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RE: Is Steem a ponzi scheme?

in #steem4 years ago (edited)

I read your post. Interesting spin on this mess. This has been an ongoing problem on the platform, perhaps potentiated by the fact that the value of Steem and SBDs have risen in recent months. There are more eyes on the site and more attention being paid to the blockchain itself.

The recent addition of Steem and SBDs to some large crypto exchanges in South Korea, such as UpBit, will likely sustain the underlying liquidity spurring their demand for the foreseeable future. However, one must realize that the scrutiny of the mechanics of the blockchain itself will grow with increased publicity. It seems that the CEO of Steemit Inc. is fine with the negative publicity of the whale wars and isn't really concerned about its underlying causes, which are the evidently exploitable deficiencies of the platform itself. This is troubling, to say the least.

I have a small stake here as I was intrigued by the concept when first introduced to it last summer. However, I am disappointed in the lackadaisical execution. Like you, I fear that by the time the power brokers around here finally wake up to the fatal flaws inherent to the rewards system itself, the money flow will have dried up as the broader market wakes up to the flaws as well and the value of Steem will consequently collapse. This recently happened with Bitconnect. I don't want to see it happen here, but it could eventually transpire if substantive improvements aren't made as soon as possible.

And if changes aren't made? Well, a more quality platform will be developed, and the lessons learned from this experiment will be applied to that community and its foundational blockchain. As the Steem White Paper forewarned: "Any imbalance in the give and take within a community is unsustainable. Eventually the givers grow tired of supporting the takers and disengage from the community."


I think the amount of centralized influence Steemit has over Steem is going to be a significant problem in itself. There were some altered plans that made that a much bigger issue than it was supposed to be originally. They may have the foresight to counter that, but if they don't it may be a dramatic mess to struggle through. We shouldn't all be looking at @Ned and @steemit to solve these issues, but there's a risk of learned helplessness when one organization controls so much of the voting power.

The organization controls much of the voting power and the origination of the blockchain coincides with Steemit's launch, so to me they are inextricably tied, even if the claim is made that the blockchain itself a decentralized global protocol while Steemit is a centralized website on it.

The recent court filing against Bitconnect and its prominent affiliates (some of which are exploiting Steemit itself) is telling.

On the third page of the filing it says, "BITCONNECT guaranteed investors up to a forty percent (40%) total return on their investments...regardless of market performance or the fluctuating price of cryptocurrency."

This statement stood out to me because it speaks to something that I have been wrestling with regarding the Steem blockchain pertaining to the characterization of SBDs. Its white paper states, "The primary concern of steem feed producers is to maintain a stable one-to-one conversion between SBD and the U.S. dollar."

The SMT White Paper, itself credited to Steemit Inc, reaffirms that SBDs are " experimental asset on Steem that relate to the US dollar, originating with Steem's launch in 2016."

Market performance has consistently demonstrated that supply and demand forces do not allow for SBDs to be pegged to $1 USD. Dan Larimer himself recently conceded in an interview that SBDs are to be considered as any other crypto currency, suspectible to fluctuations in value.

Yet some of the Steem Witnesses still debate this subject as if they themselves can set the price. This is madness, to put it frankly. And my concern is that it is a consequence of a long disproved experiment set forth by the Steem White Paper itself that has not been formally repudiated by Steemit Inc or the Witnesses.

In light of the increased oversight of the crypto space, as is evident by the Bitconnect fall out and the ongoing questions regarding Tether's claims of being pegged to the USD, I would advise the following: the next hard fork of the Steem blockchain should remove any and all "mechanisms" that the Witnesses have at their disposal to insinuate the notion that they can guarantee a minimal $1 USD value for SBDs. The claimed interest rate functionality that the Witnesses can set on the "Steem Dollars" and "Savings" accounts in user wallets here on Steemit should also be removed.

Addressing the centralized Steem distribution is phase 2 or 3 in my #fight4steem mental roadmap. Originally that massive stake Steemit got was supposed to be dispersed to new users as part of the account creation process until it was gone, but they changed course and started using temporary SP delegation instead of permanent distribution to launch new accounts. That's a major red flag.

SBDs are certainly broken, and it could make sense to just remove them completely to reduce confusion. Pegged assets can work (as demonstrated on BitShares), just not unconditionally. SBDs were cloned from BitShares but they altered the model to allow them to be issued by the network rather than by individuals, and in doing that they broke the economics of the pegging mechanism. On BitShares the pegged assets are collateralized with BTS provided by individual private investors who effectively want to short sell the peg's target asset. The minimum collateral ratio thus defines the maximum drop in the BTS price that the asset can be guaranteed to protect against. It's likely to protect against larger drops as new investors buy out positions and recollateralize them, but it can't be guaranteed. Steem is targeting average social media users rather than finance and economics geeks, so they tried to dumb down the model and make it more accessible and killed it.

I look forward to reading your continued insights in the next phases of the #fight4steem initiative. The blockchain's transaction and rewards distribution system is certainly broken. Dan himself admitted so. And the lackadaisical attitude about addressing from the powers that be around here is certainly concerning.

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