Steem is a pre-mined coin, there is a term that some use for pre-mining, they call it ninja mining. I recall a Reddit thread with Dan Larimer defending how Steem was mined to an angry sounding Redditer.

The thread was particularly interesting to me because, even though my first Bitcoin transaction was getting on for two years ago now. I am still very new to the community, Steem has introduced me to a world of chat threads with people speaking in a technical language that is just beyond my understanding.

For these last few months, I have been an interested observer, often I have read threads which whilst beyond my technical knowledge, have been fascinating to observe.

This has allowed me to gain an insight into some of the internal and external politics that come as part and parcel of the cryptocommunity. I have also been able to draw more direct conclusions regarding the future of cryptocurrency in general and if we really will get to the day when blockchain produced currency, is King.

Game Theory And The Blockchain

It is getting to the point in the human epoch, where the financial paradigm that has been in place in over large parts of the planet for around half of the last millennium. Is slowly waking people up to the fact that the system is broken.

The 2008 global banking crisis; or as the bankers called it; another day at the office, exposed the blatant, state-sponsored, criminality being perpetuated on a daily basis right in front of our very eyes. Suddenly there was a world-wide realisation, a kind of financial quickening, when ordinary people were made aware of the fact that banks, were the riskiest business of all and their profits were built on promises, dreams and lies. The exact type of business, that most banks would run a mile from.

After we were asked to swallow the scandal of the fraudulent subprime derivatives hoax, and the shockingly criminal, Over The Counter derivatives. We were then asked to sit back and watch as our governments bailed out criminals on a global scale, to the tune of trillions of dollars. And just to rub salt into the wounds, the bailout money would be printed by banks that were part of the whole scam.

But hang on, wait a minute!

There was one hero nation in all of this; the tiny island nation of Iceland broke ranks, their government and more to the point, their citizens, decided that acquiescing to the rotten status quo the bankers had established, was not the only path they could take.

They did what every country should have done, they identified the criminals, and they jailed them; banks were allowed to fail and one was completely taken over. This is what would happen if you or I were to set up a fraudulent business that defrauded millions of people world-wide; why not with a bank?

Jailing the bankers in Iceland wasn't easy, a lot of people suffered, 100 new taxes were introduced to repair the damage reaped on the Icelandic economy.

And Herein lies the problem; in my country, England, the most repeated reason for why Iceland could jail its bankers and the UK could not, was; There are only 300,000 people in Iceland, that wouldn't work in a larger economy.

I find this statement both ridiculous and breathtakingly insulting all at once.

It is ridiculous because of the fact that regardless of GDP, the banks in Iceland had their tentacles as deep into their society as the UK banks have into ours. It was no more or less difficult to jail the bankers their than it would have been here.

The insult implied from the statement, is that our banks are somehow different, or special. But in reality, neither the insult or the patronising tone was never meant meant by the deliverer of this oft repeated statement.

"There are only 300,000 people in Iceland, allowing banks to fail wouldn't work in a larger economy."

Actually means

"That's all fine and good for Iceland, I'm glad they're taking a stand; however allowing banks to fail in this country, may mean I would lose money, which I'm not prepared to do on a point of principle."

This is the crux of game theory; self interest will always outweigh group survival.

Playing The Game

If I got hold of a Culture displacer, and I could transport 30 Steemians into 30 separate rooms, and in each of those rooms there was a person who told you the following.

• If you say yes, I will give you $50,000
• If you say no, you will receive a $1,000,000 equal share in the group prize of $30,000,000
• If one person says yes, then nobody apart from the person who says yes will get any reward.
• Your decision is anonymous and will only be known, if everyone says no.

The above is a classic game theory situation; what would you do?

If you say yes, you guarantee a nice juicy $50,000 reward; however if you say no, whilst you could become a millionaire, you have do not know who the other 29 are and cannot communicate with them.

You know that if you were all in a room together, you would all say no, as everyone would want to be a millionaire.

However you're not all in one place, and the fact that you are thinking like this, means that at least one other person has come to the same realisation. Which means that person could well say yes and bag the personal prize.

If someone is even considering saying yes, then there will be giving it more than just consideration, in fact you realise; you can't trust anyone and you should just say.

Yes! Show me the money!!

OK, maybe your faith in human nature exists on a higher plain than mine and you would say no. But for the record, I would say yes, I would be a fool not to.

Change the situation to say 10 handpicked members of family and friends, then I would say no, because I know and trust them.

So how do we reconcile the need and desire to have a decentralised system of government and currency, with the very real human desire, to out compete fellow humans?

Gaming The Game - The Anarchy Mine

80% premined crypto that has a central issuing authority. Dead on arrival!

While I was performing my due dilligence on Steemit back before I decided to put every waking moment available to me, into creating content. I came across a Reddit thread, which had a very angry sounding man, telling anyone who would listen that Steemit was a scam.

The OP clearly had bags of technical knowledge, the way he spoke suggested he was a miner, and heseemed to have been a part of the cryptocommunity for a while, so I decided to read the thread.

As I said, the OP had a lot of technical knowledge; so he was using a lot of terms that were completely unfamiliar to me.

At some point in his thread @dan (our very own Daniel Larimer), joined in the discussion, in an attempt to defend Steemit and to assuage the fears of the poster, and anyone reading the thread, that Steemit was a scam.

In fact the way @dan, dealt with this guy, was what convinced me to give Steemit a go. He came across as very balanced and calm, and appeared to answer the OPs original accusations, in a satisfactorily manner. Whilst the other guy, just came across as a complete asshole.

(If @dan is reading this and can remember the thread, I'd love to add it to this article, as I never bookmarked; doh! And can't find it now.)

What I noticed as I read this thread, was that the OP kept on bringing up the fact that Steem is an 80% premined coin. He was like a dog with a bone, he simply wouldn't let go of the point and he kept on using the same phrase, over and over again...

Ninja-Mine

Being a cryptonoob, I didn't really get the significance of that term, I just thought it was just a way to give a cool name to something that was quite boring.

However as I read on, I could tell by the tone of @dan's answers to the OP, that he classed the term as a derogatory one.

I realised that the term ninja-mine, was used to suggest something untoward had happened. I remembered @bleepcoin telling me ages ago that there could be legitimate reasons for pre-mining a coin, but until Steemit, I couldn't think of one.

At some point before the creation of Steemit, when it was just a seed of an idea in the mind of Dan Larimer. He must have considered the following problems:

• The goal is to build a social media platform based around a blockchain based cryptocurrency.

• The site has to reward users for voting and posting.

• The micropayment model has already been proven ineffective, therefore payments have to be significant enough to motivate users to participate, and get a wider audience talking about it.

• In order to create long term stability, the cryptocurrency created for the site, must be able to withstand large numbers of people cashing out their rewards every day.

• People have to trust the model.

So the first two goals were achieved through code and innovation, the second two were achieved through the way Steem was mined and distributed.

If the Steemit.com algorithm, had not been given so much Steem to play with, we would be looking at miniscule payments. Steemit would be just another micropayment site, hard to use, impossible to be motivated by.

Then of course came the question of how to use self interest to the advantage of the group; that came in the shape of Steem Power. Having a growing vested interest, whilst still being able to realise liquid funds, is absolutely unique and what gives Steemit its strength. The attribution of Steem Power wouldn't have been possible without the 80% anarchy mine.

With strength comes longevity, a two year power down period in order to realise your vested interest, is the perfect way to keep everyone; well, you know... interested.

The Balance Of Power

It's not anarchy! I hear you say; it's just a microcapitalist model, with the Whales taking the place of the over inflated elite, bougorsie and us the minnow proletariat are left to swim in their wake; nibbling on the crumbs of zooplankton they leave behind.

Not so...

Capitalism was the idea that self interest could be harnessed for the good of the group, there are many examples where healthy competition spurred on innovation and industry. However the self-interest of the lawmakers, often skews the rules of the game in their favour, thus capitalism fails us over and over again.

Communism espoused the notion that everything should be fairly distributed, as there was enough for everyone to go around. The problem was, that once again the fueling drive of self-interest, from those in charge meant that things were much more fair for them, than anyone else.

The blockchain, whilst offering a decentralised environment in which to operate, doesn't eradicate the odour of self-interest. For every wonderful blockchain innovation, there are dozens of pump and dump scandals, that are driven by self-interest.

However Steemit's anarchy mine answers the problem; the Whales, the users with the highest vested interests in the site, can only realise their fortunes if the group does well. This is in direct opposition to the capitalist society at large, the sentiment is best captured by the words spoken by Ray Liotta's character Henry Hill, in the legendary Scorcese movie Goodfellas:

But now the guy's gotta come up with Paulie's money every week, no matter what. Business bad? "Fuck you, pay me." Oh, you had a fire? "Fuck you, pay me." Place got hit by lightning, huh? "Fuck you, pay me."

If you're a Whale in the real world, then if the system you have built colapses, you can haul your limited liability ass over the hills and far away, and still come up smelling of money.

You can boil capitalism down to those four little words...

Fuck you, pay me.

...and I guess Communism can be reduced to:

Fuck you, I'm getting paid.

An Impossible Utopia

image credit: James Christopher Hill

So the Steemit game has been set, the rules have been laid out; it can be argued it's not a level playing field; and it can be counter-argued, that nothing ever is...

As our society grows, it will be fueled by self-interest, but unlike usual, the fortunes of the very rich, are intrinsically tied to the very poor. The Whales need more people to join the Steemit community and to profit, they need the self-interest of others in order to realise their own.

This for me is the only way any anarchocapitalist society can survive, one not without order, yet without orders. One where anyone can join in and play by the same rules as everyone else. There will still be advantage and disadvantage, there may even be inequality. However that will even out over time, as the Whales slowly liquidate their huge interests. As they do, they will be replaced by more, and the system will keep growing, how large, is anybody's guess.

The point is, I, you and everybody who joins Steemit, now knows what the people in the other room are doing, we know that nobody is going to say no and run off with the million dollar prize. We know beyond a shadow of a doubt, that if everyone on Steemit started powering down their SP today, there would still be 50% in the system in 12 months time, locking us together in a self-interest inspired embrace.

The anarchy mine, has set new rules for an old game, that has upset some of the old players whose self-interests have been disrupted. However there is no doubt, it is a model that will be copied again and again in the years to come.

Onward the revolution!

Cryptogee

WHAT DO YOU THINK? WOULD YOU HAVE SET UP THE STEEMIT MODEL DIFFERENTLY? CAN YOU SEE A USE FOR THIS MODEL BEYOND STEEMIT? LET ME KNOW BELOW!