Crypto-Economics: A Steem Example vs Centralized Platform

As I was writing my post this morning about the Dlike bounty, it occurred to me this would be the ideal opportunity to contrast what is going to be the norm in the future.

Dlike is a Steem-based application that enables people to post links they find interesting and informative. This is similar to applications such as Reddit and Pinterest. The users of these applications contribute a great deal of activity that is extremely valuable. The only challenge with this is where the money goes.

When looking at the different paradigms, we see a major difference. Under the centralized structure, value that is generated from the users is filtered to the managers and shareholders. All proceeds flow inward and upward.

Pinterest had a value of $12.3B in 2017. According to the filing, here are the salaries and stock of the executives.

https://techcrunch.com/2019/03/22/this-is-how-much-money-pinterest-execs-made-last-year/

The filing did not state how much the executives would receive once the company went public. What it does show how much is directed upward.

We also see the IPO process taking a chunk out of the value. Offerings of this nature are bought to market by Wall Street banks. Not only do they earn large fees but also are given a lot of stock. This is often sold to their better clients who stand a great chance of profiting from the initial moves.

Here we see the trend in users of Pinterest.

https://techcrunch.com/2019/03/22/pinterest-drops-its-ipo-filing/

This is impressive. As the article just linked shows, the revenues of the company grew also. The site sells ads which, like the existing model, is based upon number of users. The greater the traffic, the more these companies profit.

My question is how much of this value are the users receiving? Are they financially partaking in the growth of the system? Do you think shares were set aside for them?

The answer is obviously not. The users provided their time and activity for free. One could state that they received the enjoyment and recreation of the site. However, this pales in comparison.

Today, there is a better way.

What if the same effort by the users was put into @dlike? This application rewards users in both STEEM and Dlike tokens. Dlike is a distributed application built upon a distributed blockchain. Under this scenario, the value is spread throughout the system.

Here is an example of what it looks like.

Source

Under the centralized system, the value is generated at the endpoints and works its way in. This is where the executives and shareholders are. Most, if not all, of the value goes to them.

When a system is distributed, the value is spread throughout. Each person who has a stake in the system benefits.

So, once again, why would anyone use the centralized platform when there is another option?

The answer to this resides in the fact people are not aware of what is taking place. Distributed systems which can be monetized, are a novel concept. Cryptocurrency is what makes this possible.

This is what Crypto-Economics (or token economics) offers.

Dlike distributes tokens to users for their activity on the site. Users can post links and earn the Dlike token. Since it is on the Steem blockchain, the main Dlike account upvotes posts providing rewards out of the Steem reward pool.

The tokens are distributed as an investment in the growth of the platform. As more people contribute, the value of the network grows. This means each token should increase in value over time. The ones who are benefiting are not Wall Street banks, investment funds, or even management.

Instead, we see a model where everyone who is holding Dlike tokens benefits.

At the same time, since this application is built upon the blockhcain, activity on Dlike enhances the value of the Steem ecosystem. We see a repeat where the additional value is distributed to all stakeholders.

We are going to see this repeated over the next couple of years. Distributed systems offer a great deal more. It will take some time but the benefits are too much for the average person to pass up.

Once the masses learn about the advantages of distributed economies, they will not hesitate to use them.

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