RE: Normie Talk - HF21 Explained (SPS + EIP) What it is and what happens next
The Proposed Change-
Authors/Curators - 65% | Interest - 15% | Witnesses 10% | SPS - 10%
If this is going to be the final proposal for the hard fork, I do not support it. Initially, I thought that using 10% from author rewards would be a good idea. I don't believe the current proposal is a good idea, and here's why:
Reducing content rewards as a whole will reduce rewards for curation. Since curation rewards are pretty much the only way to earn anything other than a negligible amount of tokens, reducing the total content rewards pie is another hit to stakeholders.
Yes, I know curation rewards are also proposed to increase to 50% from 25% of that pie, but the entire point of that was to better incentivize staking and curating. What this does is trade off some of that incentive in order to fund more "development" projects that have largely produced not much useful stuff to date.
So, we trade staked incentives for worker funding in STEEM that will likely be sold in order to pay for these (likely) mostly useless projects.
And yes, I have advocated reducing overall inflation by mostly or entirely eliminating SP "interest" - which obviously goes to stakeholders. But by eliminating that "interest," we're reducing the amount of STEEM from future circulation, thereby reducing current and future downward price pressure. This current proposal does the opposite. It will add to downward price pressure.
The goal or idea is though that with the combined components of the EIP taking effect, there will be less spam taking rewards and more individuals curating (as it's now profitable to do so). Which could mean even though the author rewards percentage is lower, the reward pool will be bigger (less abuse taking it) and therefore the actual rewards an author receives will actually increase.
This remains to be seen and is only the "hope." I would prefer to postpone the SPS protocols for this hard fork and see how the economic changes will alter behavior. The SPS was not something the community was clamoring for and it will likely have little effect on any user or investment behavior - changes in behavior that are actually desperately needed around here.
Who knows...it may turn out that the SPS isn't needed after all. Maybe if we actually fix some of the economic incentive mess, things will shape up here on Steem and it may actually become a bit more attractive for use and investment.
Many feel the SPS could be exactly what we need to push Steem to where it needs to be, while giving the community control over what is funded itself.
This is a nice thought, but "the community" has rarely ever decided where rewards go and what projects get funded. That has mostly been decided by a very small percentage of users.
I think SPS taking away 10% from authors/curators defeats the purpose of EIP.
Yeah, I think so too. Seems like a counter-intuitive package.
If that's the case, then curation ought to be moved to a larger percentage of the content distribution, like 60/40 or more. That's something that I would approve.
Your too much for one HF suggestion is not unique. The best support for everything in one release, in my opinion, is that due to the infrequency of HFs that it is best to get all desired changes out in the latest release. Having seen self voting come and go a number of times through multiple HFs, for example, has shown me that any HF is never etched in stone. 😎
I pretty strongly agree with you here, although we have different reasons for expecting negative outcomes.
I expect that since it is demonstrable that substantial stakeholders on Steem are exclusively profiteers, and voting on SPS proposals would be stake weighted, there'd be a high probability of proposals voted funding that would feature kickbacks to the upvoters, much in the way bidbots are funded now. Further, proposals that aren't able to solicit funding are likely to be not worth funding. Devising a complex and regressive tax scheme to fund them will not help to weed out bad proposals.
You state opposition to stakeholders 'taking another hit' by being limited in curation rewards. I note Steem is the only durable mechanism that incites stakeholders to extract value from the investment vehicle, rather than seek to increase it to gain capital thereby. Capital gains is a proven and functional incentive to invest in almost every other investment vehicle now, and throughout history.
Why in the world are you opposed to capital gains as the inciting mechanism for investors on Steem?
I’m not. In fact, I stated that eliminating inflation for SP “interest” would remove some negative price pressure. So, in other words, it could positively affect appreciation of STEEM.
Capital appreciation - or what is generally speculation - would be a reason to purchase and hold STEEM or any other token or asset in any given market. I think you and many others who bring up the capital appreciation argument are missing this point:
You don’t need to stake your STEEM to benefit from that appreciation.
Staking comes with additional incentives/rewards to encourage participation or “contributions” to the social media system. It offers benefits and potential ROI beyond speculation for assuming additional risk.
This is one of the unique properties and selling points of the Steem blockchain. We should be improving on this and promoting it - not only for investors looking for better returns, but for the content creators looking to be rewarded for their efforts and for content consumers looking for well-curated (popular/quality) content.
The fact is that enabling stake weighting to manipulate the rewards mechanism enables those rewards to be extracted by substantial stakeholders before that value inures to the investment vehicle and precludes capital gains. This makes profiteering the primary source of ROI, and eliminates investment from being potential. Profiteers and investors are fundamentally opposed to each other's methods of attaining profit. Investors are only possible in a system that potentiates capital gains, and profiteers prevent capital gains by extracting value before business activity can raise the price of the investment vehicle.
We observe that this is ongoing on Steem, as our token has not appreciated in value according to it's features, and Steem continually declines in market cap as investors seek capital gains from investment vehicles that make them possible. We can only improve on and promote those mechanisms that promote capital gains, or create the extant situation where unrestrained extraction of value created sucks that value out of the system before it can increase the value of Steem.
Also HODLing an investment vehicle is not only speculative, but incites HODLers to develop the business to imbue the investment vehicle with value, something profiteering only experiences as a drain on ROI. In my opinion, this is why the funding mechanism for SPS as proposed for HF21 is a regressive tax on creators, as this shifts the expense of development to the least staked. In a system dependent on capital gains, this development is generally funded by those who stand to benefit most from price increase in the investment vehicle, as intelligent development produces capital gains they depend on. Profiteers aren't dependent on capital gains, and development is a drag on their ROI. It is the extraction of rewards via stake weighting that is treating development like a disease, rather than promoting it as an increase in gains. This dynamic exemplifies the difference between profiteering and investing.
So you think the less than 25% of curation rewards being paid out in the form of SP has been a bigger bleed from the system than the 75%+ author rewards? And that those stakeholders are bigger “profiteers” than those who buy/invest nothing or very little?
Interesting take.
Most of the author rewards are captured by whales, and this has long been shown by those competent to ferret out the data (not me!) and analyze it. More than a year ago, in the ferment accompanying the rise of the bidbots after HF20, I was party to discussions that were formative to this understanding.
It isn't useful to focus on the negative connotations of the word profiteer as some kind of refutation. It is simply that using substantial stake enables the rewards mechanism to be manipulated so that most of the rewards, including author rewards, are extracted by whales, and this is the definition of profiteering, since it is extracting the assets of the business and it's economic activity instead of imbuing the investment vehicle with that value and achieving capital gains.
Both @arcange and @abh12345 publish regular posts detailing how various economic aspects of Steem evolve. That latter particularly shows that the vast majority of rewards are extracted by whales, and not content creators generally. @arcange's posts reveal the dichotomy between median and average payouts that consists of a 15 fold difference. There are only 35 whales, who make few posts, so what it reveals is that their posts payout many orders of magnitude more than median (the most) content creators. Both of these sources tend to confirm my recollections from the post-HF20 discussions that whales capture ~90% of all rewards, both author and curation, while the vast majority of creators split the remaining ~10%. The median payout is .01 SBD. The vast majority of authors aren't making much on their content.
It's also a mischaracterization to claim that creating content isn't an appreciable investment. While witnesses, folks buying Steem, and other demographics are all necessary to Steem having value, content creators are absolutely necessary to Steem having value. All else being as it is, without content, Steem would not have any value, except perhaps what a few nerds trading amongst themselves could provide. They are also the marketing department of Steem, as it is content that draws new folks here, where they can become users and expand the market for Steem.
All of the workers producing goods in a manufacturing company can be considered the same way.
My take on Steem is that preventing extractive profiteering that prevents capital gains would be beneficial, and would attract experienced investors whose ability to rely on capital gains for ROI incites development and HODLing while gains accrue. I note the history of Steem supports this position. I further make predictions based on this position, and you can judge my position by whether or not my predictions are correct.
After the implementation of EIP, the price of Steem will plummet, to less than 10% of current price within 3 months. Market cap will decline further, and retention will decline as well. I predict the downvote pool will drive increasing flagging, and generate an increase in accounts that are dedicated solely to that purpose. Since the rhetoric of proponents of HF21 diametrically opposes my predictions, it will be very obvious as to whether my position is correct, or the proponents of HF21.
We'll see. The proof will be in the pudding.