What are the Economic incentives to buy and hold large amounts of Steem Power?

in exyle •  20 days ago  (edited)

It's a question that came up yesterday by @louisthomas.


Screenshot 2019-11-20 at 12.23.27.png


I gave a decent reply to the post here, but the question is legit, so I wanted to dive in it a little deeper.

Before we get into economic incentives let's look at how people acquired their stake and how you can still get stake today.



Steemit Inc. and some early Steemians acquired their Stake by mining it.

Then users of Steemit.com (the first app build on the Steem blockchain) acquired a big stake by blogging here very early and receiving big votes from the early miners.

Others like myself took the long grinding way. Acquiring STEEM by buying it from the market with FIAT and other cryptos. And by blogging on Steem every day for 3,5 years.

And the last group just straight up bought it.

Nowadays to get STEEM (if you don't have it yet) you can work for it or you can buy it.

Now the question becomes, who in their right mind would want to do that?

Or in other words what is the incentive to get STEEMPOWER and HOLD it?

In this article, I have given reasons to hold STEEM for 3 groups. Reasons for now and the future (3-4 months from now when Communities, SMT's and RC pools are out).

The groups are Users, Developers/Communities, Investors.


One more thing before we continue:

It's vital that you know what Resource Credits are on the Steem Blockchain. They are mentioned a lot.

Transactions on the Steem blockchain are for free but every transaction with the blockchain (vote, post, custom JSON) will cost a certain amount of Resource Credits (RC's).

If you stake STEEM (into STEEMPOWER) you get access to these RC's. The more STEEM you stake the more RC's you can spend. RC's automatically replenish 20% per day.


Users


source


Steem today

If you are a USER of Steem applications (APPICS, Steemit, Splinterlands, 3speak etc) all you need is enough STEEMPOWER to be able to transact with the Steem Blockchain.

If 50 STEEMPOWER gives you all the RC's you need for a day to use all the applications that you want to use, then there are zero reasons besides that to get more then 50 STEEMPOWER as a USER.

If you can't do everything you want because you run out of RC's then it's a good reason to get more STEEMPOWER.

Steem in the future

In a couple of months, RC pools will be introduced. RC pools will allow developers/communities to fill a pool of RC's from which USERS can tap RC's that they need.

When that happens a USER will not need to own any STEEMPOWER to transact with applications. The USER will be able to tap from the RC pool.

For Example: if a USER of APPICS only uses the APPICS app and APPICS would provide an RC pool for all their USERS there is zero reasons for an APPICS USER to hold SP.

(Of course, you can make the argument that there is still a small incentive to hold your own STEEMPOWER as a USER because without it you can only transact with the communities/applications that provide an RC pool and not with the applications that don't. But for me, it's already clear that applications and communities on Steem that don't provide an RC pool for USERS won't survive.)

I don't think the demand for STEEM will come from users in the future when it comes to STEEM and RC's.

There can however come a demand for STEEM from USERS if there are more possibilities to buy things with STEEM that users want.


Developer/Communities


source


Steem today

Developers often use their own STEEMPOWER to rewards the USERS of their application with upvotes or they use their STEEMPOWER to delegate STEEMPOWER to USERS of their applications.

Splinterlands for example delegates STEEMPOWER to USERS when they run out of RC's.

When USERS don't have RC's they can't play the game. It's a good incentive for Splinterlands to hold a big amount of STEEMPOWER for this reason.

Another reason to have STEEMPOWER is that it allows the developers to create ACCOUNT TOKENS.

ACCOUNT TOKENS allow the developer to onboard users for free.

Steem in the future


When RC pools are out the DEVELOPERS and COMMUNITIES that provide an RC pool for their USERS will find it easier to onboard new users.

When USERS don't have to invest in STEEM to use applications or community that's a huge plus.

In other words. Your USERS get access to blockchain technology and all the benefits it provides (like ownership of digital assets) and can transact for free.

More USERS for applications and communities is a BIG deal. The more USERS the easier it becomes to create revenue.

Developers and Communities can also choose to reward their users not in STEEM but with an SMT if they want too.

The USERS of Applications and Communities most likely will then never know they are given access to RC's. It just works.

Also, for DEVELOPERS, once you have STEEMPOWER (and access to RC's) you can use it over and over. Regardless of STEEM price.

It can easily scale with your organization. If you have too much SP, you can lease it out. If you have too little you can acquire more.

It's a good reason to acquire STEEM today as a DEVELOPER/COMMUNITY. STEEM is cheap and once you have your own you don't have to lease it in the future.

If you can't buy the STEEM you need to grow your organization you will need to find others ways and that's where INVESTORS come in.


Investors


source


Steem today

I find it hard to make a case today to INVEST in Steem besides the fact that it can generate more STEEM once you have it. But with a STEEM price that goes ever lower, this is hardly enough incentive.

The future use case for STEEM thought might be very interesting and a reason to invest in STEEM today.

Steem in the future

I expect the demand for RC's to rise when RC pools are out.

USERS is everything and the DEVELOPERS that allow their USERS to tap from RC pools will have a huge plus over those that don't.

This could increase the demand for STEEMPOWER and the only reason I see why the STEEM price will go up in the future besides speculation.

Not every DEVELOPER will be able to afford the STEEM that they need to fill RC pools to attract USERS.

This is where INVESTORS come in.

As a holder of STEEMPOWER, it will be possible to delegate the RC's that your STEEMPOWER provides to DEVELOPERS or anyone else that needs it.

It will open up a whole new bag of investment possibilities and remember when you DELEGATE RC's you never loose OWNERSHIP of your STEEMPOWER.

DEVELOPERS might offer a return in SMT's for access to RC's. They might pay a monthly return in STEEM or any other crypto or even FIAT.

Dlease.io is already showing a little bit of what that future will look like. But I expect more options to open up in the future.

Only STEEMPOWER holders (investors) will be able to lease out RC's.

Is this good enough reason to invest?

It takes a bit of a future vision and believes that the growth of Steem through RC's will happen. But I don't think it's outside the realms of possibilities.

There are some great working apps here already. Checkout APPICS, Splinterlands, Steemhunt, 3speak, Dtube, eSTEEM, Steemit.com and more. And they are all hungry for more USERS.

USERS will be able to interact with their applications for FREE if they have an RC pool.

Also, communities for Steemit.com (major new feature) are in closed BETA and being tested and SMT's are WORKING on the Steem blockchain testnet planned for release early next year.

Steem as a blockchain is the only blockchain that is build to tokenize the web around communities and it continues to innovate. It also has an already established Steem userbase and communities surrounding different applications.

The potential sure is there but it stays a risky investment though. A lot of things still need to go right.

A lot will be more clear in Q1 of 2020 when RC pools, SMT's and Communities (steemit.com) are released).



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Thank you for the thought provoking post. Let me challenge it a bit though...

Your opinion seems to be that demand will come from projects needing RCs for outside users. I would say that most projects that choose to build on Steem would be doing it in hopes to tap into its current community. I'll explain, if a project wanted to utilize Steem's technology it has two options, 1. buy a lot of STEEM, 2. clone Steem, pre-mine a lot of tokens and use the free RCs to create many account tickets and delegate to a lot of people.

Right now STEEM is pretty cheap, so a lazy team might just buy some up. But it is really not all that expensive for a team to clone Steem and adapt it a little to their own needs. So I am not sure that businesses will choose to make buy a lot of STEEM and make an SMT over cloning, unless it is to obtain access to the users already on Steem.

This is why I believe Steem needs to reach out to many user-types rather than focus on the businesses. If you look at Ethereum you see that large businesses usually choose to use its code and not make a dapp. I think this is because they are not attracted to getting the users on the public version because its too small to them and they're fine with their closed off, private version. Yet, Ethereum is the place to be when thinking about making a DeFi dapp that wants to be interoperable with other DeFi applications.

People say "blockchain is the innovation not [insert blockchain name]" and I believe that has some truth to it under certain conditions and is wrong in others. Blockchains are just like social networks, there are a lot of social networks online, anyone can make one, so what makes Facebook, Twitter and Youtube so important? It's all the users. In the same way, I believe its not businesses before users but users before businesses. imo :)

Cloning Steem is possible. It has been done before but not very successfully so far I believe. It's also pretty expensive to buy all the infrastructure yourself.

I fail to see why anyone would go that route though when you will be able to make an SMT for 10 sbd on Steem and utilize it in your application or community.

You do need access to RC's but you can lease them if you can't afford the STEEM straight up and increase the leases with the growth of the organization.

It's a much cheaper, easier and faster option.

And besides that, if you clone Steem you will have to somehow get your token on an exchange for it to become tradable. With an SMT your token will be tradable straight away and you will have access to instant liquidity.

I'm referring to large projects. Smaller projects and communities would of course find SMTs useful and prefer them over cloning. But look at Weku, Golos, Narrative,Whaleshares and there's another one that is picture centric, can't remember the name, but they forked Steem. Its really not that challenging for a business to launch one.

The point I am making is that price of STEEM is going to be directly related to whether people clone or make an SMT, unless Steem's community is so valuable to the business that they go with Steem. Currently, Steem's not big enough of a community for that, but it should be the goal.

Let's say STEEM got back to $1, in that case a video game company wanting to cover RCs for a million people would need at least 15,000,000 SP or rent the RCs. Who wouldn't clone?

I agree with all your above mentioned points. Communities and RC's should improve conditions, but without any promotion or PR from Steemit to the wider world. This to be done in a highly target and strategic manner.

What would be the point? I do really question Steemit's communication framework and it honestly looks like no one is accountable for that obvious failure so far.

I always felt steemit.com would be a lot easier to market when communities, SMT's and RC pools are here and hopefully also easy signups at some point. It will make it a much better product.

I think a lot more people will start onboarding campaigns when they have set up their own community with an SMT and RC pool for steemit.com.

I have personally onboarded a fair bit of users but only a handful stayed when the price of STEEM dropped. And I get it. It's not easy to stay invested in this place without the money that lured one here in the good times, it takes some real belief to understand Steem in its current form and stay invested with your time and money.

I think in the future we will see a lot more applications and communities simply 'powered by Steem' but they will be completely separate from each other.

Like an APPICS user might never play SPLINTERLANDS but they are both 'powered by Steem'.

These applications will market their own applications to the world. And through those efforts, Steem can achieve greater adoption.

Hello fellow Steem Vulcan,

I am sure communities, SMT's and RC's will make a difference to the ecosystem. It will be positive for sure.

Like you mentioned easier sign in is going to be key here. I have lost the interest of many when I go in the four different keys for Steem. Then they get onto to Steemit (which I am now not doing, but directing to steempeak instead) and they are lost in the sea of content. Plus the newbies have the expectation set by steemit, that they are going to earn for their content. This from the very outset and I think this is fatal and should be reconsidered. Again we all have experiences of people we know getting upset that their content wasn't earning to their set expectations. They most likely left.

Steem engine tribes have been out for a while now, but has that increased onboarding significantly? They didn't market their products, so I find it hard to listen to Steemit's logic that marketing/promotion isn't a priority. Additionally a lot of past users had a bad taste of Steem, cause they where under the impression it was only Steemit. We know the ecosystem has grown and evolved, but do they?

Steem needs to be promoted as Steem blockchain and not as a blogging site. I agree with you Dapps will make Steem successful.

Good luck with the weight loss as I know the feeling. I stopped drinking alcohol over a year ago and that shed the kilos off me. Processed food is everywhere and I do my best to avoid that too (not matter how good it tastes).

Thanks for going into even more detail around this topic! Extremely interesting.

No problem! I enjoy talking about this aspect of Steem. I feel a lot of time the focus on Steem is too much on human behavior and how people act and feel that the underlying technology and investment options that Steem offers get too little attention.

Cant I ask that about pretty much any Crypto?

What is my incentive to hold large amounts of ETH despite speculation (after the switch to pos it is a different story)

Why hold Tezos if not for staking and speculation?

Steem is solving issues not many people have at the moment and I think there are so many misinformation out about it which is a problem as well.

Creating an environment that promotes the usage is kind of a backdoor way to making steem relevant. @Exyle has the point when it comes to why we will one day need to own and hold steem. Whoever holds steem today, may as well be a bank in the future.

One could even say that this is the internet of tomorrow since we're all sort of building this protocol that may well be the next generation protocol of how people transact and interact on the web. Steem can be easily replicated once its done, but first movers advantage is a massive advantage (ie solving problems before they are problems).

I guess the original question from Louis could be asked about any cryptocurrency really. It all depends on the use cases for the token.

RCs are no doubt the key for the platform and that's why I've been trying to load up on SP. There are other ways that SP can gain itself though.

Curation, content creation with those dapps you mention, dlease is another way that I've explored and works pretty well, contests with prizes... The list goes on but still, the importance is onboarding new users as simply as possible and SMTs and communities are going to be a big part of it.

As a user, I like the interaction aspect but so many discord servers is kinda off putting, I'm hoping to see some embedded forums with communities but I'll have to wait and see how things look when they are launched.

I'm thinking in years though - use cases for steem will come about if people make exclusive products that can only be bought with steem that creates a buying pressure (which you mentioned).

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Very insightful and I just hope things get better here

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Nice. You actually managed to write an entire article on why people might have incentive to purchase STEEM without once mentioning why they wouldn't want to. Such as the fact that if a whale doesn't like your content they can downvote you into oblivion, and actually cause you to LOSE that STEEM you just purchased. THAT'S why nobody's buying my friend, and why so many are selling. STEEM will be $0.05 by January.

A whale cannot prevent any STEEMPOWER holder from accessing their RC's. Nor can a whale take STEEM from you that you have purchased.

I clearly state that for a USER it's only necessary right now to own the STEEMPOWER that you need to transact with the network. And in the future, you won't even need any STEEMPOWER if the application/community has an RC pool.

Big stakeholders can indeed downvote posts they don't like to zero in STEEM but unless whales want to become a whale in every SMT that will be created they won't be able to do so for every community/applications build on STEEM in the future.

It doesn't mean STEEM can't go to 5 cents, but not for the reasons you mention because they are not valid.

Well, learnelectronics actually does have point. Where do the rewards come from? Inflation. Why do people dislike inflation? It erodes the value of the money in their bank account. When someone with more stake than someone with less stake downvotes something that has been upvoted, the upvotes become negated. This hurts both the author and the curators. And exposes them to harm via inflation.

Such as the fact that if a whale doesn't like your content they can downvote you into oblivion, and actually cause you to LOSE that STEEM you just purchased.

a whale can only downvote you. they cannot cause you to lose the steem you already have, purchased or earned

Thank you for this detailed explanation. All of this could make sense for my own project... :)))

If 50 STEEMPOWER gives you all the RC's you need for a day to use all the applications that you want to use, then there are zero reasons besides that to get more then 50 STEEMPOWER as a USER.

If we want the price of Steem to go up instead of generating more Steem for the holders, comments votes and transaction should cost way more than what they cost today. Even 100x more...each.

That might trigger people to invest in Steem

Yes and No. If it's too expensive nobody wants to use Steem. Great that transactions are for free but if you have to stake thousands of Steem to post a blog nobody would go for that.

I don't think current RC prices are bad. Steem simply needs more users and incentives for DEVELOPERS/INVESTORS to stake STEEM.

These incentives are coming in the form of RC pools.

For USERS I would like things to be as smooth as possible. Quickly get a username and keys and then transact with the blockchain through easy to use applications for free through an RC pool.

Example: Signup through APPICS app, get username and keys, Login, start posting pictures and share those with friends while earning APX tokens.

I heard we need 2000 more users to fully utilize the current stake to create demand for RCs. We have to be careful to not engineer everything for a tiny user base that would make the site unusable if we had more activity.

I guess I was thinking that, even for a dapp, if lets say 20K SP is all it takes for them to have a fully operational app with thousands of users interacting etc using their RC pool, I can't find a reason why the price of Steem would go up in the future?. Unless we are talking about thousands of dapps here...

I think to figure out how more activity would play out with the current RC settings one would have to be better a modeling what more use would look like.

I have shared your concern, currently it seems like we have a lot we can do with a little steem, but remember that changes with more users the RC credits get more expensive vs. remaining static.

I don't have any answers, just though I would bring up the point that you can't model it around today's userbase if you want to grow the user base.

I don’t think the focus will only be on dapps. Perhaps thousands of communities, with owners, admins, ability to pin posts, mute posts etc will put many more people than just dapp owners the ownership mentality and look out for the growth of these communities. I do think communities will have SMTs too even without a dapp, looking at the structure of communities on betasteemit.

Another thing that may help price is it being the base currency or pair against smt like btc is. Plus I foresee people coming from outside too, to make use of a decentralized exchange perhaps to hold or trade steem or SMTs that have gain popularity.

Another incentive to buy steem is for claiming accounts. Accounts may not seem so valuable now but it can grow valuable. Even in recent times it has grown more valuable. One steem account accessing hundreds of dapps.

Accounts may not seem so valuable now but it can grow valuable.

I'll drink to that

Too late. That's exactly what the last HF was designed to, and succeeded in creating. The same people now complain about users earning and dumping.
The old adage of 'spend a little, save a little' has never been more apt.

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Hi @exyle
Thank you for the article. I hadn’t considered all those points of view; user, dev and investor in terms of how much or how little SP they need.

Plus I had never heard of Applications providing the RC pool users need to interact with their Dapps! That is new information and a great onboarding tool or tactic. I think that’s great news.

I know people are bummed about the price, but I can’t help but be encouraged by all the development, increased user base for the Dapps and continual stream of improvements.

I know this sounds “fanboyish” but the Steem community is doing amazing things. I am a believer and I have been here 20 moons!
I have seen some ups and downs, but I am still accumulating and hope to reach 30k by Christmas.

I agree short term all you can hope to make from your Steem is more Steem, but looking at this blockchain, it’s achievements and activity I think it’s it has a lot of potential.

Upvoted and Resteemed!

@shortsegments

This was a very thorough article! Thanks for sharing. I think you did a good job of explaining the three groups as you see them. I really appreciate your honest evaluation of the blockchain and your continued commitment to it. They should really start handing out bracelets with the letters WWED. Then when people are not sure what they want to do on STEEM they can just be like "What Would Exyle Do"?

You could be making a killing if the doldrums finally end. Many altcoins will fail, but those that survive could become a great investment

Hosting content, voting, and post payouts are really expensive. If those things aren't providing any value why keep doing them?

Amazing post. This is the STEEM pitch, showing why it has a utility and value.

But what about other coins which we have in steemit now? I mean coins in steem engine...

They will probably become SMTs. That's my guess.

Hi, @exyle!

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You are right. Delegation feature on steem blockchain is the engine that will bring us to success

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Great write up. Explained it clearly enough for a noob like myself.

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