Why Down Votes and Flags are an Unavoidable consequence of Game Theory

It has been suggested that Steem should adopt an "up vote only" system for allocating rewards. I want to demonstrate how this is impossible in a decentralized system. The real goal is to eliminate "punishment" because no one likes to be singled out for punishment. Punishment also "divides" us and many people perceive it as an act of violence against one individual.

What many people may not realize is that Ned and Dan originally set out to design an up-vote-only, positive platform. They felt that the negative experience of "losing money by popular vote" would harm user experience. The system of up and down votes that we have to day is out of necessity not desire. We have to design systems that are fully compatible with the laws of human nature (game theory).

The majority of people are good people who have the community interest at heart. The challenge for these good people is that they cannot conceive of the amount of time and energy people will invest to profit at the expense of the whole. Today I want to take you through the evolution from up-vote-only to the system we have today. I am sure there are other systems that could be developed, but I promise you they all employ some kind of punishment for bad behavior.

On the surface up vote only sounds very appealing because "down votes" are perceived as a personal attack on another user. We tend to magnify the negative and ignore the positive in our life which results is most people perceiving a down vote much more painfully than the joy they get from the same up vote. This is magnified further when a down vote is applied after massive potential rewards have accumulated because small votes have greater impact on large payouts than small ones.

Every so often someone gets upset and "rage flags" another user costing them potential income and reputation. Sometimes this goes so far as to hide someones content from the default values. Sometimes flags are abusive, sometimes they are merely a difference of opinion and it is impossible to identify the difference objectively. Not everyone is emotionally mature enough to accept the consequences of a difference of opinion without feeling anger and resentment.

What if everyone was Good?

If we assume a user base of honest individuals voting on content that adds value and not voting on content that takes value away then the following system would make the most sense: all votes carry equal weight and payouts are linear.

This simple system is subject to sybil attack by people creating many accounts, so we do stake weighted voting to counter fake accounts. Assuming this was the only problem then we could do linear rewards and up vote only.

Under a linear reward model the logical choice is to vote on your own posts as often as you can. This is the other half of sybil only with "fake posts". To prevent this Steem introduced voting power which rate-limits how often someone can vote.

After eliminating fake posts we are still left with the fact that the logical choice (to maximize personal return) is to vote only on your own content as often as the rate limiting will allow you. This is almost identical to paying people interest which in turn would not redistribute funds and therefore would be pointless. Some people may choose to vote for others, but in this case the incentives are identical to a tipping model and subject to similar mental costs as micro payment systems.

So we need to discourage people from voting on their "own" content and encourage them to vote on other people's content. Unfortunately, we have no way of knowing whether two accounts really belong to the same person. The more STEEM POWER an account has the more unique it is and the less likely it is to be fake. Likewise, the more collective votes a post receives the less likely it is to be fake.

Steem introduced the super-linear (n^2) reward system as a natural way of ensuring rewards only go to posts that have strong consensus. Some people may vote for themselves, but the rate of return will be low enough due to being low on the n^2 curve that it is an acceptable cost of doing business. To put it in terms of "micro payments", imagine that you were given the choice to pay yourself $0.01 or to tip someone $1.00. For most people it isn't worth it to work for $0.01, but it would be worth it to them to see someone else receive $1.00. The value of giving $1.00 is much greater than the opportunity cost of $0.01. This is especially true for smaller stakeholders whose vote is unable to climb above the $0.02 threshold for payout. In these cases the cost is $0.00.

Now with this system (which is so far up-vote only), a group of people can decide to get together and form a "reward mining pool". They will all up vote an empty post to allocate the maximum rewards possible on the n^2 curve and then they will divide the rewards linearly. Everyone who joins in profits with higher interest while the reward pool for everyone else shrinks quickly. The logical endgame is that everyone joins the pool or they will be inflated away for no benefit.

It is my belief that the majority of people want to see good things achieved by the group, while a minority wishes to exploit the group and/or cause harm. If the rules favor corruption and don't provide tools to fight it, then eventually everyone (including the good people) will become corrupt.

Fighting corrupt behavior in a subjective world means that actions have consequences. Any action without consequences will be abused by a minority if they can gain even a small benefit. The most basic consequence is a loss of reputation of an individual user. This is a one-time consequence. Once you lose your reputation you can start another account and continue. It is also not financial and only matters if you care about what the community thinks. If you cared about the community then you wouldn't be abusing it in the first place.

Socialized Costs and Privatized Profits

The costs of bad behavior are socialized, but the benefits are privatized. This creates a situation where the community as a whole suffers so that a few individuals can enjoy breaking other people's toys and/or keep a small profit. This kind of behavior is like pollution, it lowers the quality of life of everyone so some factories can profit.

Spam and bogus up votes come at a cost to the community. The network is bloated, the website is filled with spam, people start trolling, etc. Many of these things can be handled with filters like NSFW, but the economic costs cannot be hidden.

If someone steels a dollar from the community, then it is large enough to be worth their while to do. This same dollar costs every other user less than $0.001 (an imperceptible amount). This means that no individual user feels "attacked" even though all users were attacked.

The market loves easy money and anytime someone is making high profit margins more people will join in. Fear of missing out will kick in. Eventually one person earning a quick $1.00 will turn into 100 people working together to earn a quick $1000 ($10 each). Some people may object to "polluting" on moral grounds, but without economic checks and balances the profit motive takes over.

Eventually the collective behavior of all the polluters kills all life on the platform. The polluters are suffering from tragedy of the commons. They each take as much as they can today without caring about the sustainability of their collective actions.

Policing Anti-social Behavior

A community consisting of mostly good people can fight of an infection of anti-social individuals hoping to get something for nothing, but only if they have the power to deny rewards or claw it back. In the case of industrial pollution, the people should be able to deny the factory their profits if it comes at the expense of everyone else. This is highly subjective, but a coordinated shunning of purchasing a factories products would shut them down without violence.

We know that in practice consumers prefer the benefit of lower prices at the cost of the pollution. Individually the consumer shares in the privatized profits of the factory. This means those responsible for the pollution are not just the factory owners, but everyone who buys their products. You will not get a large and organized boycott of factory products, especially if there are 1000's of factories that each individually produce an imperceptible amount of pollution.

An up vote only system is an economy where consumers (voters) will vote for things that profit them (voting pools/vote buying) and there is no recourse from those who suffer the costs of the pollution. This leaves one outcome, everyone pollutes to get the most from a bad situation.

Down Vote adds Cost to Producers

Without down votes, all factories operate with little or no cost. A down vote is a way for those who do not like the factories profits to express their perception of the cost of pollution. A down vote is not free, it comes at the expense of purchasing something else. This means that for the majority of people down votes are only used when they perceive the cost as being greater than the value they could get by up voting something else. One of the "costs of down voting" is loss of reputation and retaliatory down votes.

This puts the entire community in a multi-party/iterative prisoners dilemma where the ideal strategy for success is tit-for-tat. Without the ability to punish other players the prisoners suffer the worst possible outcome of "always defecting".

Abuse of Down Votes

Anything that can be used for good can also be used for evil. Some people may dislike a company that is producing clean energy for the economy. They will view the opportunity to hurt the company as having private value to themselves even if it has social costs for everyone else. At this point they start abusing the down vote to take profits from a company and potentially drive it out of business.

The problem with "pollution" is that it is subjective. If someone has done something to upset you enough to down vote them, then it is arguable that there was some kind of pollution. So long as the factory produces enough profits to cover the costs it incurs then all is well. The market will drive all factories that are not perceived as having more benefits than the pollution costs out of business. Many apparently good businesses may suffer if enough people believe in bogus pollution allegations (ie: CO2).

Vote Pollution

Game theory dictates a tit-for-tat strategy. Any actions that do not have a corresponding counter-action are sources of potential abuse. In this case, someone who votes poorly but never posts is currently immune from tit-for-tat reactions. People can write bots to compensate victims of down vote abuse just like they down vote content suffering from up-vote abuse.

Abusers Whine Loudest at Defensive Measures

A factory generating huge profits from their pollution will cry foul if people start inflicting costs on their business. They will claim that "good people will lose jobs" and that consumers will pay more. They will claim that their rights are being violated while ignoring the "micro-aggression" against all other users that collective adds up to a real aggression.

Companies that are socially responsible and produce products desired by the majority will prosper and have no fear of being victim of defensive measures. Smart companies will be pro-active in managing their PR to ensure that they don't piss people off for any reason. Overall the community will be more civilized if there is properly balanced tit-for-tat.

Just because the community is balanced doesn't mean that it will be accepting to individual views or that "good" businesses will not be driven out. It simply means that the majority of "people with good intentions" will be guiding the ship the best way they know how. No tit-for-tat system can police a system with a majority of "people with bad intentions". In some cases intentions don't matter. You cannot fix stupid. If a majority is "stupid" then the economy will sink until the majority wake up.

Banning Down Votes is like Banning Guns

If you ban guns, then only the bad guys (including government) will have guns. They will use their guns to secure privatized profits at the hands of those without guns. Eventually everyone will have to become an "outlaw" if only to defend themselves from the gangs (including government). In this analogy, up votes represent guns in government hands while down votes represent guns in the hands of the people. Criminal gangs represent private voting pools that split rewards. A whale is nothing more than a well-organized gang (aka government). Often times governments are in bed with criminal gangs.

The current Steem rules are like a society where everyone is armed, but only those who own real estate can be hurt. In this case real estate are posts with positive pending payouts. If you down vote poorly you break the windows of individual businesses. If you up vote poorly you shoot holes in all businesses.

Conclusion

The only civilized society is one where all people have equal access to tit-for-tat strategies. Give every man a gun and no man shelter. Some people may die due to acts of passion or psychopathic aggression, but most people will treat each-other with respect out of fear of getting shot.

I am a proponent of non-violent solutions so my analogy to guns should not be interpreted to my belief that voting (up or down) is violent. Instead, I am advocating a personal right to self-defense. An up-vote only system denies the masses a right to self defense against abusers. An up and down vote system means everyone has the ability to defend themselves and their community. In many cases a flag war is mutually assured destruction of the parties involved. Those who do not get involved in the war inherit the earth and a more peaceful remains.

One More Thing: What about Power Imbalance?

Some people have pistols while others have nukes. The short answer is that those with nukes fear being nuked by others with nukes as well as an uprising of the masses. Anyone who gets persecuted by a nuclear power will find sympathy from the other powers who see the entire economy suffer as a result. Those with nukes (large steem power balances) have the most to lose if social oppression kills the Steem economy.

So should we eliminate down votes? No. We need to carefully consider adding new features to further counter-balance voters who have nothing to lose. Only then will we be able to put a stop to reckless down voting by whales and other users.