Speculation, Optimism, Network (effect) and Scarcity raise value of a coin: A case study with STEEM, EOS and BTC?

One can wonder why Bitcoin still the number one coin. It is slow, has transaction fee and expensive. The answer is the scarcity and network effect. Bitcoin is a very scarce commodity, only 21 millions will exist. Of those, 17 millions are already mined and few millions are lost. It has the brand image due to its network effect of being the first successful cryptocurrency. In the all the exchanges, it is the core currency that altcoins are traded with. BCH and LTC has similar characteristics of scarcity and network advantages compared to newer currencies with better fundamentals.

On the other hand, EOS had once market cap lower than STEEM (STEEM 80c vs EOS 50c). It is the speculation and optimism behind its founder @dan. Dan Larimer has the track record of co-founding two top 40 coins. He is world renowned blockchain visionary and programmer. Therefore, investors believe that only @dan can make a ethereum killer. There is a big speculation and optimism on EOS due its founder's previous successes. EOS has become scarce too since 99% of EOS are sold to investors. New investors of EOS has to buy it from old ones.

Now let us talk about STEEM. A coin that is ranked 2nd by the powerful department by Chinese ministry and consistently rank high along with ETH and EOS, in WEISS ranking, rank petty 32 among the top coins.

It is believed to be fundamentally a strong coin and has powerful technology (e.g. same graphene protocol used in EOS) behind it. It has 1M accounts in first two years, therefore, it has a strong network effect. It has speculation of launching SMT that will be make STEEM, a competitor to ETH and EOS.

However, STEEM lacks optimism and scarcity. More STEEM will be produced in next 20 years than the current supply. It needs exponential growth of users to sustain higher production rate than the other coins. Though SMT can be ground breaking technology, there is a little speculation behind it compared to EOS's future success.

Moreover, there is a pessimism among the newcomers due to generic wrong message. Most users who join have the anticipation of earning (a good amount of money) just by commenting or blogging in Steemit which is not true.

STEEM being DPoS coin (a version of PoS), it needs a good amount of staking to have a starting influence. On the other hand, one has to be a prolific blogger or social media celebrity to earn decent money without any initial staking (i.e. investing) in STEEM. Therefore, STEEM's retention rate is very stagnant and a very large number of users spread pessimism.

SOLUTIONS

One of the solutions is to reduce STEEM's production. STEEM will only can be produced for interest on staking and witness compensation. Therefore, STEEM's supply will drastically be reduced to 2% from current 8.7%. STINC can launch their own SMT which will work exactly as STEEM works now.

STEEM will become very scarce. All the blogging or content sites (e.g. DTube, DLive, Steepshot) can launch their own SMTs. The reward distribution policy among these SMTs will be varied widely due to easiness of experimentation.

Moreover, any resentment and argument will be localized within the SMT site. Demand for STEEM will come from bandwidth purchases from the companies behind the SMTs.

STEEM will become a very scarce commodity and optimism will be high since pessimism/wrong-marketing will be bottled in the respective SMT which will have very little effect on STEEM.

However, it may sound very similar strategy to EOS. But there is a fundamental difference and which is a very powerful one. EOS can struggle with future regulatory issues by SEC being an ICO. It is one of the big reasons why Ripple (XRP) was denied to be enlisted in Coinbase in spite of strong lobbying from Ripple Lab. Fortunately, STEEM was initially mined with PoW policy, later it got distributed as PoS/PoB hybrid policy. STEEM can almost be treated as BTC like currency.

Since STEEM has already got widely distributed, after successful SMT release its supply can be kept limited. Then the scarcity, speculation, optimism and network effect will make STEEM, one of the top five coins by market cap. Then the ranking will be in line with good rating given to STEEM by top agencies.

Disclaimer: This opinion is not a financial advice, it my personal perspective and opinion. Please seek professionals for financial decisions.

Image sources: Most images are open sourced (e.g. Pixabay, Wikimedia etc.) with Creative common license. Some images are used with due courtesy to respected owners.

Thanks for reading.
@riseofth
Cryptominer since 2013, occasional trader and tech blogger