Steem pyramid scheme revealed

[Hyperme.sh]

The Steem scheme is an illegal investment security and the implications are potentially dire.

Can't say I disagree.

The famous blog post states intent to circumvent securities laws while achieving the same economic reality of raising funds by selling stake to investors seeking a return from success of the project. That's basically a roadmap for SEC prosecution. Whether the SEC chooses to prioritize this over hundreds of other such candidate token/ICO cases is unknown to me. I always felt that blog post was a strategic blunder (i.e. harmful admission) driven by ego ("Look how clever I am, I figured out how to skirt the law while achieving the same thing").

Just my uninformed and ignorant view, not legal advice.

Did you see “he” proposed an alternative to proof-of-work distribution which he claims would avoid the problem? See the section, “Pre-mine Without Securitization” and the comment that discusses Dan’s latest strategic blunder with EOS.

Then we can say the same about all the bitcoin miners too, imo. Every miner is selling stake to investors seeking a return from the success of the project(bitcoin)

Mining is competitive, thus it’s not free to mint tokens. Thus it’s not a transfer of value from the investor to the issuer who is responsible for the managerial or development efforts which the expectation-of-profit depends on. And the issuers are independent from each other, not a centralized issuer. The miners are orthogonal to the developers who the investors’ expectation-of-profit depends on. The value is significantly burned and ends up dispersed into heat, utility companies, and hardware manufacturers, etc.; thus it’s not economically equivalent to an issuer (who are the developers) pre-mining some tokens for (nearly) free then selling them to investors. Read the linked blog again more carefully. You need to understand the 3 points of the Howey Test. Without a transfer of value to an issuer who the investor depends on for managerial efforts, then there is no investment security. Btw, thanks for the upvote.

Whereas, for an instamine or stealth proof-of-work mining launch where a significant portion of the money supply is mined over a very short period of time mostly by the developers group (and their insider friends), there’s no significant competition and thus the developers (and friends) mine the tokens at nearly zero cost (relatively speaking to the price they sell them for), and thus a very significant portion of the money supply has been effectively pre-mined at nearly zero cost by the developers who the investors’ expectation-of-profit depends on. Thus this is economically equivalent to an ICO and thus those tokens are effectively “ICO-issued” tokens under the Howey Test’s criteria. This is what transpired for Dash, Steem, and Bytecoin. In Bytecoin’s case, the stealth mine may have been over a long period of time, because afaik it was not publicly announced for up to year from the date of the genesis block.

Thus in addition to ICOs, Dash, Steem, and Bytecoin are also investment securities under the Howey Test (and possibly in other countries as well that may follow the sane principles about investors’ expectation-of-profit and value transferred to an issuer which). They are also likely illegal investment securities, because they weren’t registered with the SEC. Illegal investment securities are illegal for US persons to trade ever. US persons who are trading unregistered investment securities are culpable under the law. Apparently other countries are also going to harmonize their securities regulation with the SEC, so eventually all persons of the world will be similarly affected.

As for ICOs such as Ethereum which also then employed proof-of-work to distribute more of the money supply, those tokens which were in the ICO are not fungible with the competitively proof-of-work mined tokens, in terms of compliance with securities regulations. For those ICOs-issued tokens of ETH (and others), if they were registered with the SEC, then US persons may trade them, but only on exchanges which are registered with the SEC and they may not spend them (i.e. trade them) decentralized. Thus such tokens are not legal to use as a cryptocurrency. If for any person’s jurisdiction, the unregistered ICOs-issued tokens are illegal to trade (and spend!), then they can’t be traded ever without being culpable under the law. It is a giant mess because these ICO-issued tokens of ETH (and others) have been mixed together with the proof-of-work tokens, so the SEC and others countries will likely be forced to seize all ETH tokens on all exchanges. Note however, probably regulators will prioritize purely ICO tokens which were clearly scams first. I think the demise of ETH is some year or years from now, but I believe eventually all the ICO-issued token systems are doomed to illegality. What can happen is that past trading in ETH can be generally ignored, but when the authorities want to for example force you to testify in court against some other ICO prosecution, they can employ your past ETH trading as a threat against you. It is also possible that ETH in the future might become delisted on regulated exchanges where the tokens were sold in countries where they were required to be registered but were not (and of course illegal to trade on unregulated exchanges). Note how regulators have seized trading records from Coinbase and BTC-e, and surely they will attain all trading records from all exchanges eventually. The G5 (Five Eyes) national security apparatus are recording everything and tracing can be done even across VPNs and Tor (and Tor is a honeypot any way). Russia, China, and Germany’s national securities apparatus is also surely very active in recording and tracing all Internet activity.

The linked blog explains this in more detail.

Excuse my ignorance, but I'm not clearly seeing what the "clear legal way" is. Reading here (where you linked):

https://steemit.com/cryptocurrency/@anonymint/re-h0bby1-re-anonymint-are-most-cryptocurrencies-doomed-to-collapse-because-they-re-ico-issued-20170904t001326092z

I'm not seeing the "clever way".

I'm not a lawyer, so this is beyond my expertise.

I see how PoW gets around the Howey Test. But for crowdfunding a project, I'm not really seeing "the clever way". (Maybe it's just late and I'm being stupid.)

Click the link to the blog so you can read the section:

Did you see “he” proposed an alternative to proof-of-work distribution which he claims would avoid the problem? See the section, “Pre-mine Without Securitization” …

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[maursader]

Yes, Steem is nice for content creators but from an investors point of view it is a no go imho. Just have a look at https://steemwhales.com/. Steem ist not a decentralized currency, most of the coins are owned by Steemit and the exchanges.

[chryspano]

Whereas, for an instamine or stealth proof-of-work mining launch where a significant portion of the money supply is mined over a very short period of time mostly by the developers group (and their insider friends), there’s no significant competition and thus the developers (and friends) mine the tokens at nearly zero cost (relatively speaking to the price they sell them for), and thus a very significant portion of the money supply has been effectively pre-mined at nearly zero cost by the developers who the investors’ expectation-of-profit depends on. Thus this is economically equivalent to an ICO and thus those tokens are effectively “ICO-issued” tokens under the Howey Test’s criteria. This is what transpired for Dash, Steem, and Bytecoin. In Bytecoin’s case, the stealth mine may have been over a long period of time, because afaik it was not publicly announced for up to year from the date of the genesis block.

My only "objection" is that I don't think there was an "instamine" or "stealth proof-of-work mining" in Steem, there was the [ANN] thread, and there was the code available for everyone. No matter how much easy the mining process could have been, there would always be some people that could not mine at all. If we make the claim that Steem was "premined" because people could not mine it if they didn't have a degree in IT then we can also make the claim that most coins are also "premined" because they require at least some basic IT knowledge, lets also not forget those that don't even own a pc, everything must seem "premined" to them. What I'm trying to say is... where do we draw the red line when we talk about "premine" based on how "difficult" is something to mine?

Imo, it's too far fetched, that's all.

[Hyperme.sh]

Whereas, for an instamine or stealth proof-of-work mining launch where a significant portion of the money supply is mined over a very short period of time mostly by the developers group (and their insider friends), there’s no significant competition and thus the developers (and friends) mine the tokens at nearly zero cost (relatively speaking to the price they sell them for), and thus a very significant portion of the money supply has been effectively pre-mined at nearly zero cost by the developers who the investors’ expectation-of-profit depends on. Thus this is economically equivalent to an ICO and thus those tokens are effectively “ICO-issued” tokens under the Howey Test’s criteria. This is what transpired for Dash, Steem, and Bytecoin. In Bytecoin’s case, the stealth mine may have been over a long period of time, because afaik it was not publicly announced for up to year from the date of the genesis block.

My only "objection" is that I don't think there was an "instamine" or "stealth proof-of-work mining" in Steem, there was the [ANN] thread, and there was the code available for everyone. No matter how much easy the mining process could have been, there would always be some people that could not mine at all. If we make the claim that Steem was "premined" because people could not mine it if they didn't have a degree in IT then we can also make the claim that most coins are also "premined" because they require at least some basic IT knowledge, lets also not forget those that don't even own a pc, everything must seem "premined" to them. What I'm trying to say is... where do we draw the red line when we talk about "premine" based on how "difficult" is something to mine?

Imo, it's too far fetched, that's all.

I agree that defendants can make arguments about subjectivity. Here is my logic.

Main “objection” (reply) to your point is the one @smooth stated, which I reiterated.

It’s the duration of the mining phase that most distinguishes a competitive proof-of-work distribution from an attempt to obfuscate a pre-mine.

Because otherwise we get into subjective arguments about where is the official location for an ANN, and what constitutes a sufficiently fair ANN circumstance (e.g. binaries provided, etc). Given a long enough duration of mining, the free market sorts out those subjective issues sufficiently to the value proposition which the decentralized free market ascertains. The duration should be sufficient that mining is still ongoing when the token has gained significant awareness in the market, i.e. at least until well after the first major pump (which for Steem was summer 2016).

I also lean to agree that it is unlikely that STEEM is prosecuted as a high priority, if ever (probably never). The probable main target of the current crackdown are the Xerox copy purely ICOs on Ethereum.

And perhaps other purely ICO distributed tokens such as NEO and Qtum although these are probably viewed constructively (i.e. not vacuous projects) by regulators other than the fact they have an investment securities structure. There is another way to structure fundraising so the tokens are not investment securities. That is to separate the fundraising shares and the tokens. Pay out dividends to the shares, instead of transferring capital gains in tokens.

But even though I may agree that it is unlikely that Steem will be become illegal to trade very soon, there is no way I would buy any of these. Why put myself in danger in the future 5 years from now when the governments in the West become much more desperate and totalitarian. They could dig up any old reasons to confiscate assets. Better to invest in things which were launched 100% legally. Surely you value yourself and your freedom more than some token.

I urge you to consider launching a Steem replacement which is launched 100% legally. Or joining someone who does.

[smooth]

Whereas, for an instamine or stealth proof-of-work mining launch where a significant portion of the money supply is mined over a very short period of time mostly by the developers group (and their insider friends), there’s no significant competition and thus the developers (and friends) mine the tokens at nearly zero cost (relatively speaking to the price they sell them for), and thus a very significant portion of the money supply has been effectively pre-mined at nearly zero cost by the developers who the investors’ expectation-of-profit depends on. Thus this is economically equivalent to an ICO and thus those tokens are effectively “ICO-issued” tokens under the Howey Test’s criteria. This is what transpired for Dash, Steem, and Bytecoin. In Bytecoin’s case, the stealth mine may have been over a long period of time, because afaik it was not publicly announced for up to year from the date of the genesis block.

My only "objection" is that I don't think there was an "instamine" or "stealth proof-of-work mining" in Steem, there was the [ANN] thread, and there was the code available for everyone. No matter how much easy the mining process could have been, there would always be some people that could not mine at all. If we make the claim that Steem was "premined" because people could not mine it if they didn't have a degree in IT then we can also make the claim that most coins are also "premined" because they require at least some basic IT knowledge, lets also not forget those that don't even own a pc, everything must seem "premined" to them. What I'm trying to say is... where do we draw the red line when we talk about "premine" based on how "difficult" is something to mine?

Imo, it's too far fetched, that's all.

You can look at economic reality here. As Hyperme.sh pointed out, the mining was not competitive. It was at near-zero cost, based on asymmetric and privileged information, and therefore very much unlike competitive mining that takes place over a significant period when there is ample opportunity for information to disseminate (and the developers are not admittedly and deliberately exploiting their exclusive access to that information to gain a very large non-competitive advantage).

So the outcome is effectively (about) the same as a premine, regardless of how they got there. (And conversely such an outcome would most assuredly not be achieved with competitive mining over an extended period as with Bitcoin or Litecoin.) Achieving the equivalent outcome of token distribution and investor funding of developer efforts via a different mechanism is effectively synonymous with looking past form to function (i.e. "economic reality") to me, but I'm neither a prosecutor, nor a judge, nor a jury. There is a small caveat here but I don't think it ultimately changes the conclusion so I will omit for brevity (and economy of my writing effort).

[Hyperme.sh]

Achieving the equivalent outcome of token distribution and investor funding of developer efforts via a different mechanism is effectively synonymous with looking past form to function (i.e. "economic reality") to me, but I'm neither a prosecutor, nor a judge, nor a jury.

I’m not clear if you also intended your reasoning as quoted to also apply to the proposed idea wherein a company could take investment in exchange for shares which are securities. Then launch a decentralized ledger with a pre-mine but never sell those pre-mined tokens until it had completed all its managerial efforts. It is suggested that the said tokens would not be investment securities when sold, because there is no ongoing development by the issuer after an investor buys them. So it side-steps the Howey Test. Of course the shares remain securities, but the tokens are not. The company can then distribute the dividends to the shareholders. It is a different structure, because the investors in the shares get dividend income instead of capital gains. The investors in the shares never receive tokens.

Note the company could award some of those tokens for onboarding, because the individual onboarding does not pay anything to the issuer, thus there is no investment contract. The FinCEN implications of this idea were also analysed at the blog.

So this is how to redo Steem 100% legal.

This idea is obviously donated to the community as open source. With the ICO paradigm threatened, it seemed like it was an important juncture to share an idea that was originally intended to be proprietary until launch, so the community has another way to finance development.

The other legal model is proof-of-work distribution and donations for development. But then there is no way to do onboarding. Proof-of-work distribution doesn’t distribute tokens broadly. The tokens stay stuck within the same small group of nerds, professional miners, and eventually the capitalists (and their bankster financiers) who control the only two ASIC foundries in the world. If we want to disrupt the centralized Internet (e.g. Redditard, SuckerBook, Wankerpedia, GitHo, YouTurd, etc), we must distribute the token more widely than nerds with GPUs.

[profitgenerator212]

Steem is a true currency now, it can be directly used to buy stuff with. This is the definition of a true currency.

https://www.peerhub.com/

[Hyperme.sh]

Steem is a true currency now, it can be directly used to buy stuff with. This is the definition of a true currency.

https://www.peerhub.com/

Not more than a handful of people will use it because not enough people have STEEM to make the economies-of-scale sufficient to jumpstart it. And no one is going to buy STEEM to use it. Thus the cross-section of people interested to sell and buy from compatible locations at any given time out of a small population of Steemians who live all over the world, is roughly a handfull ± handful. It’s the classic hen-egg dilemma.

“Build it and they will come” is not a valid marketing concept. Identify an unmet need which drives viral adoption from the moment of launch.

And there are like 300k users.

Been noticing many Indians joining. I doubt most male Indians are there to build the ecosystem, but rather probably to game it and extract from it. Perhaps my experiences with male Indians is not representative.

That is a stupid analogy and you know it.

.

[profitgenerator212]

Steem is a true currency now, it can be directly used to buy stuff with. This is the definition of a true currency.

https://www.peerhub.com/

Not more than a handful of people will use it because not enough people have STEEM to make the economies-of-scale sufficient to jumpstart it. And no one is going to buy STEEM to use it. Thus the cross-section of people interested to sell and buy from compatible locations at any given time out of a small population of Steemians who live all over the world, is roughly a handfull ± handful. It’s the classic hen-egg dilemma.

“Build it and they will come” is not a valid marketing concept. Identify an unmet need which drives viral adoption from the moment of launch.

That is a stupid analogy and you know it.

Things are always unequally distributed, let's face it, Marxism is nonsense.

So you could just as well say that BTC is not well distributed and that people barely have a few thousand satoshis, so they can't use  BTC based services.

Steem is only little more than 1 year old, give it some time. BTC didn't got many users only by 2014 when they started putting ATMs in cities.

Maybe Steem will have to do the same, but it's only 1 year old. And there are like 300k users.

Wait 1-2 more years when there will be millions of users ,and you will get your economy 

[smooth]

Achieving the equivalent outcome of token distribution and investor funding of developer efforts via a different mechanism is effectively synonymous with looking past form to function (i.e. "economic reality") to me, but I'm neither a prosecutor, nor a judge, nor a jury.

I’m not clear if you also intended your reasoning as quoted to also apply to the proposed idea wherein a company could take investment in exchange for shares which are securities. Then launch a decentralized ledger with a pre-mine but never sell those pre-mined tokens until it had completed all its managerial efforts. It is suggested that the said tokens would not be investment securities when sold, because there is no ongoing development by the issuer after an investor buys them. So it side-steps the Howey Test. Of course the shares remain securities, but the tokens are not. The company can then distribute the dividends to the shareholders. It is a different structure, because the investors in the shares get dividend income instead of capital gains. The investors in the shares never receive tokens.

I had no such intent.

I'm pretty sure we have discussed before that if the developer can really stop ongoing development (also whatever other "efforts") and have the platform succeed then it seems plausible. That's a big 'if' though.

For example, in the case of Steem, there is an enormous amount that remains to be done if the platform has any chance of attracting a much larger user base, and no one seems all that interested in doing it besides the original developer. So I think your suggestion, while quite possibly legal, would likely fail in the market for practical reasons in this particular case (given the current state of the platform, etc.). I guess maybe one could imagine that the original developers step away in 10-20 years (or more) and then investors get their return? Seems a bit of a stretch, but possible. It's even slower liquidity than VC.

[Hyperme.sh]

I'm pretty sure we have discussed before that if the developer can really stop ongoing development (also whatever other "efforts") and have the platform succeed then it seems plausible. That's a big 'if' though.

Why can’t it shift to a donation model (a la Monero) when the corporation exits. The key developers who were employees of the corporation, then continue to work for donations (or because they have so many tokens).

One of the key aspects is that the decentralized ledger could possibly be designed such that it can be upgraded by independent (even contending) groups without requiring a hard fork and without needing a significant consensus. IOW, the ledger would be designed so that it can run multiple “forks” simultaneously. The technological discussion of that is out-of-scope for this thread.

For example, in the case of Steem, there is an enormous amount that remains to be done if the platform has any chance of attracting a much larger user base, and no one seems all that interested in doing it besides the original developer.

It may be the revenue and onboarding model that is the fundamental hindrance. If there is so much revenue to be made on building “apps”, then competition should take care of the problem, presuming the ledger itself is capable. DPoS is permissioned, centralized control, which is another problem because it has to be paid for without a free market pricing. So there is a prisoner’s dilemma amongst the whales in terms of where the profit in the system is.

Daniel Larimer was apparently incentized to exit Steem in a rush and go take raid the ETH cookie jar. Very lucrative opportunity costs compete (but IMO I doubt they’re correctly valuing the long-tail legal risk of launching ICOs).

I do not think centralized systems can scale politically-economically, without being taken over by a dictator.

Solving the decentralization problem of ledgers I believe remains the fundamental challenge. DPoS sort of solves scaling in the way Facebook or Visa solves scaling. But that is not very interesting in terms of a paradigm shit of the Internet. I claim (as probably all of us here do) that the Internet need a decentralized, permissionless protocol for decentralized ledgers, analogous to TCP/IP for decentralized networks. Proof-of-work fits except it has been modeled in research that incentives don’t achieve consensus any more when transaction fees exceed protocol block reward, and once that is fully distilled it (even for Monero it) comes out that oligarchy is the only way proof-of-work continues to function as it scales up economically (even if block size remains 1MB, increased, or adaptive). Oligarchies aren’t very interesting as that is the problem we’re trying to fix on the Internet with centralized ledgers that currently dominate.

So I think your suggestion, while quite possibly legal, would likely fail in the market for practical reasons in this particular case (given the current state of the platform, etc.)

So I am outlining some paradigm shifts above that I posit are required. And you noted your doubt is contingent on the current state of the platform. So I guess what must come next is experimentation.

[mroth7684]

I just write content and blog on that so not worry much about this problem

[smooth]

I'm pretty sure we have discussed before that if the developer can really stop ongoing development (also whatever other "efforts") and have the platform succeed then it seems plausible. That's a big 'if' though.

Why can’t it shift to a donation model (a la Monero) when the corporation exits. The key developers who were employees of the corporation, then continue to work for donations (or because they have so many tokens).

I can't rule out that it is possible but it is a very difficult transition. The cultural shift from being employed by a corporation (steady job, benefits, etc.) is enormous. Many people literally won't be able to do it because they are supporting families, etc. and really do need the stability that comes from being funded by investors. If the corporation shutters they will likely go get another such job where they can be paid a steady income by investors (or customers in the case of a non-startup).

Volunteer/donation/etc. projects like Monero sometimes work because they self-select up front for people interested in working in that structure (the rest never join), and even then there is a lot of filtering as people leave. Only if arrivals exceed departures over time does the model work (as it has for Bitcoin and Monero and some other open source projects; none others really in the cryptocoin space), and it isn't guaranteed that will continue indefinitely (or as long as "necessary") either.

In a sense I think the problem you are running into here is the same sort of problem that a lot of ICO/token projects run into (Steem included) when tying themselves in knots trying to avoid being 'securities' and in the process ending up with very distorted incentives. It is important to recognize that the models that fit into 'securities' exist and have been codified by securities law precisely because those are actually very effective models to pay for investment (by which I mean actual work which produces something of longer-term value) while generating a return for the investors (those who pay for such work). Everything else is quite Rube Goldberg-ish by comparison, and most will fail. For every 10 (or 100) claims of "disruption" of anything, say 9 (or 99) are just broken models that don't work.

Experimentation is certainly fine though. No other way to find that one truly disruptive model.

[profitgenerator212]

Been noticing many Indians joining. I doubt most male Indians are there to build the ecosystem, but rather probably to game it and extract from it. Perhaps my experiences with male Indians is not representative.

Hey that's kind of racist. There are tons of good Indian software developers out there working in many software fields related or affecting cryptos.

In fact I did a research on gambling a while ago and it's mostly indians and chinese.

So the entire cryptocurrency gambling industry is supported by asians. They are very very important in this economy.

Once you get some kind of Steem based gambling website, you bet that will help.

[profitgenerator212]

Why can’t it shift to a donation model (a la Monero) when the corporation exits. The key developers who were employees of the corporation, then continue to work for donations (or because they have so many tokens).

One of the key aspects is that the decentralized ledger could possibly be designed such that it can be upgraded by independent (even contending) groups without requiring a hard fork and without needing a significant consensus. IOW, the ledger would be designed so that it can run multiple “forks” simultaneously. The technological discussion of that is out-of-scope for this thread.

Donation models are always strugling, and it's kind of demoralizing to always beg for money.

For profit models are much smoother. Sort of like how Canonical a for profit company had taken over a Ubuntu distro compared to other linux distros that are donation based. Ubuntu has more success compared to that.

While I love Debian, I do think some of the funding system could be designed to be for profit.

This doesnt mean that you can't donate if you want, but you could introduce some other stuff that would be for profit. Just to make the funding smoother.

A cryptocurrency is a perfect combination between a nonprofit and a forprofit entity.

You design a platform that is nonprofit, public. And on top of that you build for profit services.

Steem would be like this. The blockchain is public, Steemit is private and you can build other services on Steem too.

[Hyperme.sh]

Hey that's kind of racist. There are tons of good Indian software developers out there…

Yet I was writing about those who are joining Steem and not about s/w devs who work predominantly for Westerners.

Eventually India will be a huge market, but go to App Annie and study where the revenue on apps comes from. India is huge on downloads, but irrelevant on sales. 10 years from now, it will begin to shift significantly enough to matter.

Marketing analysis is not racism.

TIP: btw, there is need for better buy/sell websites for example in the Philippines because someone monopolized the main ones and stopped for example accepting vitamin ads (perhaps the drug importers are involved). The markup on vitamins imported from abroad is 200 - 300% of costs, because they have a monopoly. But the problem for making your Peerhub exclusively for STEEM remains that the filipinos do not have STEEM tokens and they will not buy them. I suggest you support all cryptocurrencies, work with rebit.ph/coins.ph, MyBenta, and also allow for other payment methods. Sometimes filipinos will deposit in a bank account or send cash via remittance (padala) in order to buy by mail. More often though they just meet up since most commerce of that sort is in the Manila capital city area.

In fact I did a research on gambling a while ago and it's mostly indians and chinese.

Then you should know it is but a fraction of MMORPG in terms of revenue.

Another important datum is that Facebook earns on average only a measily $0.05 for the 50 minutes per day that the average N. American is on Facebook’s properties daily.

Donation models are always strugling, and it's kind of demoralizing to always beg for money.

I proposed donations only for the original core devs, not for the apps. Re-read my prior post more carefully.

I'm pretty sure we have discussed before that if the developer can really stop ongoing development (also whatever other "efforts") and have the platform succeed then it seems plausible. That's a big 'if' though.

Why can’t it shift to a donation model (a la Monero) when the corporation exits. The key developers who were employees of the corporation, then continue to work for donations (or because they have so many tokens).

I can't rule out that it is possible but it is a very difficult transition. The cultural shift from being employed by a corporation (steady job, benefits, etc.) is enormous. Many people literally won't be able to do it because they are supporting families, etc. and really do need the stability that comes from being funded by investors. If the corporation shutters they will likely go get another such job where they can be paid a steady income by investors (or customers in the case of a non-startup).

Volunteer/donation/etc. projects like Monero sometimes work because they self-select up front for people interested in working in that structure (the rest never join)

At least it seems we agree that the dilemma is due to economics. So any solution must be profit (opportunity cost) based.

Tangentially, there is a huge and growing demand (in the form of excess supply of cash) which is outstripping the supply of private equity, so providing a viable alternative to ICOs is critically needed.

Apparently I didn’t convey clearly the stated point that the app ecosystem is driven by a profit model (and one better than Steem’s debasement via voting model). As for donations, I was only intending to refer to those self-selected core devs who have every incentive to see their baby conquer the world, so they will behind the scenes talk to the whales and make sure there are donations paid in public to give the illusion that they are working in a decentralized ecosystem. They may even be donating to themselves to fool the securities regulators, but who can prove that and besides the app ecosystem would presumably be highly competitive if there is significant profit to be made.

Daniel Larimer was never really ideologically focused on changing the world. His focus is much more pragmatic. Thus ETH cookie jar opportunity cost and other cookie jars before it, were irresistible. As for the rest of the developers, I don’t know them, but I presume they lack a holistically driven leadership and commitment. Ned is much too inexperienced to lead it. My cogent refutations of @profitgenerator212 may be representative of their mistakes.

In a sense I think the problem you are running into here is the same sort of problem that a lot of ICO/token projects run into (Steem included) when tying themselves in knots trying to avoid being 'securities' and in the process ending up with very distorted incentives.

Given other information you may not be privy to, I do not see the conflicts. I think it’s very well thought out and planned out. If only as an early investor, you were privy to internal documents then one could have a more informed discussion of the issues.

It is important to recognize that the models that fit into 'securities' exist and have been codified by securities law precisely because those are actually very effective models to pay for investment (by which I mean actual work which produces something of longer-term value) while generating a return for the investors (those who pay for such work).

Yes but ecosystems can mature and outgrow the need for core developers. The key is that the decentralized ledger has to solidify and not require a consensus to attain further improvements. I mentioned that technological innovation in my prior post. Seems you’re not factoring that into your analysis, because no details about it have been provided.

Given a stable protocol, then the ecosystem of developers competes within that stable ecosystem.

Bitcoin can’t achieve it because they’re still mucking around with the block size and scaling issues, but for someone who has already solved all those issues…

Everything else is quite Rube Goldberg-ish by comparison, and most will fail. For every 10 (or 100) claims of "disruption" of anything, say 9 (or 99) are just broken models that don't work.

Experimentation is certainly fine though. No other way to find that one truly disruptive model.

Indeed. It is figuring out which are the truly disruptive which is absolutely essential.

How many people wish they had been mining on their laptop when Satoshi launched Bitcoin.

[smooth]

Once you get some kind of Steem based gambling website, you bet that will help.

There are already several Steem-based gambling websites (or games built on Steem/Steemit itself). How will this change with more websites? How does Steem-based gambling add value relative to other crypto gambling, especially BTC (and maybe ETH) with far more liquidity, recognition and user base

[Hyperme.sh]

Once you get some kind of Steem based gambling website, you bet that will help.

There are already several Steem-based gambling websites (or games built on Steem/Steemit itself). How will this change with more websites? How does Steem-based gambling add value relative to other crypto gambling, especially BTC (and maybe ETH) with far more liquidity, recognition and user base

Presumably the reason is because there is nothing significant those games do which people really salivate for, which can’t already be attained on games in the mainstream.

Steemit does something unique. It pays people for blogging. Afaik, that is the only app of significance so far for Steem.

I’m guessing that perhaps some Steem devs drank the “we are change” Koolaid and are thinking people will use decentralized replacements for mainstream apps/sites, just because of the altruism factor. There must be an economic (not necessarily monetary) incentive. For example, the economic incentive for me to use Facebook for my social contacts, is because it is the most convenient for sharing/contacting, because everyone else is there. But for crypto, I don’t use FB because even if y’all are there, I can’t find you as needles in haystacks on it.

Resistance against censorship is actually an economic need that some centralized apps don’t offer. It’s not an economic need for most apps though. Each app market has to be carefully analysed.

[profitgenerator212]

Yet I was writing about those who are joining Steem and not about s/w devs who work predominantly for Westerners.

Eventually India will be a huge market, but go to App Annie and study where the revenue on apps comes from. India is huge on downloads, but irrelevant on sales. 10 years from now, it will begin to shift significantly enough to matter.

....

Okay so there are 2 strategies:
* You get few rich people to sign up
* You get many poor people to sign up

In the end the total sum in either cases should be equal.

If you get 1 westerner with 10,000$ to invest in Steem, might be like getting 1000 poor Indians to invest 10$.

And it can be just as hard to find a person with 10k than to get 1000 people. So it's kind of the same from a marketing perspective.

Tangentially, there is a huge and growing demand (in the form of excess supply of cash) which is outstripping the supply of private equity, so providing a viable alternative to ICOs is critically needed.

2nd layer stuff is just now coming out. Ethereum ICO's are only the beginning. Wait until BTC smart contract systems come out, that will be the real deal. 70-80 billion $ eager for some big profits.

Either way it looks like the smart contract stuff is the future of private equities.

Apparently I didn’t convey clearly the stated point that the app ecosystem is driven by a profit model (and one better than Steem’s debasement via voting model). As for donations, I was only intending to refer to those self-selected core devs who have every incentive to see their baby conquer the world, so they will behind the scenes talk to the whales and make sure there are donations paid in public to give the illusion that they are working in a decentralized ecosystem. They may even be donating to themselves to fool the securities regulators, but who can prove that and besides the app ecosystem would presumably be highly competitive if there is significant profit to be made.

There is some conflict now between the whales and it might be bad for Steem that such high profile people are in a fight right now. But we will see what will happen.

Daniel Larimer was never really ideologically focused on changing the world. His focus is much more pragmatic.

The way I understood it is that he finished his mission at Steem anyway. He made the root of the blockchain for Steem. And he said in a recent interview that Steem is pretty much ready now, it only needs GUI design from now on for Steemit. The blockchain is mature enough. And he actually wanted to create a scaleable multifunctional blockchain which he could only do via an ETH ICO, thus he made EOS. I think the ETH ICO is only for fundraising the EOS blockchain will be kind of independent the way I understood it.

Nontheless it's an interesting project and I don't blame him for leaving, he already did a lot to help Steem. And Steem might need more engineering in the future, but if Dan wants to work on a "bigger project", it's his choice.

I haven't invested in EOS yet just to make that clear, but I might later once the situation gets more clear.

[profitgenerator212]

Once you get some kind of Steem based gambling website, you bet that will help.

There are already several Steem-based gambling websites (or games built on Steem/Steemit itself). How will this change with more websites? How does Steem-based gambling add value relative to other crypto gambling, especially BTC (and maybe ETH) with far more liquidity, recognition and user base

Gambling in crypto is like a huge vacuum cleaner that sucks in value into that currency.

The house always wins, and gambling websites have little costs compared to how much money they hold and bring in.

The only real expense for a gambling site is if it gets hacked or if it's an inside job and the owner disappears with the funds.

But if this doesn't happen, and it shouldn't as people demand now more transparency. Then a gambling environment for Steem would mean that the value that is brough in would offset the inflation rate.

So Steem would become from an inflationary to a deflationary currency.