Steem pyramid scheme revealed

[iamnotback]

I was thinking about the capping of rewards on posts, to make more "room" for smaller posts to get something from the reward pool...

In theory this is fixable by curation (whale downvoting reducing payouts to sane levels)...

...

But the problem is if we successfully spread the rewards out, then authors won't hardly be earning anything. Then why would 20,000 bloggers switch from Medium, and even Facebook and other more powerful competitors are adding blogging features. The voting paradigm is inherently dysfunctional and I am intending to do something about this soon.

[AlexGR]

I'm not saying to spread them evenly, but if you cap the high rewards, suddenly there's much more rewards that can go to the lower strata.

A 10.000$ post could be paying 100 authors x 100$ or 1000 authors x10$. So....

[iamnotback]

I'm not saying to spread them evenly, but if you cap the high rewards, suddenly there's much more rewards that can go to the lower strata.

A 10.000$ post could be paying 100 authors x 100$ or 1000 authors x10$. So....

Okay but you will not be able to pay more than about 10% of the users anything meaningful unless the debasement rate is increased to 1000% yearly, at least in the current structure where every 10% of rewards produces 90% more dilution paid to SP holders.

So you still won't have an activity that most users can participate in.

I showed the math before. With social networks valued about $100 per user, then with 10% reward per year, that is $10 per user per year. If you pay 10% of the users, that is $100 per year.

Since Steem is currently valued at about $40000 per active user or $4000 per signup, it can pay more, but as you've noted, this overvaluation is unlikely to scale.

[AlexGR]

Yes I don't see how it can scale. The only flaw I can find in my argument is that "userbase" is not necessarily the same as "authors", so if you have 50k users and 50mn users it doesn't mean the paid authors go up x1000. They could be "scaling" in a non-linear fashion compared to "ordinary readers" (kind of like the numbers from medium.com). Of course the avg income per user is still going down.

[iamnotback]

Yes I don't see how it can scale. The only flaw I can find in my argument is that "userbase" is not necessarily the same as "authors", so if you have 50k users and 50mn users it doesn't mean the paid authors go up x1000. They could be "scaling" in a non-linear fashion compared to "ordinary readers" (kind of like the numbers from medium.com). Of course the avg income per user is still going down.

Well I thought of that also. Medium has 20,000 unique weekly blog authors serving 25 million unique monthly readers, so roughly a ratio of 1000. At $100 per reader valuation, that is ~$10,000 a year per blog author which isn't really enough unless the best bloggers get paid more than that and the mediocre ones less than that.

But Medium was recently valued at $400 - $600 million only by a round of financing. So that is only $16 - $20 per reader valuation. So that reduces the reward to $1600 - $2000 per blog author per year.

Facebook's mcap is significantly higher at ~$300 per user, but Facebook users are highly engaged and are publishing and interacting with content, e.g. photos, sharing posts, etc.. Problem is that you are only paying for blogging and not the rest of activities that would motivate users to do all those things on Steem instead of on Facebook.

Blogging is too one dimensional of an activity to go after the masses. So if the onboarding model is paying blog authors and that is the main incentive to join, then I just can't see how it can cross the chasm and finance even a run to Medium's level.

I thought through all of this.

Edit:

STEEM is just a coin with a marketing budget controlled by the owners, that's all.

The main problem is that the entire point is to distribute the currency to as many people as possible who would engage in commerce with the token, because that is the only future that will make the token valuable.

But with the concentration of the blogging rewards into a few 1000s of authors wallets, the remaining 93% have not been brought into the platform and quit. Even if they continue on only as readers, they haven't been onboarded with tokens.

[iamnotback]

Jeff is milking this circle-jerk:

Jeff builds a strawman argument by only focusing on the perspective blogging authors. If you want to argue that Steem is a scam, you start by stipulating that it is scam for investors, not for blog authors. And then you make an argument about how it was 80 - 90% sneaky "pre"-mined by a few guys who can now cash out 1% per week and/or dominate the curation rewards, while investors have to lock up their investment for 2 years. Does that make it a scam? Decide for yourself.

With one promoter with a microscopic anarchist audience dominating the blog rewards nearly every day, Steem is looking more and more like a community of backslapping and not real diversity.

Fools lying to themselves:

So even if all of the sudden the big players were to start to cash out everything and the value of steel began to drop you could still cash out a nice chunk of change (obviously not all) of which cost nothing to begin with.

That is not necessarily true. If investment demand dried up, it is possible you wouldn't be able to sell for anything worth more than your miniscule cost of time+effort in selling.

An astute minnow (and the youth are not going to like paid blogging because it isn't easy and immediate):

I enjoyed both sides of this debate. Something I found today needs to be considered. Stats (today) have 68,624 user accounts. Of those 22,287 have at least 1 post (comments count as a post too). Accounts with more than 10 followers is 2,223. I have been here 1 week, I have provided content 20 times, commented, read tons of material, voted, I have worked it and developed 31 followers. My son made a few blogs and left but got 10 followers. I am a minnow, my vote is worthless. My followers are minnows, worthless. You, dollarvigilante have 1850 followers and are now likely a whale. Unless content is noticed by whales, and more than 1, thats like having your story page in a stack piled 2000 pages high. Will anyone read it? I am having a hard time imagining that 3 or 4 whales might stumble upon my page. So I am wondering what is the purpose of the minnow? As 5-10 thousand new people come thru and then in turn leave, are the minnows purpose to make all this appear legit. I WANT TO BE WRONG. Jeff, any thoughts?

Schooling @smooth on the contextual aspect of marketing:

Unfortunately it doesn't offer the masses anything they want. The masses aren't that interested in reading blogs out-of-context. They read blogs in the context of that author being important to them in some content, e.g. as author of the s/w they are using or the music they are listening to. And they don't really care if the author is getting paid, unless they've developed that close contextual relationship. And often that context is already paying the author (which can mean no advertising as well).

[generalizethis]

Berniesanders noticed one of my poems, so you can get the attention of a whale without first knowing them or bringing a following previously established or being part of the whale up-vote train.

https://steemit.com/poetry/@generalizethis/icarus-1-original-epic-poem

[Sontoloyo]

Steem is nothing more than a pump and dump. For those fools who bought it I feel bad. If you simply made Steem on steemit then little lost.

[alexjonescrypto]

Its probably a pyramid. JUST DO NOT BUY STEEM AND ONLY CASH OUT THE STEEM YOU EARN. IF YOU DO NOT ACTUALLY BUY BUT JUST USE THE PLATFORM YOU CANNOT BE BURNED. JUST THINK OF IT AS A BONUS IF YOUR ABLE TO CASH OUT SOME MONEY.

[mtnsaa]

Treating posts as if they are only valid for 12-24 hours is the most ridiculous thing I've ever seen. A well written and rich post can get buried with $0.05 and then forgotten forever. Are they Facebook status/tweets or actual blog posts/serious articles?

That's only to mention the site problems. The system won't survive more than 3 or 4 months the way is currently set up, the power of the whales and early birds is too evident for any smart trader to invest in this. Sure if you are a "good" content creator or a personality you will get your share.

Many whales and people behind the project think they have something completely unique. The only unique thing are the high payouts, the rest is just a complete clone/copy from Medium, Reddit, Buzzfeed and others, even the name. The whole platform and high payouts depend exclusively on Steem price and speculators won't keep the price up forever (this downtrend will likely tend to continue indefinitely).

No one will be in Steemit if payouts are 10 cents per post. Curations rewards will be laughable so minnows are out of the equation too.

[Dafar]

Its probably a pyramid. JUST DO NOT BUY STEEM AND ONLY CASH OUT THE STEEM YOU EARN. IF YOU DO NOT ACTUALLY BUY BUT JUST USE THE PLATFORM YOU CANNOT BE BURNED. JUST THINK OF IT AS A BONUS IF YOUR ABLE TO CASH OUT SOME MONEY.

Agreed with this. If you just use the platform, get lucky and make some money then it's all good.


Investing in Steem was a terrible idea for me. It seems like the way the inflation is set up is not only to encourage users to convert whatever they have to SP, but also to take $$ from people who invest and distribute it to the users.

If you invest and just sit on Steem or Steem Power you are fucked.

I had $3.5K worth of SP a month ago... the # of SP I have in my wallet increased significantly but but my overall account value is now $1K.... LOL wtf is this? I know Steem went though a "bubble" recently, but even then the inflation is so ridiculously high that it's nearly impossible for Steem to go back to the $3-$4 range now.

The interest you get in SP is an illusion that makes you think that you are earning money/interest... but the inflation of Steem totally negates any SP earnings you get by letting your account sit. I knew there was some trick to this mechanism.

The only way I can get my $3.5K back is to earn it though posts that make a few grand... which is tough to do if you're not a hot girl or someone who's famous.

Then I have to power down and wait 104 weeks to get my full amount back. Of course, since I'm being paid back in weekly installments of Steem... by the time the 2 years pass the Steem inflation will be so high that whatever I get back in Steem will be worth peanuts. So essentially, I'm never getting the amount I power down... each payment will give you back the same # of Steem but they will be worth significantly less because of the ridiculous inflation and however the fuck "vests" work. No wonder the system is so complicated, it's starting to make sense where the money comes from

[AlexGR]

Adjustments on the economic part: https://steemit.com/steem/@dantheman/steem-dollar-stability-enhancements

Some are pretty radical tweaks...

[Zer0Sum]

Adjustments on the economic part: https://steemit.com/steem/@dantheman/steem-dollar-stability-enhancements

Some are pretty radical tweaks...

They have flat-lined at 5,000 daily users and Stan Larimer is a top "celebrity"...
But Dan is obsessed with tweaking his broken dollar peg that no one cares about.

[AlexGR]

Adjustments on the economic part: https://steemit.com/steem/@dantheman/steem-dollar-stability-enhancements

Some are pretty radical tweaks...

https://steemit.com/steem/@dantheman/steem-dollar-stability-enhancements#@alexgr/re-dantheman-steem-dollar-stability-enhancements-20160820t180419652z

Feedback Wanted

If anyone has any concerns or has better solutions in mind please let us know.

I have some long-term stability feedback that may be useful.

One of my main concerns is that the system is not viable in the long run due to problematic reward scaling. In other words, if userbase goes 1000x to 70mn people, the marketcap must go to 1000x (that's 200 BILLION $) to keep up the rewards at current levels. If marketcap goes only 10x (up to 2bn USD) when userbase goes 1000x, the average reward will be 100 times smaller.

This is a serious issue that penalizes growth.

Now the question is how can one make a successful system when it is penalized by its own growth. The growth has to be working in the system's favor.

On top of that there is the issue of residual income that has been discussed recently where authors desire that income must continue beyond the 30 days.

Now in a scaling scenario where our userbase is 100x or 1000x, and the reward pool is already insufficient to cover daily rewards, how can one then take from that same reward pool to generate revenue for the older content? It seems impossible.

I was doing some thinking on it and I believe I have cracked the issue of both long-term viability and residual income through an ad-based scheme that breaks the closed-loop economy.

One of the main promises of steemit is that there is no advertising. This promise can be kept: For its registered members.

I believe a lot of the traffic, if not most of the traffic (pageviews), that will be generated in the future will not be by the members themselves but by external viewers who arrive to read something without being registered members. We could have 10mn members and 1bn non-members getting some kind of article to see here at one time or another. The interface for non-registered members will have ads generating revenue. This revenue will sustain both the price of the currency, the reward pool and even residual income. In fact upvotes on old content may be paid exclusively through the ad-revenue generated by ad-views from non-registered members, instead of the reward pool for the 30-day period.

In this way

a) Registered members enjoy an ad-free experience and the promise for such an experience is kept
b) Non-registered members see ads and generate ad-revenue through their millions/billions of page views, but they are also incentivized to join for free if they want to have an ad-free experience
c) Ad revenue can help reward scaling which currently seems doomed in the long-term
d) Ad revenue can help residual income-level which currently seems even more doomed in the long-term
e) The currency is supported by inflows outside the closed loop.

[chryspano]

One of my main concerns is that the system is not viable in the long run due to problematic reward scaling. In other words, if userbase goes 1000x to 70mn people, the marketcap must go to 1000x (that's 200 BILLION $) to keep up the rewards at current levels.

Why rewards should remain at the same levels as today? if userbase rises 1000x why should we also have 1000x more people earning thousands and hundrends of dollars per blog? I have not done any calculations but intuitively I don't think there is any problem with that, rewards are HUGELY overpriced right now.   

[AlexGR]

One of my main concerns is that the system is not viable in the long run due to problematic reward scaling. In other words, if userbase goes 1000x to 70mn people, the marketcap must go to 1000x (that's 200 BILLION $) to keep up the rewards at current levels.

Why rewards should remain at the same levels as today? if userbase rises 1000x why should we also have 1000x more people earning thousands and hundrends of dollars per blog? I have not done any calculations but intuitively I don't think there is any problem with that, rewards are HUGELY overpriced right now.   

I don't disagree with the overpricing and part of the reason why payouts are high today is precisely because the reward pool is intended for a larger audience (as are the witness payouts - because the service provided right now is elemental from what some witnesses say).

But we have to remember payouts are high only for a very small number of authors. The others get peanuts. So the "peanuts effect" will go 1000x

[smooth]

One of my main concerns is that the system is not viable in the long run due to problematic reward scaling. In other words, if userbase goes 1000x to 70mn people, the marketcap must go to 1000x (that's 200 BILLION $) to keep up the rewards at current levels.

Why rewards should remain at the same levels as today? if userbase rises 1000x why should we also have 1000x more people earning thousands and hundrends of dollars per blog? I have not done any calculations but intuitively I don't think there is any problem with that, rewards are HUGELY overpriced right now.   

I don't disagree with the overpricing and part of the reason why payouts are high today is precisely because the reward pool is intended for a larger audience (as are the witness payouts - because the service provided right now is elemental from what some witnesses say).

But we have to remember payouts are high only for a very small number of authors. The others get peanuts. So the "peanuts effect" will go 1000x

I don't agree with your various statements about market cap entirely, but to the extent I do, I see this as an early adopter incentive, not very different from how mining usually works (blogging is considered a form of mining in Steem). It is often easier to mine more early on and this is by design, as an incentive to join a small network. With a larger network, less incentives are needed.

They have flat-lined at 5,000 daily users and Stan Larimer is a top "celebrity"...
But Dan is obsessed with tweaking his broken dollar peg that no one cares about.

Valid points. There is other development work going on though, I wouldn't base everything on what blog posts Dan decides to put up.

Then I have to power down and wait 104 weeks to get my full amount back. Of course, since I'm being paid back in weekly installments of Steem... by the time the 2 years pass the Steem inflation will be so high that whatever I get back in Steem will be worth peanuts. So essentially, I'm never getting the amount I power down... each payment will give you back the same # of Steem but they will be worth significantly less because of the ridiculous inflation and however the fuck "vests" work. No wonder the system is so complicated, it's starting to make sense where the money comes from

You make some valid points about the investment proposition overall, and many including existing investors have said the same thing. The above is wrong though. The portion of your SP that isn't yet powered down continues to get antidillution payments. Your weekly payments actually increase in terms of STEEM every week. This largely offsets the effect of inflation. In fact your outcome will largely be determined by what happens to the market price/demand, not inflation.

[danherbias07]

Why have I read this just now. Is this really suppose to be in altcoin discussion? This is a revelation. Is this really true or just a hoax to bring them down?

[DecentralizeEconomics]

Its probably a pyramid. JUST DO NOT BUY STEEM AND ONLY CASH OUT THE STEEM YOU EARN. IF YOU DO NOT ACTUALLY BUY BUT JUST USE THE PLATFORM YOU CANNOT BE BURNED. JUST THINK OF IT AS A BONUS IF YOUR ABLE TO CASH OUT SOME MONEY.

Agreed with this. If you just use the platform, get lucky and make some money then it's all good.


Investing in Steem was a terrible idea for me. It seems like the way the inflation is set up is not only to encourage users to convert whatever they have to SP, but also to take $$ from people who invest and distribute it to the users.

If you invest and just sit on Steem or Steem Power you are fucked.

I had $3.5K worth of SP a month ago... the # of SP I have in my wallet increased significantly but but my overall account value is now $1K.... LOL wtf is this? I know Steem went though a "bubble" recently, but even then the inflation is so ridiculously high that it's nearly impossible for Steem to go back to the $3-$4 range now.

The interest you get in SP is an illusion that makes you think that you are earning money/interest... but the inflation of Steem totally negates any SP earnings you get by letting your account sit. I knew there was some trick to this mechanism.

The only way I can get my $3.5K back is to earn it though posts that make a few grand... which is tough to do if you're not a hot girl or someone who's famous.

Then I have to power down and wait 104 weeks to get my full amount back. Of course, since I'm being paid back in weekly installments of Steem... by the time the 2 years pass the Steem inflation will be so high that whatever I get back in Steem will be worth peanuts. So essentially, I'm never getting the amount I power down... each payment will give you back the same # of Steem but they will be worth significantly less because of the ridiculous inflation and however the fuck "vests" work. No wonder the system is so complicated, it's starting to make sense where the money comes from

Suspiciously, this sounds like Communism.

[AlexGR]

One of my main concerns is that the system is not viable in the long run due to problematic reward scaling. In other words, if userbase goes 1000x to 70mn people, the marketcap must go to 1000x (that's 200 BILLION $) to keep up the rewards at current levels.

Why rewards should remain at the same levels as today? if userbase rises 1000x why should we also have 1000x more people earning thousands and hundrends of dollars per blog? I have not done any calculations but intuitively I don't think there is any problem with that, rewards are HUGELY overpriced right now.  

I don't disagree with the overpricing and part of the reason why payouts are high today is precisely because the reward pool is intended for a larger audience (as are the witness payouts - because the service provided right now is elemental from what some witnesses say).

But we have to remember payouts are high only for a very small number of authors. The others get peanuts. So the "peanuts effect" will go 1000x

I don't agree with your various statements about market cap entirely, but to the extent I do, I see this as an early adopter incentive, not very different from how mining usually works (blogging is considered a form of mining in Steem). It is often easier to mine more early on and this is by design, as an incentive to join a small network. With a larger network, less incentives are needed.

The problem is that even with the incentives offered at the level of our small-scale network (right now), most people bail. If the incentives don't work now, it is only logical to question how will they work when rewards are divided /100 or more? If the casino-effect (1/37) tends more to lottery effect (1/xxxxx), it simply won't work. I don't know - it seems clear as day to me.