Over Easy

작년

I can't say I really like eggs without solid whites. The same thing can be said about economic principles like scarcity. Raw scarcity means nothing and under-cooked scarcity clearly could use a couple more years in the frying pan.


Over Easy.png

I've spend so much time thinking about fixing Steem and its economics, I haven't really considered the possibility that actually building a valid economic model on top of the current framework might violate the laws of thermodynamics or something like that. The scarcity is simply undercooked.

What does that mean? I don't know. I'll just quote my less cynical younger self on one of the key elements of scarcity (and quality):

If anyone can do something, than one stops them from producing that thing with ease. If something takes a large amount of effort to create, than it is harder to replicate. Not only must something be original, but it must be hard to duplicate. That is not saying that the object must be unique, but is must be hard to reproduce. Something can't be quality if everyone else can copy it. The original scribble on a napkin is not better than other scribbles on napkins because it is easy to reproduce.

What is so unique about a DPoS blockchain? Well, there really isn't anything. If someone simply cloned Steem and ran an equivalent and parallel chain, the scarcity of chain access is identical to the original chain. Steem's transaction limitations are completely artificial and arbitrary. Sure they are practical in that they reduce the growth rate of the blockchain, but what does it really mean? Why does content need to be in a blockchain?

The obvious counterargument to this is censorship resistance, but why do we need to pair scarcity with content? Such an approach is antagonist to scalability and growth because such the scarcity we have is space. And that space is artificially fenced off from other theoretical space.

But if the demand for the space exists, then the space is worth something, but at some point people are going to simply ignore using the bandwidth as the bandwidth is completely optional and censorship resistance simply isn't that important when cheaper means of redundancy exist.

At lot of this is hard to grasp. I don't know if I know what I'm even talking about, but these thoughts are just floating around.

Of course the purpose of the chain might not be access to the scarce chain, but perhaps the ability to accrue inflation on top of existing coins. But at the end of the day what do those coins get you? More access to a limited resource that in this case doesn't matter (otherwise we simply reduce to the case of artificial bandwidth restriction concerns). Coins do translate into actual money, but without a reason to hold, that translation is transitory and doomed to reach an equilibrium price of zero (since there is a lack of reason to hold).

One may argue that one may hold as a means of speculative extrapolation, and that reduction of the circulating supply as well as the attractiveness of acquiring inflation through holding may be worth something, but if we look long term, how does the coin maintain and growth their collective wealth? Well demand for the coin must increase. Because if it doesn't increase and scarcity means nothing (again, in this case), the growing supply (via inflation) and selling pressure (via cashing out) reduces the price.
Only new users can maintain and grow the price.

Why are new users required? Well, technically they aren't, as current users can continue to inflate the price of investing more, but eventually in order to realize a profit, those users eventually have to sell something leading to the sell pressure. People could simply hold forever and never turn a profit, but remember that in this case we're arguing the purpose of the chain is to accrue coins to get more coins.

For those familiar with such a pure inflation approach (the good ole money printer), such structures require the growth in a sort of pyramid-like shape. That is not to say that this is a Ponzi Scheme if we look at Steem solely for the money, but it does suggest that it is Ponzi-like. So, even though the scarcity / censorship resistance argument is kind of weak, the money printer argument for Steem is even weaker.

But one may argue that Steem is still worth something now. And others may argue that Steem has value beyond simply the fact the blockchain is provides scarce censorship resistance or is good at printing additional Steem. There is always the good old store of value argument. That "work" is traded for coin, rather than simply printed, although such a notion requires adoption and faith in the coin.

However, the inflation system doesn't necessarily appear to look very fair as those with more coins, simply get more coins simply by passively holding. Sure they have more risk in the system, but does risk really equate to performed work and thus a good basis to have faith in the coin as a fair entity to trade good and services against as opposed to selling out for a better store of value... It's an interesting question.

There is also the point that such money printers can again be easy replicated with the same passive investors earning additional coins for their "work". Due to ease of replication, it is hard to argue that meaningful work is really being done here, but that's looking simply at a pure inflation model.

Steem isn't a pure inflation model. We have Proof-of-Brain. Although again, such distribution is reliant on the whims of the most invested rather than of some metric that more closely reflects actual work being done. Even if Steem distributed coins on a click-based or interaction-based system (as stupid as that sounds), that work is harder to replicate across duplicate chains as some work (although a very miniscule amount) is being done.

You might wonder I keep bringing up the idea of replication as a means of discrediting the blockchain. There simply aren't other chains like Steemit. But that's not the point. The point is to show how easily is would be to reproduce a similar system which demonstrates that Steem isn't that special (or inevitable) and that other competitors could out-compete Steem by tweaking some parameters so their scarcity and use cases aren't undercooked.

If any of this doesn't make sense, feel free to ask questions. I'm not sure if I can quite articulate the ideas that I'm trying to convey. Also, there are other use cases and mechanisms I haven't considered that might be worthy of talking about (such as blind faith or representational value ("community status symbols")).

Why eggs? Because they're fragile and delicious (if they aren't undercooked).

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It's hard to see the value of Steem when there are zero dapps on the platform but every app falsely claims to be decentralized.

The one dapp on Steem (blogging) doesn't gain much value from being decentralized, especially when all the frontends currently allow censorship by downvote.

As you say, the distribution is currently unique, but nothing stops a clone from coming around. Such is open source development. The one thing you can't clone the community, which is the ultimate variable that gives these projects value.

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You can't clone the community, but the community grows on top of the system rather than a necessary part of it. The smaller a community is, the easier it is to transplant.

Also, one would argue that censorship isn't happening by downvote, but rather access control.