the spoils go to the loyal, devoted and active members of the network, while the sellers/traders/exchanges/speculators eat the inflation rate.
Its brilliant, despite the fact that its still not working. The concept is smart, so people should be incentivized to keep staking and participating, for STEEM to grow in demand and for supply to stretch across the globe with ever increasing scarcity. So what gives?
Same with Bitcoin, even though more and more people lose their keys, locking up BTC coins, still the price moves in waves and not a straight line up.
Like Bitcoin again, the active participants receive the inflation. This is a method to keep both Bitcoin and Steem alive during the bad times. If people were paid the same as in a good market, everyone would just ditch during the tough times.
This is true for both curators and authors. If the STEEM price drops low enough that witnesses, curators, authors and stakers start walking away, then the active curators, authors, witnesses and stakers gain network share via the inflation. Its an intended redistribution of the wealth, rewarding those keeping the network alive.
Steem Whales United ... Against Authors
There is an attack on these two beautiful, brilliant functions of the Steem survival mechanism. It is also particularly an unethical attack on the loyal authors sticking it out and continuing to produce work on Steem during this bear market.
"But its good for everyone! Protecting the SBD peg is part of keeping the network strong," you may be thinking. Well, you're wrong. The SBD peg has absolutely nothing to do with the health of the network. Need evidence?
Sure, here's some evidence... First, when payouts shift from SBD to STEEM its a defense mechanism to keep it functioning as it can't afford to pay in hard dollar values. In a good economy SBD gets paid out to protect investor profits, while in a bad economy it stops using SBD all together. This is because SBD has nothing to do with survival at all.
Someone will try to argue I am wrong, and they'll be spewing total bull shit. How do we know? We can know by fully understanding the actual purpose of SBD. Its sole purpose is to reduce the total amount of STEEM minted under certain conditions. That is why SBD has been designed to mint less than $1 of STEEM per token in a bad economy (the "hair-cut") and less STEEM over all in a good economy. Holding SBD is for suckers, also known as "authors" on Steem.
If the SBD is pegged to USD or not, it has absolutely no effect on the Steem network's functionality. Steem is designed to keep rewarding authors in STEEM during hard times in order to keep them around and, an increase in author inactivity means that the authors that stay are rewarded with a larger share of the pool.
This is similar to how the company Harley-Davidson reacted when their business was going to shit. They offered employees equity to dig in and solve the company's problems. Likewise, Steem switches from offering dollar value to offering potentially more lucrative equity value to the remaining participants in STEEM.
Again, SBD has absolutely nothing to do with the actual health of the Steem network and is not part of its survival system. Rather, SBD is part of its prosperity system, that limits the value authors receive in a good market.
How Is This Unethical?
The projects @sbdpotato and @burnpost are not out to protect authors from harm, they are protecting whales from a redistribution of STEEM that has intentionally been baked into the protcol. As I mentioned several times above, Steem's survival mechanism is a protocol-based redistribution of network share from the inactive to the active.
Even if authors were indeed increasing downward pressure on the price of STEEM by adding to the sell wall, they'd still mostly be hurting themselves. This is because the long-term holders of STEEM that have it powered up and curating are earning all the new inflation.
The inflation doesn't hurt people that have their STEEM locked up as SP, because these are the people receiving all the inflation. In reality, the only ones hurt by inflation are the ones with liquid STEEM. So, @sbdpotato and @burnpost are trying to protect liquid STEEM holders, not powered up holders.
But what's so unethical about these two initiatives?
Let's pretend we're playing a game of Monopoly, but in this game the rules are a little different from the traditional version. In this game, when you pass go you still collect $200, but it is divided between two parties 50/50. The two types of players, the dice roller and the runner share the $200 evenly once they get past go together.
Now, the game has a set of rules that both parties know about. But the dice rollers figured out a trick that allows them to keep their $100, while sending $20 of the runners' share back to the bank (burned). This trick is not part of the game design, its a manipulation of the system, and many of the "runners" don't even realize it is happening. That is what @sbdpotato and @burnpost are doing right now...
When authors burn their rewards it cuts into the 50/50 ratio on the author side of the reward pool. The collective community of authors on Steem only receive 50% of the pool dedicated to curators and authors and burned author rewards sucks out STEEM that would have otherwise been rewarded to other authors.
The SBDPotato and BurnPost projects create automated spam posts and comments for a large number of whales and witnesses to curate. These posts are short and repetitive in content, completely ignoring the spam rules required by the rest of the community. And when you track the curation rewards, you will find that many of the members involved are receiving curation rewards while the author rewards are burned.
What is the effect of the curators receiving rewards while the author rewards go to @null (get burned)? The result is that the 50/50 reward ratio set by the protocol becomes less than 50% on the author side. This means less rewards overall for all authors on Steem. Most authors on Steem have no idea that this is what is happening to their rewards.
Code Is Law
All the blockchain communities function under a specific premise, which is that code is law regarding fair and ethical activity within a blockchain. Nobody likes phishing scams right? It negates the standard rules of our social agreement known as the protocol.
The phrase #NewSteem became popular as a fight against spam and economic manipulation. The idea was that bidbots and "self-preservation spam" posts were no-nos. Sure, you were physically capable of doing it, but was it good for Steem? Many argue it was not.
At the time I was opposed to eliminating bidbots, mainly because I saw them as Steem's best customers, at least in the early days, and thought it made poor economic sense to drive them away. I believe much of the downward pressure is due to these businesses selling their STEEM supply and not authors.
However, there is an even better model for utilizing STEEM such as burning STEEM to receive promotion in feeds, hot and trending areas. This sink benefits all STEEM holders and not just a few businesses, while providing utility of the STEEM currency to authors that seek to earn it.
There is always a better way to get the result you want. We can improve the SBD peg if everyone really wants it so bad, and we can do it without stripping authors of their due share of the reward pool.
We can shrink author sell off by providing legitimate and valuable burning features such as allowing authors to promote their posts into people's feeds or the hot and trending pages.
We can build a wide list of authors that will gladly and willingly send their own rewards to @null for the benefit of curation that raises the visibility of their content in order to grow their audience.
Screw The Authors Means Screwing Yourself!
You might think you can get away with continuing on with these activities, but to be involved in the SBDPotato and BurnPost projects means that you are working against Steem's survival mechanism for keeping authors around. What if you cause more authors to leave than you gain?
Authors will stick around only if they believe the network is worth their time. If they begin to realize that their rewards are being siphoned away into @null, you might lose them.
Previously, Steem was the only game in town. It is not now, and in fact, according to a @scottcbusiness review, he found that Steem was not the best paying crypto social media platform. It is currently ranked second to Publish0x, and might soon be beat by Minds.com due to the launch of Minds Pro.
Let's work together to Make Steem Great Again ... starting by not %$@!ing the authors over.