"Derivatives" - A Series About Fixing Steemit - Part 3
"There shall be weeping and gnashing of teeth."
And sure enough ... there is.
The angst, if not black depression, amongst cryptocurrency investors is now palpable. Bitcoin is range-bound and our dear STEEM can't seem to break a buck. Main stream media is filled will crypto-related tales of woe and my good buddy @cryptogee recently published an article entitled, Still Smiling After My Biggest Crypto Loss: What's Yours?
Most distressingly, Steemit is awash with posts invoking the Power of Positivity.
I get it. It feels good to vent. Moreover, misery loves company and when things are not going well, a bit of empathy is comforting ..."We're all in it together." But such emotional solace is also very dangerous. Emotion binds us ... but so too does it blind us. And one person being emotional gives permission for others to do the same. It spreads. But the fact that there are others feeling your pain does nothing to alleviate the problem that's causing it. As the limbic system ramps up, the pre-frontal cortex turns off. In finance, feelings are a problem. To navigate financial markets ... you must suppress your emotions and think ... often, quite viciously.
I used to run two hedge funds: The first focused on asset-backed securities (securitization); the second, currency-trading. Let me promise you, the market doesn't care whether you're feeling positive or negative or whether you're psyched or suicidal. Nor does it care about New Age aphorisms or the metaphysical bromides being espoused by a legion of self-appointed "thought leaders" and "life coaches:" "Are You Living in Abundance or Scarcity?" ... "According to the Law of Attraction ..."
Do you believe the "Law of Attraction" is being employed on the trading floor of Goldman Sachs? Cryptocurrencies are growing up and you're now competing against a host of hedge funds and investment banks. If you can't set aside your emotions, whether negative or positive, the financial markets are not the place for you. They will destroy you financially and do a number on your psyche in the process.
The intent of this Series of Articles is to address, rationally (and brutally where necessary), what is going on in the world of cryptocurrencies in general, and specifically, how to fix (quickly, before it's too late) the systemic problems that plague Steemit.
The first articles in this Series were:
- Jerry Banfield, Down-Voting & Freedom of Speech
- "Down-Voting as Censorship" - A Series About Fixing Steemit - Part 2 Be sure to read the comments section, especially the comment thread of @bossel ... it contains implementation information for my proposal and such proposal will become important (in later articles) beyond just its Freedom of Speech implications. As a favor, would someone with a bit of upvote power upvote that comment thread so it rises to the top and is therefore easier to find. Thanks.
Cryptogee Comments & Replies
Five months ago, @cryptogee and I engaged in a series of comments and replies in response to his original article, Killing Bitcoin With A Million Sob Stories. I've copied-pasted them below (lightly edited). Give them a read and I'll update and expand upon such comments at the end (respecting Derivatives ... due to length, the rest will be addressed in subsequent articles).
quillfire (49) · 5 months ago
The key to the future of cryptocurrencies is derivatives markets.
The extreme volatility of cryptocurrencies will be tamed only when sophisticated investors can begin using call and put options to neutralize, or limit, their risk. Indeed, the most precious thing any cryptocurrency could acquire at present would be the ability for its investors to enter into a costless-collar: The simultaneous buying of an At-The-Money put option (preventing downside loss) while simultaneously selling an At-The-Money call option (forfeiting upside gain) ... in effect, temporarily freezing the price at no cost (other than transactions fees). This is what large companies and retailers require in order to utilize cryptocurrencies in anything other than a novelty fashion ("Look, we're hip .... we accept Bitcoin").
At present, fear means "selling" (or stress-vomiting) and so it's a roller-coaster of hyper-optimism followed by hyper-pessimism. No one gets to be "emotionally neutral." This, of course, is easier said that done. Putting aside government regulators and exchanges, in order to have a functioning options market (high liquidity, and thus tight bid-ask spreads) you need a Market Maker ... someone who will buy or sell the security irrespective of the price.
In order to do that, though, a Market Maker needs other Market Makers against whom he can hedge his risks. Market Makers don't care about the price of a security per se ... they only care that there is a balance between buyers and sellers, because they are both. Ironically, it will probably be Goldman Sachs et al (hold your nose) who end up providing this service. Who else has the capital, trading experience and risk tolerance to fulfill the Market Maker(s) role on a grand scale?
One of the problems with cryptocurrencies at present is their inability to focus capital for a purpose. You just have a million cats running around doing their own thing. Years ago, some upstart individuals got the idea that they could cut out the middle-man (banks) and began making micro-loans to borrowers through exchanges on the Internet. Peer-to-peer lending was born.
There were countless articles written about the upending of the traditional banking system. Today, most of the funding for peer-to-peer lending originates from banks. The banks joined the party. But, because they were larger, they could afford to charge a lower interest rate, for the same degree of risk, than could individual lenders.
Concentrated capital is a weapon.
Look at Steemit. Look at what whales and dolphins can do that minnows cannot. And, crucially, it's not just a matter of scale. If you, Cryptogee, used 5% of your assets to sponsor a contest, people would coming running ... and such participation has numerous knock-on effects that are highly profitable. If I used 100% of my assets to sponsor a contest, people would fall out of their chairs laughing. You have concentrated capital, I don't.
I would be less worried about banks crashing cryptocurrencies than simply co-opting them. They will simply provide the services which make them pragmatic to use in the real world. He who concentrates the capital, controls the system, including Market Making ... and therefore, the future of cryptocurrencies.
What an excellent analysis as usual @quillfire.
In particular I find it interesting about the derivatives market, even though I have heard that term before, I had absolutely no idea what it meant. I think you also hit the nail on the head, at the end of the day banks want profit, and crypto at some point tends to go through fiat, I mean we value our crypto in fiat after all! Very true also about concentrated capital, I guess that is what will act as a 'cat herder' and yeah Goldman probably will jump in on it. Do you see this as an inevitable progression; or is there some as-yet-unseen factor going to come into play?
quillfire (49) · 5 months ago
I used to run a family of hedge funds, and one was based upon currency trading. As a result, I got to know a lot about currencies. Currency markets are made up of numerous participants with very different motivations. Of course, you have traders who invest in the currency itself as the underlying security.
But, you also have multi-national corporations who only use foreign currencies as a means of transferring wealth from one place to another. Take, Nike for example. It sells shoes, shirts and shorts in hundreds of different countries. In the US, it sells them for US Dollars. In the UK, for pounds. As a US company, it needs to convert those pounds to Dollars as it repatriates its profits. Nike doesn't care about trying to currency speculate (bet that the Pound will appreciate or depreciate against the US Dollar over the next 30 days). They want to lock-in their planned 15% profit. Period.
And that requires freezing the exchange rate using derivatives (options and futures). Now multiply Nike by tens of thousands of multi-national corporations. Add in a billion international travelers paying for hotels, restaurants and taxis in foreign countries with currencies from their own. The point is that to make fiat currency markets work, there has to be centralized Market Makers so as to accommodate the many different currency exchange strategies being employed by the host of different market participants.
That requires enormous amounts of concentrated liquid capital so as to be able to handle the unpredictable, and fluctuating, demands for currency pair exchanges (USD/GBP in our example). Now add in all the other currency pairs to USD. Now add in all the other currency pairs with GBP. Now add in YEN/EUR and EUR/CDN ... The quantity of concentrated capital required is staggering.
Cryptocurrencies don't have this yet. For cryptocurrencies to become status quo mediums of exchange for the Nike's of the world, there must be a functioning derivatives market. To have a functioning derivatives market, you first need Market Makers so as to provide the ability to hedge currency fluctuations. In order to be a Market Maker, you need to be able to concentrate enormous amounts of capital. At present, only the "Big Banks" have this ability (and no one else is even close). And even if someone else was able to concentrate such capital, wouldn't they be a Big Bank in all but name?
Steemit is an interesting deviation for the norm in this respect (which is why I'm here despite there being no derivatives market for the currency). It has an internal economy which is partially isolated from the outside world. People keep publishing posts irrespective of the value of STEEM in relation to other currencies. And, it has a quasi-put option built-in at $1.00 (the Witnesses have the ability to decrease the money supply at a buck).
But Steemit also has an Achilles Heel ... and a huge one at that. Steemit's Central Premise (it's raison d'etre) is that "Content Shall be Compensated Commensurate with its Quality." This is the fundamental assumption upon which all else depends. And it is failing miserably.
As a Prime example, consider your Great STEEM Giveaway Contest. (For those who don't know, Cryptogee sponsored a contest that awarded huge upvotes for the best comments to one of my posts ... a poem + article discussion). The post was excellent and there was massive participation. Both the quantity and quality of comments would rival those of any post in the entire history of Steemit. This should have been a $1,000+ post. It garnered $1.56. https://steemit.com/poetry/@quillfire/for-the-people-poem-the-law-for-it-whom
This was a comment in the Daily Dose (PoetsUnited) that appeared yesterday (written by poets about poets):
Quillfire is the most skillful poet in our little group [approx. 250 at the time] and he could be the number one poem every day. This poem is a masterclass in poetry and he even invented his own form of sonnet, the Savagerean Sonnet. If you like poetry this is one not to be missed. And I mean this post and this poet! https://steemit.com/poetry/@quillfire/raving-refrain-poem-a-savagerean-sonnet-explanation-100-days-of-poetry-contest-day-5
$4.94 ... one of my largest post-payouts ever ... and most of that came from the Contest's sponsor.
Content Shall be Compensated Commensurate with its Quality.
Either the whales' sonar systems suck ... or they're turned off because they have a voting strategy which doesn't entail discovering, or even caring about, quality content. I could point to a dozen similar sites across Steemit. If in 5 weeks I can find them, despite barely looking ...
Any stable system can be measured on its ability to take a punch. This is referred to as the system's "robustness." Can it get back up off the mat and continue to function normally? It takes, roughly, nine torpedoes to sink a modern US aircraft carrier. Modern US aircraft carriers are robust.
In normal securities markets, Market Makers are regulated by government agencies to ensure that they don't cheat. This is important because it is very easy to manipulate the price of a security in the short-term. Such regulation ensures the integrity of the system itself.
On Steemit, the whales have enormous concentrations of capital. But, because there is no regulation, they are Market Makers that can do anything they like, including self-serving behavior that invalidates the Central Premise ... thereby jeopardizing the integrity of the entire system. They could, of course, take action that would force adherence to the Central Premise, but, as a group, they won't, as it would disrupt their short-term interests. Human beings are myopic. And, like an arms-race, it would be suicide for the Good Whales to unilaterally disarm (implement good practices) ... as this would only give the Bad Whales more power.
To compensate for these distortions, all other market participants are either forced to game-the-system (in whatever way they can) or maintain their morals by remaining penniless. This is not sustainable.
As the Central Premise of Steemit is actually quite brilliant, I suspect the way this ends is with the creation of a new cryptocurrency that replicates the theory of Steemit ... while safeguarding against its realities. A cryptocurrency where the Central Premise is sacrosanct: "Content Shall be Compensated Commensurate with its Quality." There would be a mass migration within a matter of weeks (talk about needing Velocity) ... and the stragglers will most likely be the Steemit whales who, too late, would then attempt to implement the reforms they always knew were required.
People will, of course, always find ways to cheat, but scale matters. 95% isn't perfect, but it still gets you into Harvard. As measured against its ability to achieve its Central Premise, Steemit, at present, is not even a minimally-functioning system, let alone a robust one. A spit-ball could sink it. Personally, 90% of my research into cryptocurrencies involves searching for such an alternative cryptocurrency. Given that Steemit's code is open source, and the relative facility in launching a new cryptocurrency (and hence the reason why there are more than 1,000 of them), I'm astonished it hasn't already happened.
Whales, if you're reading this ... this is straight-line logic. Do what you have to do, or someone else will. If you're interested, I have some ideas on how to fix what's broken.
As an aside: I would rank the average of "cryptocurrency analysts" found here on Stemmit as abysmal. I am aghast at the number of amateurs pretending to be professionals. Here's a clue: If a particular cryptocurrency doesn't have a Central Premise, a reason to be, then it won't survive. Can you imagine Christianity surviving without Christ ... Nike without shoes ... Cryptogee without hypothetics!
Technical analysis, a favorite here on Steemit, was developed over a century for financial instruments that, directly or indirectly, had underlying economic value. Stocks create dividends. Bonds pay interest. Cryptocurrencies, in general, (STEEM is an exception) do neither. It's like measuring mass with a thermometer. Technical analytic tools work (to whatever degree that they do) because they identify cyclical trading patterns ... but the impetus for such cyclical trading patterns are cyclical financial performance and/or macro-economic trends that occur in the real world. The vast majority of cryptocurrencies have no underlying economic function and therefore fundamental analysis is impossible (because there are no fundamentals).
And hence, the popularity of TA for cryptos ... there's nothing else to use as you pretend to be analyzing something. A great deal of TA is the result of self-fulfilling prophecy. That is, because a whole bunch of traders are all using the same indicator, they cause the movements that the indicator purportedly predicted. TA indicators go in and out of fashion, however, so whatever works today may not work tomorrow. Moreover, the hedge funds know which TA indicators the amateurs use and can easily manipulate them for profit. I don't dismiss TA in it's entirety, but it is widely misused.
In my estimation, there is room for perhaps 2-3 Super-Cryptos: Currencies widely used as general mediums of exchange, just as fiat currencies are used today. Even then, a couple of those will probably have to be specialized. For example, by being super-secretive (thereby facilitating criminal exchange, money laundering, fraudulent transfer and tax evasion) or by being the internal fuel for smart contracts.
All others will have to have an underlying economic purpose ... like Steemit. Such currencies will be more akin to private currencies or company scrip. All the others will end up in the dustbin. Evolution rewards the useful. It is unkind to the useless.
There is absolutely nothing about being a decentralized blockchain-based currency that overturns the basic laws of finance and economics. The entire history of both has simply been exchanging one set of problems in preference for another. Cryptocurrencies are no different. Perhaps a couple of dozen will find useful niches in which to co-exist with a litany of other financial instruments. The rest will evaporate, along with the delusions of legions of dreamers.
Wow! Where do I begin? First of all, thank you for explaining how a derivatives market works and the need for one, that was perfectly explained and I never even thought of what a company goes through when recouping profits in different currencies.
It also highlights how the cryptocurrency market has a long, long way to go, before it can even think about replacing the current fiat system. What I'd like to ask you though is; does the Shapeshift app, which I'm sure a lot of vendors use, mitigate the need for a derivatives market? In case you haven't heard of it, the app instantly converts your crypto into your currency of choosing. Instinctively I'm thinking it does, simply because the vendor now doesn't have to worry about the price of Bitcoin, as he can shape shift to Yen, Euros, or Dollars.
However as I write this, I think I'm answering my own question, because of course the vendor is still vulnerable to minute-by-minute price fluctuations, whilst the orders are waiting to be confirmed. Anyway, I'd like to hear your thoughts on that.
OK, onto to Steem/Steemit, I think you hit the nail on the head, that it ultimately is failing on its promise, though I don't believe the failure is total. I have seen people come onto the site and go from zero to high per-post earnings, by posting quality content. This may not happen as often as it should, however it is happening.
I would so love to hear your ideas on fixing it, as I have wracked my brains, and listened to quite a few suggestions. There were talk of caps, which in my mind, do nothing whatsoever, the problem lies with the fact that somebody could be posting one or two liners, but if they have a whale friend, or they themselves are whales, then they can vote for that content. Whether the rewards are capped or not won't make a difference to them, somebody could make 10 posts a day about absolute nonsense, and vote for every one. Sure you're minimizing the Steem Dollar amount of their rewards, however their overall percentage take on the reward pool, will remain the same.
Then we come to the solution of minimizing weighted voting, or getting rid of it all together. However this is more likely to exacerbate the problem. As now you don't even have to be a whale to abuse the system, you can simply start a million bot accounts and start mass voting on rubbish. When I first joined Steemit, I thought that the algo was somehow going to work out how reputable each person was, and assign voting weight that way. However this would prove very difficult to implement, as any of the indicators that code could use to assess reputation, can easily be gamed.
I have read your reply a few times now, and I want to think about it some more, and like I said would love to hear your ideas on how to fix Steem's Achilles heel. (perhaps a post or posts?) As ever, thanks for the food for thought!
Ah also I just remembered a question I wanted to ask regarding the hyper-pessimism/optimism of the markets and the role of market makers thereof. Are, or even, can tether coins somehow play the role of the derivatives; by adding some kind of stability? Thanks
Derivatives
Derivatives, whether Futures (called "forwards" when created off-exchange by banks) or Options (calls and puts), are simply contractual financial instruments that "derive" their value from some other underlying financial instrument (a stock, bond, currency, etc.). [There are other kinds of derivatives as well but I'm keeping it simple.]
Such derivatives involve obtaining the right to buy or sell the underlying security at a pre-determined price sometime in the future. Derivatives are used to either enhance speculation (profit potential) or to hedge against unfavorable price movements (principal protection). Important to note (with respect to cryptocurrencies) is that the latter motivation is frequently employed by non-financial actors such as farmers, miners and multi-national corporations engaged in cross-border trade.
In December of 2017, futures for Bitcoin were introduced on both the Chicago Board of Exchange (CBOE) and the Chicago Mercantile Exchange (CME). The New York Stock Exchange is said to be interested in getting in on the action as well. Ledgerx now provides Bitcoin call and put options.
All this is excellent news for cryptocurrencies.
That said, as I explained to Cryptogee, creating a "functioning derivatives market" requires more than just exchanges and regulatory approval. It also requires a number of deep-pocketed Market Makers. Creating a functioning derivatives market will be a process of fits and starts. Liquidity that is sufficient today may not be sufficient tomorrow. It will be tumultuous.
But here's the important part: As a functioning derivatives market develops around Bitcoin, it will dramatically change Bitcoin's price action. This is absolutely unavoidable.
Hence, as Bitcoin "grows up," the way it will be traded in the future will be very different from how it was traded in the past. Although well beyond the scope of this article (it's complicated), derivatives tend to stabilize the price of the underlying security (in this case the cash price of Bitcoin).
"Range-bound" could simply be "price-stablized," couldn't it? It only looks like "strange behavior" relative to the way Bitcoin used to behave prior to derivatives being introduced.
Here's a brief Forbes article from a couple of years ago respecting Bitcoin derivatives:
For those who really want to dig into the subject (and you should because this is REALLY important to understand):
http://media.terry.uga.edu/documents/finance/impact.pdf
Bitcoin becoming temporarily price-pinned ought not be in the least bit surprising. Indeed, it was predictable.
A Cautionary Note: A "functioning derivatives market" acts very differently than a "non-functioning derivatives market." At the outset, the presence of derivatives (which internalize a great deal of "leverage" or "gearing" for you Brits) can make market manipulation easier, not harder. This will change as the market matures. This phenomenon is not unique to cryptocurrencies. As I explained in my Cryptogee comments, however, derivatives are absolutely necessary if cryptocurrencies are ever to become practical for day-to-day commerce.
Alt-Coin Derivatives
Once Bitcoin derivatives become established, there will be tremendous pressure to add others (Wall Street is greedy). Keep in mind, however, that the vast majority of cryptocurrencies won't qualify for their own derivatives. They'll be too small with insufficient trading volumes to attract the necessary bevy of Market Makers. And hence, cryptocurrencies will quickly be divided into the "haves" and "have-nots."
When this occurs, the "have-nots" will be largely decimated. Hedgeable vs. non-hedgeable ... who's going to choose the latter?
Fortunes will be lost.
An analogous situation can be observed in the stock market. There are large publicly traded companies (with derivatives, and hence ... that are hedgeable) and small penny stocks (without derivatives, and hence ... that are not hedgeable). Penny stocks are extremely volatile, subject to market manipulation and extremely speculative in nature. Pump and dumps are common. Investors react to rumors like nitro-glycerin reacts to flame. Most investors, especially institutional ones, wouldn't touch them with a ten-foot pole.
In the not-distant future, launching a new cryptocurrency will become much more difficult, not just because of increased regulatory scrutiny, but because of a lack of hedgeability. "Getting off the ground" will become as difficult as it is for all other start-up ventures.
A lot of cryptocurrency advocates are ideologically motivated. "Sticking it the Man" is a worldview objective. As should be obvious by now, this is a worldview doomed to fail. Cryptocurrencies are going to fall into line and behave. They are going to say, "Yes sir, No sir" to government regulators and institutional investors just like everyone else. Anarchists dream of "No Rules, No Rulers" will join a host of other Utopian dream-schemes in the dustbin of history. Governments possess the Power To Compel and the Concentrated Capital of investment banks is a weapon of insurmountable potency. Believe to the contrary at your peril.
STEEM Derivatives
STEEM is currently unable to maintain Top 30 status amongst cryptocurrencies. This is not good.
Being in the Initial Alt-Coin Derivatives Group may well mean the difference between life and death. In the next couple of months, a number of Steemit competitors will be coming on-line. And, there is already a steady stream of Steemians signing up ... myself included. And it's not just Minnows ... there's plenty of Dolphins as well. Active recruitment is well underway.
The reason is simple: Steemit suffers from a number systemic flaws, of which everyone is aware, but the people who could fix them ... Whales and Witnesses ... won't. Indeed, a number are involved with their perpetration.
The "cryptocurrency-backed social media platform" that gets derivatives first will have a tremendous advantage over its competitors. Very probably an insurmountable one. Given its existing user base, Steemit ought to be able to win this race handily, but such success is not at all certain. It what can only be considered an act of self-immolation, Steemit Whales and Witnesses fiddle while Rome burns.
Keep in mind, it's not Steemians who will decide whether Steemit gets derivatives ... it will be Market Makers. No Market Maker with an IQ over 2 would touch Steemit as presently configured. It is a dysfunctional cheater's paradise, a fact articulated by countless Steemians and outside observers.
Correlation & Decoupling
Undoubtedly, everyone's noticed that the prices of cryptocurrencies (excepting stablecoins which derive their value from real world assets) are highly correlated. When the price of Bitcoin goes up 10%, the price of STEEM goes up 20%. And similarly, when the price of Bitcoin goes down 10%, STEEM's price drops by 20%. This will continue until functioning derivative markets are created. While it is likely that there will always be some degree of correlation, derivatives will allow a substantial degree of decoupling to occur.
Given STEEM's underlying economy, its ability to rapidly decouple from Bitcoin is greater than most other cryptocurrencies ... BUT ONLY if Steemit performs as it was designed ... which, at present, it is not.
By the end of this Series, I will propose ways to resolve all the systemic problems currently effecting Steemit. Stayed tuned for my next article, "Central Premise," where I will begin to address specific problems, and their solutions, at length.
Quill
You guys know the drill. Be verbose ... but articulate.
And remember ...
Go Love A Starving Poet!
@cryptogee @old-guy-photos @d-pend @c0ff33a @derangedvisions @jaynie @karenmckersie @ervin-lemark @steevc @fionasfavourites @joanstewart @bossel @wordymouth @greer184 @juanmiguelsalas @darth-azrael @palasatenea @toddrjohnson @lymepoet @trumanity @girlbeforemirror @angelveselinov @madevi @drakos @dollarsandsense @bengy @rebeccabe @blockurator @hash-tag @sunravelme @ecoinstant @lynncoyle1 @rensoul17 @crystalhuman @blueteddy
OK a lot to take in here and I'm sure I'll be coming back to this over the coming days/weeks...
I wanted to ask you about the above, is this what is happening with Bitcoin at the mo? It seems it is caught in a $1000 pocket, every time it goes up to around $7500 or so, it then falls back down to around $6500.
Unfortunately I think that it will never work as it was meant to, there were too many unconsidered variables that were thrown into the mix. Look at accounts like Haejin who have bought their way to power and are unstoppable.
I like your comment about the witnesses fiddling while Rome burns, I wrote a similarly titled article around 18 months ago, whereby I lambasted another meaningless hardfork when there were serious user issues that had been ignored.
Now though I just sigh and don't bother getting angry, because ultimately Steemit is stuck between being an incorporated company and an open source project.
It has all the financial implications and (no doubt) structural ones of a proper company. However it seems to operate like an open source project whereby things tend to take years to happen.
I've got that pdf you linked, it's too late to read now, but I'm sure I'll be back with questions!
Cg
I think our delegation/"bond"? market could help things out. I think more of Steem delegations should go to humans on places like minnowbooster and less to automated robots.
https://www.minnowbooster.net/market?direction=asc&sort=effective_price
Alright, I've finally read through this (very insightful and well-written) piece, as well as all the comments.
I am really not sure what to add.
I guess where I am on this Steemit journey really doesn't involve me considering the long-term health of the platform. If it folds, great, I go elsewhere. I have nothing serious invested here in either time or money.
I do get annoyed at the high payouts I see on ... mediocre ... content. I posted the folloing on one of denmarkguy's threads, which I will repost here because I am lazy and I am proud of my analogy.
So some of what you are proposing sounds like it would mitigate this to some extent? I'd be all aboard that train.
I'm not sure how you separate the reward structure for content creation and witnessing/investing. I guess you'd need a second currency that couldn't be exchanged for the first. So it probably wouldn't work.
I guess the bottom line is that, with all due respect, I really don't care. I will vote for the witnesses that I see doing things I like and will follow the lead of people who have ideas that I can get behind. But there's just so much else that matters more to me than the fate of cryptocurrency, so it's hard for me to offer much more feedback than this.
Sorry if that disappoints you. I'm only 4 months into this platform - get back to me in a year and I might feel differently :P
The only answer to this type of abuse that I see is quite simple but effective and already proved. It calls taxes, but to take measures like this you should change the Steemits code and this is something that I think the whales wouldn't approve. Is obvious that the first adopters, the witnesses the most powerful users of Steemit won't take a measure like this because is going directly against their interest, but I don't know maybe some of them would see right the redistribution of the benefits.
Then we should see how to distribute those taxes and with what purpose. The basic theory is that the bigger you are they more taxes you pay, but in the real live it's not like that. Because the richest people always find the way to trick the system and they have the tools to make it happen.
It's a very complex theme and of course isn't the panacea but could solve some mayor inequalities that we can see today here.
@palasatenea,
There's no need for taxes. The only thing we need are Rules of Conduct and a pragmatic way to enforce them. The litmus test for what's allowed and what's not would be the Central Premise, that: Content Shall Be Compensated Commensurate With Its Quality. Anything that diminishes that end would be prohibited. Anything that furthers it, encouraged.
Quill
That's definitely one possible solution, although as you say, one unlikely to see the light of day.
I think people will flog it to death with the "redistribution of wealth" label, so it would have to be presented as a tax on earnings (not SP). If you made the tax rate variable and correlated to SP, then I think you're on to something that just might be able to get some traction.
That could be a good implementation, as the way you said that label could be quite unpopular, the idea of do it correlated to SP and only applied to earnings is good also.
That is a form of direct taxes that could be useful but the indirect taxes to discourage some bad content or to foment others, could be another good initiative as well, I know that there are bots like cheetah that do it already but I don't know if they're very effective, for the things I see daily I would say that they aren't.
Anyways it's so polemic issue that I'm very skeptical of the application of such measures I think that is a problem that brighter minds than mine should try to solve.
There is so much in here! I need to read and re-read it, particularly as you have explained things about which I have less than no clue (seriously). I am, though, particularly interested in what you see as Steemit's fatal flaw, particularly as it relates to its raison d'être and what I see as a contradition between being a social media platform versus a showcase for quality content. I do recognise that what is quality for one person is not for another, as I have said before, and I also think that on person's entry level is another's barrier.
Anyhow, I've been AWOL for a while - lot's going on - and so that I don't lose this, and because I can only upvote I am also going resteem this post. It does really deserve attention from @curie and @c-squared as well as @sndbox. Although if it hasn't already, it may be too old... (that's another issue for another time, too.....)
I'll be back..... :)
good day your colony ned ur action. :)
@darklands,
I dropped by yesterday ... I have NO IDEA how the game is played. I'm still waiting on my daughter to figure it out. Is there any way I can skip the niceties and simply have a sword fight with @blockurator and steal his colony? :-)
I'll check in a little later and see if I can't "grasp the concept."
Quill
Ha ha!
Do you have a sword? Cause I don't. I'll trade you two pebbles for a hand of dirt clod. lol
Seriously, you have four phases. You figure out what to do in each of the four phases. The first post on this, two weeks ago, I think, explained it. But I have to figure it out again every week when it comes to game play. So there is a little bit of mind twisting.
If you want to wrestle, we can head up to the big cliff. Whoever pushes the other off first can take over the dead man's colony. It could be the @darklands version of racing for pink slips.
@blockurator,
So, just for instance, if you were in my colonial shoes ... what would you do? Very specifically and precisely, what would you do? Verbatim. :-)
Quill
I would hire a lumberjack and have him start building a fire. Then I'd start exploring the immediate area to see what I can find. If you want more workers, delegate some SP to the @darklands account. You'll get extra workers to use on your next turn and grow your colony faster, plus you'll get more upvotes on your posts.
@blockurator,
You know, that's what I was thinking too. Great minds.
We'll see how in sync we are on the next move too. What is that you think I'll do next? Be specific.
Quill
I dont know. Probably go on a quest. Maybe trade resources I wait for the game master then decide.
@blockurator,
I think that's what I'll do too. :-)
Quill
I have not read all that yet, it's 10pm at night and that is way too much heavy reading for my tired eyes. I will return to it tomorrow - very interesting what I did catch though.
#thealliance #witness
Okay, I gave you a 100% upvote, so enjoy that .01 SBD.
Now, this was in many ways a brilliant post. There's a lot to parse. A lot to take issue with, but a lot to agree with. That's what a great piece of content does. It makes people think, feel, and possibly both at the same time. Then act. In this case, blow two cents up your ass.
First off, the premise of Steemit is flawed. The whole idea of "quality" is subjective. There's no such thing as objective quality when it comes to content (or much of anything else, really). Try reading "Zen and the Art of Motorcycle Maintenance" and you'll begin to get an idea of what I mean. The very idea of quality is such that everyone with half a brain cell is qualified to judge what it is. Few people are good at judging and all of us who are use flawed criteria or prejudicial ones (there's a reason that confirmation bias is a thing). So any system designed to rise or fall on the basis of quality has doomed itself from the get-go.
I'm certainly not an expert on derivatives, or financial markets for that matter, so I can neither confirm nor refute your argument on that. What I will say is value is an agreed-upon state of awareness regarding anything that might be tradeable. At one time, before fiat, people traded what they owned. Fur coats, or pelts, in colder climates were of high value because they provided a useful purpose. In warmer climates, they were of lesser value. But if you lived in Africa and was good at hunting and killing animals that could be used for making fur coats or pelts, then you could make a living if you could find someone who wanted what you had and who had something else you wanted. Many cryptocurrencies are based on this kind of value. Many more aren't, as you so aptly noted.
I was around when the dot-com bubble burst in 2000. I was active on the Internet, but I wasn't involved in any type of commerce. Many people were. When the dot-com bubble burst, I started researching why. Quite simply, irrational exuberance took over. People got emotional about a new technology that was going to change how people communicate, do business, etc. It did. But not until a lot of failed experiments hit the dirt. Many of those failed because investors put money into bad business plans and bad business managers. But there were people making money online. Amazon opened its doors in 1994. They didn't become profitable for 10 years, but that reality was built into the business plan. Jeff Bezos is a genius. And all he sold for the longest time was books.
When it comes to cryptocurrencies, there are different kinds of "currencies." Some are coins, some are tokens. Among tokens, you have security tokens, utility tokens, staking tokens, and probably a few more categories I'm leaving out. They all have a different purpose. But few of these will survive if, as you say, Market Makers, don't support them. In some cases, those are banks and financial institutions. In other cases, governments. In other cases, it could be a market. Gaming tokens, for instance, don't need government or banks to survive if the gamers who buy, sell, and trade them agree on the value within the gaming system wherein they interact. So, while you hit the nail on the head in some respects, there is a lot of complexity regarding crypto markets that go beyond these arguments. Nevertheless, you have proffered a valiant effort, and I lift my sword (point it toward the sun).
Too long to go for today, but we'll get you there...
@blockurator,
You are such a brilliantly delicious writer that I even enjoy your insults ... you S.O.B. :-)
Yes ... quality is subjective. But not that subjective.
Some Supreme Court Justice once said (paraphrasing), "I can't tell you what pornography is ... but I know it when I see it." Playboy's porn ... but naked Greek statues aren't, even though the subject matter is the same.
In any event, my issue is not about what you and I might variously consider quality, but rather the systemic way that quality is determined, and hence rewarded, on the blockchain. If you're buying your own upvotes (bidbots), then clearly any notion of Objective Curation is being violated.
Ironically, I DO NOT blame anyone for using bidbots. It is a sensible adaptation to the realities of the environment. Nevertheless, it is destroying the blockchain by making it untenable for those that don't. It is creating a Tragedy of the Commons. https://www.investopedia.com/terms/t/tragedy-of-the-commons.asp This is something I will address in great detail in the next Article of this Series, "Central Premise."
Agreed, and an issue I will address in the future Articles of this Series. As you can see, this one was getting pretty long.
Quill
Quill,
We agree much more than we don't. And then you go and illustrate perfectly well what I was saying by trying to refute it. Thanks!
But there are people who take issue with Playboy, and with naked Greek statues. Feminists and conservative Christians both agree that Playboy is bad, but for different reasons. I don't know why people take issue with naked Greek statues, but they do. Maybe it's just because they have to take issue with something even when its level of innocuousness is obvious. But there you go.
I certainly do agree with this, however:
The systemic way that quality is determined on the blockchain is by allowing people to upvote what they consider quality. Here's a question for you: How is a person spending 5 STEEM on a bidbot to earn back 7.86 STU on a 6-day layover for a crap post any different than two creators of crap posts agreeing to upvote each other's mediocrity? Or, how is it any different than using SteemAuto to upvote every post in a curation trail with a 5% upvote even though you won't read any of them just so you can get your 100% upvote from the upvote bot run by that curation trail? Each of these moves is an economic decision. And they're all made on the basis of the flawed Steemit premise that you're taking issue with.
I am waiting eagerly for your next installment, sir. You certainly provide food for thought, and thought for food.
Curation on steemit isn't about selection of quality content. It's a matter of taking an action that has certain outcomes in 7 days. If it were about content, we would find interesting articles in trending. Curation is about hording. There are companies who do this openly - you can see over a thousand votes, but not a single comment. If 1,000 people read something, how is it that not a single person commented?
I think objectively curating content is all about me reading it, assessing if it is worth paying for a vote to get it to be seen. It is way less time consuming than waiting for some jerk to objectively come to the conclusion that my content will trend well. In the end, my content may still trend long after berniesanders and his brilliant meme's are long forgotten. Maybe something is broken, but I think it's broken in human nature, so any system will be weak to counter act those flaws in human nature.
Anyway, your article is brilliant and thought-provoking. Thanks for all the efforts!
Congratulations on hitting 50 Rep!
I'm not an economic expert, and if you used to run hedge funds then I risk making a fool of myself... I thought that one of the biggest hurdles to real investment money coming into crypto was the lack of qualified custodians for holding the crypto assets?
The anarchistic world view of the stereotypical crypto supporters is sadly misplaced. There are power and governance structures ingrained in blockchain projects, despite the best efforts to ignore them. The sooner we realise this and deal with them in a transparent and accountable way, the better it will be for the ecosystem as a whole.
I have serious misgivings about Steemit, it appears to be more an exercise in networking rather than an exercise in quality. However, there are projects that struggle to make it work, against the ingrained wealth and power inequality that is detrimental to the entire system.
I am curious about the other platforms that you mention, but I will pm you.
You mined it for me, the least I could do is come over! Wow!! Longest read of the day award goes to @quillfire! 👍🏿 Have a good evening, sir.
Your going to do it! Hit 50 rep with this article! I'm sure of it!
Now let me actually read it....