Why a Rising Steem Price May Not Be Your Friend - @J2R is Leaving Part Three

2년 전

JR is leaving - 3.jpg

This is the third post in my series on difficulties that new users face when creating a Steemit account.

You can read parts 1 and 2 here:

@just2random is Leaving Steemit and This is a Real Problem - Part 1

@just2random is Leaving Steemit and This is a Real Problem - Part 2

My central point is that the difficulty associated with getting started on Steemit is increasing daily. Flowing from this I would argue that if this trend is left unchecked, we will reach a point where the platform is no longer attracting new users and we are left with MySpace.

My argument is not that Steemit should be easy. Nothing worth doing is easy. When the level of difficulty increases so much, and continues to increase week by week however, you have a system that is self defeating.

Back in my day…

Let’s start to look at some other ways in which Steemit is becoming more difficult for new users. It’s very common to see posts on this platform where existing Steem users provide tips to new users on how to succeed on the platform. I have written one of these post myself. What frustrates me about the vast majority of these posts however, is that they are quite often written in the context of what I would call the ‘back in my day‘ is mentality. This message in one form or another states that, back in my day I worked hard to succeed on Steem and therefore all you have to do is work hard and you can be successful like me. Let’s explore this and see why this statement is demonstrably incorrect.

Let’s imagine a hypothetical scenario where a new Steemit user was able to produce good quality content, upload it to the platform, and received author rewards totalling five dollars. Let’s also assume for simplicity that the author chooses the 100% SP (SP) payout ratio. The same logic applies for a user who chooses to be paid in 50% SBD, but the numbers become more difficult to demonstrate, so I'll stick to a simplified scenario. In this scenario the user would receive a total amount of SP equivalent to $5.

With a Steem price of $2.50, which is both convenient to work with, and a very close approximation to today’s price, this sees the author receive 2 SP in reward for their efforts.

Now let’s compare the outcomes we achieved above, with the outcomes the same author would have achieved had they posted their content on 9 March 2017, which is exactly one year prior to the date I wrote this article. On 9 March 2017, the Steem price was $0.08 US. For exactly the same post, earning five dollars in pool rewards, on 9 March 2017 the author would have received 62.5 SP. So, in a hypothetical scenario, for the same post, achieving exactly the same level of author rewards, today's author today receives 3.2% of the reward as measured in SP as they would have achieved 12 months ago.

It can be validly argued that this example is wrong because in March 2017, the author only received 50% of the post rewards, not the current 70%, therefore their payout was lower. To have included this would have overly complicated the calculations however, as it is the magnitude of the change, not the actual % change that I am attempting to highlight. As such I am comfortable that the example used serves it purpose.

To provide another example let’s look at what would have happened on 9 November 2017, which was approximately the time that I joined the platform. The price of Steem on 9 November 2017 was $0.96. Meaning that for a $5 post, posted on that day, you would have received 5.2 SP, which is approximately 2.6 times as much SP as you would receive today.

But wait you say! This is a ridiculous argument because the total amount of reward that I have received in real dollar terms has not changed. Whether I get 62.5 SP with Steem being worth $0.08 per coin or 2 SP with Steem being worth $2.50 per coin, I still receive a total amount of $5 in rewards. This is correct. What this does not consider however, is the rate at which new authors are able to accumulate SP.

The Importance of Steem Power

Anyone who has been on the platform for any period of time understands that the way to ultimately be successful on Steemit over the longer term is to accumulate SP.

SP gives you influence.

It allows you to attract followers, because when you have SP people wish to interact with you because they hope that you will interact back up and upvote their posts. SP also provides you with censorship resistance as the greater your SP, the greater the power of your down vote. There are any number of arguments as to why SP/influence is important on Steemit. I covered these at length in my first post linked above.

It is my belief that most people who are serious about wanting to use this as a blogging and content sharing website are not here to make a quick dollar. They are here for the longer term. To create a successful account with a large number of followers that will allow them to share their work. Accumulation of SP is the only way to do this successfully. With the Steem price having risen so dramatically over the past 12 months, it is now significantly more difficult for new users to accumulate SP and therefore be successful on this platform. Let’s stop pretending that the solution is just to work as hard as I did and you can be as successful as I am.

It is a fact that it is harder for new users on Steemit to be successful today than it was for those of us who joined six months ago, and it is many, many times harder for new users on Steemit today to be successful than it was for those who joined 12 months ago.

How a rising Steem price makes the problem worse

If we extend our above analysis we can look at the effect of rising Steem prices on levels of difficulty for new users. It’s purely coincidence that I have chosen to write this post at a time when the Steem price has taken a significant fall to $2.50. The table below shows the effect of a rising Steem price on the rate at which a user will accumulate SP.

Steem PriceSP Rewards from $5 in Author Rewards
$2.502 SP
$31.67 SP
$41.25 SP
$51 SP

This table clearly demonstrates that as the Steem price appreciates it gets more and more difficult for new users to accumulate SP and therefore influence on the platform. The total dollar value of rewards does not change, however the difficulty for a new Steemit user to build a large and influential account increases as the Steem price increases. In effect an appreciating Steem price makes those of us already on the platform more wealthy, whilst at the same time discouraging new users from joining the platform due to the increased difficulty of replicating our success.

The problem is we have a Catch-22 situation, because the longer term success of Steemit relies on the platform continuing to grow and attract more users so that the price appreciates. As the price appreciates the platform becomes less attractive to new users however. In the absence of an effort to address this issue, there will come a point where Steemit will stop attracting new users in large numbers.

The break in the SBD peg has masked some of this in the short term. If Steemit was functioning as the creators outlined in the White Paper, we would all be receiving one dollar in rewards for each SBD that we earn. Currently we receive significantly more than that, which means everyone is cashing in on the short term riches, and many are not looking at the longer term consequences of the way in which interactions on the platform are playing out. If the SBD peg was still in place, author rewards would be significantly lower than they currently are, and much of the incentive that existing users have to interact with the platform would be removed.

Please note that I’m not advocating in favour of, or against the SBD peg. This is not something which I understand in sufficient detail to provide an informed opinion. I merely highlight the fact that because it is currently broken, we are all getting a short-term sugar rush of higher than usual rewards, which is potentially distracting us from the longer term implications of the way in which rewards are currently distributed.

It’s Not The Fault Of The Whales

I need to pause the article here highlight that I’m not criticising early adopters of the platform. I would congratulate those early adopters for having the vision to be involved in the project at an early stage. They are now in a position to reap the rewards of the work that they put in before the rest of us could be bothered to even learn what Steemit was. The fact that someone was able to accumulate a large amount of influence in the early days is not a problem in itself. This can be seen as a justifiable reward for the risk taken to become involved in a platform that was, at that time, unproven. This doesn’t change the fact that for us to all be successful in the longer term, we need to ensure that Steemit remains attractive to new users and continues to attract growth across the platform.

Buying Influence - Another Way That A Higher Steem Price Disadvantages New Users

The other way that someone can gain influence on the Steemit platform is by purchasing Steem and powering up. It is very simple to go to an exchange, by some Steem, transfer it to your account and power up. This overcomes a lot of the angst that new users feel in getting their account off the ground. The first 500 SP is most definitely the hardest to earn. While it’s important to note that it is beyond the means of many Steem users to buy Steem, it is still one way in which a new user can give their account kickstart towards longer term success.

Unfortunately, the same dynamics we have demonstrated above also affect the amount of SP that a new user is able to purchase.

Looking at the same dates that we use our example above, let’s examine an example where a hypothetical new account holder decided to invest US$500 into SP to give their account a boost. Had they done so on 9 March 2017 they would have received 6,250 SP for the initial investment.

Were they to invest US$500 today they would receive 200 SP.

Whilst I haven’t looked at the statistics in great detail, I would argue that 6250 SP is more SP than the vast majority of Steemit account holders currently have. Most minnows can only dream of having an account balance of this amount. To purchase 6,250 SP at today’s prices would require an investment of US$15,625. This amount of money is clearly beyond the reach of the vast majority of Steemit users. So, purchasing SP is another avenue that has been closed off by the higher Steem price.

Let’s Be Clear About What I’m Not Saying!

I am not saying that a higher Steem price is a bad thing. Clearly all of us on Steemit benefit with an appreciation in the Steem price.

What I am attempting to highlight is that if we wish the Steem price to continue to appreciate, then we must ensure that the platform continues to attract new users, otherwise over the longer term it is likely to fail. Clearly this hasn’t had a negative impact to date as shown by the diagrams in my previous post, which clearly demonstrate that the number of new accounts is rising very strongly.

It is my opinion however, that over the longer term if we don’t make it easier for new users to succeed on Steemit then several things will occur. Firstly, the number of new users coming to the platform will slowly stop. Secondly the number of existing users who choose to leave the platform will increase. This is what happened to my friend @just2random that inspired this post. It’s possible that even with a large number of new users flocking to the platform, we can still go backwards if existing users drop-off faster than new users are added.

Enabling minnows is key to the long-term success of Steem

Main image courtesy of Steve Harvey on Unsplash

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You're right, my friend! What we know is that people who have already been successful and have a very high SP attract many new followers, so they get a lot of votes, and thanks to the fact that the price of SBD has gone up, they generate a lot more money than a year ago (just now they generate 2.5 times more). This is the perfect setting for people who are already successful in Steemit.

Now let's talk about new people. The scenario in which we are now, is leaving a lot of profit to the successful users, but, it is sinking or slowing down the growth of new users on the platform... In fact I feel inside the affected ones, since my growth is too slow, to the point of discouraging me sometimes to continue publishing. I'm still going to keep on doing it because I have my goal, but in the case of new users are affected from the beginning, so maybe they retire a month after just starting...

There are alternatives to win SP, which are the bots of votes... They should be made known. But logically, this should not be the way people get their SP.

A greeting and a hug from my friend @aghunter

It's a toughie... we're trying to convince people to put their effort into this platform instead of the platforms they've already invested years into. The main benefits is that no one is profiting off your data, you're not censored and no one person or company controls the platform... but the challenge is that people have all their lives and all their friends on these other platforms and may not really care about the data or the decentralization....

... so then the only thing that Steem has going for it then is that you can make money for your effort... but it really is so hard now, and the reward/effort ratio is a big whack for new people... who then get discouraged when they see 'lesser quality' earn more than their own work (not understanding that Steem is more about relationships than quality).

I'm not really sure what the answer is either... whales could earn more SP back in the day, but that SP didn't really amount to much when converted back to USD. It'll be interesting to see where we're at a year from now.

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I've found it much easier to make new friends here, than to make money on facebook :)

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Hahahaha, great point.
I'm sure most people have found though, that it's easier to make money elsewhere than to make money here... So Steem has a branding problem... if we take the expectation of making money out of the equation altogether, and make it about banding with like-minded awesome people instead of people we happen to be related to or went to school with, then people would love Steem more. If they're only here for the moula then they'll get burnt out and leave.

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I'm okay with that. In fairness it was the immutable nature of the blockchain that really drew me in. The idea that what I write here can't be altered by anyone.
It was and still is also a real meeting point for the anarchist/voluntaryist/freedom loving community, so it's those relationships too.

This is a really good series, and I like the way you have made your points @aghunter.

I think it is to be expected that it gets more and more difficult to be successful on Steemit. Let’s pretend for a minute that all Steemit users are investors, and your SP is your share of equity in the Steemit business. (Not that hard to imagine right 😜 )

The really early users were like the seed fund investors. They didn’t have to invest much time or money to get a decent share of the total SP. Although at the time that they invested, there wasn’t as much ‘certainty’ of the success of the Steemit business.

As the Steemit business grows, new investors need to be willing to put in a bit more time or cash to get a decent share of the total SP. Eventually as the ‘certainty of success’ of Steemit grows, it becomes pretty much impossible to get a large share of the SP. Or at least, if leave it too late to invest, Steemit is too far along it’s exponential growth to leave room for a decent return on investment.

To your point...

What I am attempting to highlight is that if we wish the Steem price to continue to appreciate, then we must ensure that the platform continues to attract new users, otherwise over the longer term it is likely to fail.

Steemit is designed so that the whales will ensure the success of the platform - and I think they will. Market forces will make sure they do. I think we will see cycles of times when it will get hard, and users will drop off, but then alarm bells will ring for the whales. They will react.

I’m sure there’ll be times when whales get lazy or don’t do a good job... but that will make the price drop and attract newer smarter whales.

Without trying to sound apathetic, I look at this as a battle for the whales. Us minnows don’t have much influence. So unless I have the money to buy in and become an opportunistic whale, I’d rather ride the waves than fight them.

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opportunistic whale I like that ;)

"Let’s stop pretending that the solution is just to work as hard as I did and you can be as successful as I am."

Now this is the biggest point here, everyone wants to make it, everyone (apart from the vote bot farms) and although I joined beginning of Jan 2018 I am hugely enjoying this platform and the sustenance that it could offer my life and allow me to get by without using the conventional UK methods such as "University" (I am studying an art foundation but would like to show the world examples of how there are other ways of making it in the world) However.......It's the issue you said broken SBD short term, minnows like me staying I can count off the top of my head a dozen amazing up and coming artists that would love the hell out of Steemit; but I know they would struggle at first due to lack of not just basic understanding of cryptocurrencies/blockchain technologies work, but I would know their work would be cut out against them DESPITE THE SIMPLE AS ANYTHING SIGN UP PROCESS.

Everyones brilliant ideas need to be thrown together with a philosophy like yours and out comes the platform that we need, not necessarily the one that certain greedy people deserve.

10/10 article mate

Can anybody help me here? I have been publishing content for a few weeks, and I make alot of effort producing quality content (so I believe and have been told..) but it's like a ghost town on my blog! How am I supposed to get people to find my profile and read my content or just upvote and comment?
I would be grateful for your help!!!

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Perseverance is the key, but I think also measuring your energy you put into it. There is no ‘quick fix’ to get views on your blog, so pace yourself in terms of how much energy you put into each post and how often you post. If you keep posting quality and engaging with others via comments you will get there. It takes time.

You can also try networking on some of the discord channels to build your community. And posting through the other steem aps like steepshot (the Steemit version of insta) and busy. Just make sure you understand how to use the keys so you don’t give your master key away.

You won’t lose if you just keep at it, slow and steady is better than going in hard for a big audience and then giving up out of frustration.

What's with all the looking back? If you want to compare your accomplishments with those who've been here a year or two of course that's going to sting.
Imagine instead a year from now; when people write about how back in early 2018 a single post could earn you one or even two whole steem.
When 2019 signups dream of having an account with 100 SP; and can't believe that you were here earning back in those glory days.

I remember what it was like when steem was 7c; people were throwing their hands in the air and leaving in frustration, that the place had no future; that they were only getting a few dollars worth of steem for their efforts.
It didn't feel like the glory days then; in fact I remember a whole lot of people in late 2016 complaining that they'd missed the glory days, back when steem was worth 50c.

Seriously, do the work, build your audience. Train people to click when they see your name.
A year from now, people will be desperately envious that you were right here, right now, and they weren't.

I'm so glad that you are addressing this issue in a nicely balanced way @adhunter. It's good to hear the arguments put rationally.

I have been here 3 months today and have been through many ups and downs, primarily caused by the imbalance of rewards here.

When I was new I read about the "bad" whales and then came the flagging wars. For a while I was upset about it but then I realised that these issues were so far out of my league it wasn't worth getting upset about.

Then I realised the important of SP but it wasn't until I thought about buying some that I saw just how hard it was. I decided one day that I would buy myself 500 SP after much agonising because I wanted to play the game and earn it. Believing the message of those that came before that it would all be different in 6 months.

The came two more disappointments. I discovered that buying 500 SP was also way out of my league and, even if I could, it wouldn't really make that much of a difference to the size of my vote.

So I soldiered on. Next issue was seeing those who had started about the same time surging ahead by buying Steem, buying delegation and/or spending $100s on bots. All the while working far less than I am.

I like that you acknowledge that it's harder now than it was "back in the day" but I find I don't want to think too hard about it or else I will get dejected again.

My saving grace has been commenting, enjoying conversations and building relationships as a result. If I look at the financial stuff I end up despondent.

I am fortunate to have won a 75 SP delegation (plus and extra 25 SP) from @abh2345 and I am very grateful for that. I just feels better to be able to upvote more good content. The upvotes of still small, less than 1 cent often, but at least I can make more of them without deleting my VP. In the early days I was usually at 25%.

So that's a short cut version of where I have been and where I am now. How long I will keep on keeping on remains to be seen but it is an interesting journey. 😊

I love your analysis. Signing up and using steemit grows in difficulty each passing. In the next coming years it will require so much effort or rather money to acquire a single SP.

I can't stop thinking of 'what would have been' had I joined the blockchain a year ago.

Then again, thinking deeper I realised I need to be thankful. It is unfortunately getting harder day by day for new users without huge pocket to invest to do well on steemit.
And truth be told, the selling point of steemit is the financial rewards. Other social media have every other thing better covered except for that.

For the growth of the community, it is now time for the dolphins and whales especially to step up and help as many new users as they can in the form delegation and generous upvote until they can stand. It is time we are start putting the survival of the community in the forefront.

@aghunter, You just brought an important topic that is paramount to the growth of this blockchain... I will so much hate it to turn into MySpace.

Best of motivation

Congratulations @aghunter!
Your post was mentioned in the Steemit Hit Parade in the following category:

  • Upvotes - Ranked 3 with 1843 upvotes

Thank you aghunter I have been here less than a week and your post series hit home in many places. I came with intentions of staying for the long haul but was hoping it would be more rewarding at first. I was lurking around a couple of weeks waiting for my account to make it to the front of the line. I ran across similar concerns scattered here and there in various posts over the past few weeks. It concerned me somewhat but hey why not give it a shot.

Each time I ran across the problem my thoughts are that we are dealing with human nature not the blockchain in this instance. What can be done will be done I think everyone could agree. There has to be trust that the whales will see their best interest as staying keeping it going for their investment and not decide to just cut and run to the next promising ICO. That is a very precarious balance to try to support.

After I realized a plankton has it even worse than a minnow lol I decided to try some Curation rewards. Hey at least I can help the platform that way and make a few sp to invest to grow. Well that didn't take long to realize I may be helping the platform and some other Steemians but clearly wasn't going to be helping my goal. The thought came to me that it would seem to be a fairly simple solution to just set a fee for everyone. A percent of their account value (the same percent for everyone) and toss it in a minnow reward fund. I was having some success hitting some curation but it all gets rounded down to nothing I think still not totally sure. Trying to curate gave me the thought that at least I was seeing and following what others were curating to help me evaluate the value of content. So not a waste of time for sure just different rewards.

I would have been happy to have some dust accumulating feeling I at least was growing with my work to help find quality content like I thought this place was supposed to work. Why not let the minnows have the dust they scrape up through a fee system that would distribute enough to each curator to make a penny or two for their efforts. They could then start accumulating so they can buy vote boost like everyone else does. Maybe level the playing field somewhat giving much-needed first encouragement and success even at a limited scale. Then as you grow your fee contributes back to the minnow pool which enables even more to participate growing the membership base.

In essence the more successful you are the more you help the newcomers who really need it. Word spreads that you can actually be rewarded even a tiny amount means a lot to many, many people you wish to attract from around the globe. What a great opportunity to help perhaps millions in impoverished regions where $1 really means something. I realize my thoughts are likely those of protozoa and there is much I don't understand but I think if somehow the blockchain could redistribute even a tiny % of a posts rewards to everyone who was involved in curating the post, that would feed the incentive to sign up and add much value to the blockchain and therefore the whales investments. Seems like a win win for both sides to me.

Good morning gans..salam kenal..

Hi good morning

I'm confused, I don't know what I want to do, LOL ;)
I'm still engaged with Facebook that, from a certain point of view, it's a kind of illness?

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dopamine reward system feedback loops got you hooked, I deleted mine fully almost 2 years ago, re-made it , then about 6 months ago finally went cold turkey. Never looked back. Im serious try talking to certain friends without it .

near impossible. because without it you would of sacked them off years ago. dead weight. just like the website.

I'm serious check the shifting age demographic

I liked your previous 2 posts and you are making some great points. But this post you just got it all wrong. You are not getting SP based on the dollar amount on posts. The dollar value is calculated based on the SP you are about to receive.

Your entire argument is just plain wrong. If I make a rough estimate If you have 10,000SP and vote someone 100% while your voting power is 100% you are giving that person 1SP. The dollar value shown on the post is based on the witness price feed of STEEM. This is why the value of your vote fluctuate when STEEM price go up/down.