Real Trading #2 Steem Has No Value

Steem Has no Value

After yesterdays drop today is calm and steady.

As I talked in my last post "Real Trading #1", my strategy is to monitor LTC closely as it approaches 0.01 BTC price point. This morning LTC has a bit of a jump against BTC:

At some point I thought LTC could be heading for a break as the price suddenly spiked along with trading activity. However, its more likely to hover around 0.012 price point that it currently trades at and then continue to decline as value of bitcoin falls further (discussed in Real Trading #1). Oder book looks somewhat balanced while market has been quite all day. Therefore, I do not expect any major movements in the coming hours.

Steem Has No Value

I want to use this quite night to elaborate on my opening blog and why I am skeptical toward Steem.

While concept of getting paid for blogging without going through hassle of selling content is a fantastic idea; there are some fundamental issues with it conceptually. Any asset in an open market is exchanged through some form of currency. An asset must meet a certain need of a purchaser for transaction to happen. In addition, a seller must capture value (through a medium such as money) of an asset given up.

Issue with Steem currently is that its product is ill defined. Is the product wealth of information posted? Steem rewards? Ask yourself, what do you need Steem token for? To sell on the market for BTC and then cash out? Ok, but why would a seller be interested in giving up BTC (or even better actual cash) in exchange for Steem with which he/she cannot purchase anything with (other than Steem power maybe)? Steem token has no value, its driven by speculation.

Speculation is not a bad thing. It gives life to projects otherwise would never get funded. Steem community creates a lot of good , useful content. Participants of this community absolutely deserve to get compensated. However, current setup has major flaws. I have briefly operated a part time business and we tried to be proactive on the social media. After half a year operating the business, I had less than 10 followers; and you guessed it, most of them I knew personally. I created an account on Steem and made a one sentence comment on a blog. I forgot about my Steem account for two months and when I came back on, guess what? I had over 150 followers, all of whom I do not know. How did that happen?

It happen because Steem ecosystem encourages mindless participation. The game becomes participate, get rewards and sell it to speculators. No one feels that they are losing anything because Steem rewards are generated, like fiat, out of thin air (ok by witnesses and their servers, but its same thing). If speculators go, so is most of Steem community. It reminds me of Pets.com. Great concept if done properly. Company was kept alive by speculators. Speculators went with dot-com bubble and so did pets.com.

In other words, there is no supply/demand economics and market itself is virtually absent because there are no assets to be traded. Think about it, what are we supplying? Content? Then who demands it? Readers on Steemit, most of whom are here to "mine" Steem? So its not the content that they demand then, its Steem rewards? How are those supplied? By demand for TOKENS not for CONTENT!

For Steem to work, I believe we need an ecosystem with assets that our community creates for the outside world in exchange for money (Crypto, Steem token or fiat, doesn't matter). The need for those assets will drive demand for content, readers , authors and most importantly innovation. Most common asset that media sells is ad space, but there can be other assets. These assets need to be created within Steem ecosystem to give benefit to businesses , consumers and facilitate economic exchange. This would usher a shift from speculative trade to a sustainable free market economy.

What do you think? Input below is welcomed and encouraged. And don't get me wrong guys, I'm all for Steem and other social blockchains. Just giving my constrictive criticism.