Understanding why people will buy STEEM is a mind bending exercise in economic and social theory. All value is perceived value, and people will buy anything they perceive will have more value in the future than it has today.
Lets start by discarding useless or oversimplified economic theories:
Myth of Intrinsic Value
There is no such thing as intrinsic value, not even with gold. The idea behind "intrinsic" is that the value is a property of an object rather than the perception of an individual. A basic understanding of marginal utility will show that 1 oz of gold has different values to the same individual depending solely on how many oz of gold they already own. Hence, value is clearly not something intrinsic to gold, dollars, Bitcoin, or Steem.
Myth of Quantity Theory of Value
This theory says that as the supply increases value must fall a proportional amount. This oversimplification does not align with real world observations in the change in the supply of dollars. The dollar supply has increased by 4x with minimal inflation over the past 8 years.
Supply and demand dominate market price based solely on people looking to enter or exit a market today, not based upon the total quantity. If you double the quantity, but give it all to people who will not sell any time soon, then it has limited impact on today's price.
Myth of Revenue / Profits
As the founder of BitShares, I had a theory that transaction fees represent a form of income. Demand for transactions would generate fees which would generate a revenue stream from which value could be derived. Bitcoin has revenue from fees totalling less than $7 million per year, yet is valued 1000 times higher. Bitcoin has 0 profit. From this we can conclude that this method of valuing businesses is only a small and insignificant factor when the market perceives capital gains that far outstrip dividends. Gold and Silver are examples of assets that have value with negative rates of return due to their holding / security costs.
Social Value
Many people recognize that a dollar has no value to them, but they work for dollars because it has value to others. So long as someone, somewhere, values it others in turn will value it. This means that the network of individuals hom know and value a currency contribute to the value others will perceive.
Why will People buy Bitcoin?
So the question could become, "why will people buy Bitcoin?". After all for the first 8 years of its life it had an inflation rate that redistributed in excess of 10% of BTC to people doing work with little lasting value. If there is demand to buy Bitcoin then the same motivation to buy Steem must also exist.
The primary reason people buy Bitcoin is because it is a cryptocurrency with a large base of people who know about it and are willing to transact in it. The secondary reason is it has a large amount of liquidity. Steem has the potential to build a much larger user base than Bitcoin and provides financial incentives for liquidity. This combination means that Steem could become a better known currency than Bitcoin and thus become easier to transact in than Bitcoin. If market participants perceive this possibility they will buy.
Demand for Influence and Transactions
Anyone looking to transact on the Steem network needs Steem. There may not be visible transaction fees, but the demand to transact will drive people to buy and hold Steem.
Advertising Demand
This is similar to influence, but is geared toward an indirect monetary payoff. Anyone wanting to attract more attention to their content (aka ads in disguise) will buy Steem.
Monetary Use
At the end of the day, people will buy and sell Steem and establish a price history. Once a price history is established it is simply a question on whether or not STEEM makes a better money than other crypto-currencies. If it does make a better money, then people will buy Steem to use as money for transfers without any care about its use as influence on steemit.com.
Good money drives out bad money when no one is forced to overvalue bad money. Steem hopes to get into more users hands and therefore achieve a wider network effect. This in turn can make it better money than currencies with less network effect. Speculation on whether or not Steem will have better luck as a currency than other cryptocurrencies will be the primary driver for buyers early on.
I think your logic is circular and there is very little bases to access the demand for steem.
You can say that people will want steem so that they can post on steemit, but why would you want to post on steemit instead of other social media platforms?
You can answer that question by saying that there will be demand to post on steemit, because you can earn steem. But if there is little demand for steem, then the steem you do earn from your content and curation won't be worth enough to incentivize you to post on steemit.
The fundamental problem I have with your argument is that you assume that there should be demand for steem, or even bitshares for that matter, because it is necessary for a user to have these cryptocurrencies in order to utilize the blockchain services. However, you don't provide a compelling answer for how these blockchain based services provide greater utility than their competition.
I hope steem does catch on. I just don't see it having any value if not directly tied to some revenue stream of steemit, because right now the value proposition of steem is very dubious.
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I struggled with the same thing. However I have come to believe that it is as @dan explains - no matter how unintuitive it is. If you think the other way around, you might intuitively think that everything that has intrinsic value also has some monetary value, which isn't the case. Think air, or time, or happiness. I have come to believe that price/valuation/monetary value and actual value are somewhat totally independent phenomenom.
Another good point is to think about the utility. Who can you pay with bitcoin? Nearly no-one accepts it, so what's the utility? Because of the visible monetary rewards, steem is incredibly attractive to new users who mostly don't care where the value stems from. As a result, there will be lots of people for whom there is very little resistance to accept STEEM or SBD as a tip or payment for something - and so we have a functioning currency with real utility. Where the initial value comes from has very little relevance.
The belief that revenue from transaction costs creates some utility and initial value to the currency turns out to be a circular logic too. Why do you need bitcoin in the first place? To be able to pay transaction fees so you can transact? Transact what? You get it...
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"The dollar supply has increased by 4x with minimal inflation over the past 8 years"
A bit off topic, but one of the ways dollars are created is when we go to the bank for a loan. Simplistically, the bank "creates" the dollars in a ledger entry and usually secures it with some sort of collateral (home, future earnings etc.). Those who have more collateral can loan more and buy more and secure more loans with what they have bought. This "created" liquidity stimulates the economy but also slowly inflates the prices of the collateral. Therefore the have's outpace the have-not's and the wealth gap increases.
I wonder how these difficult conundrums will play out in years to come in CryptoLand and more especially the Steem economy.
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Did you intend to reply to the OP or me?
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Sorry OP
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When it comes to network effects, all value is circular and self referencing. Why does bitcoin have value? It has value because someone, somewhere, values it. Everyone else values it because others value it.
In the case of Steem we have a currency that actively traded and valued by hundreds of people. This is the initial foundation. These people in turn work to create value for others.
Ultimately, owning Steem maximizes your ability to earn more Steem by participating on the platform. Curators make more when they own more. Posters make more when they can vote for themselves and kickstart the curation of their own content.
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Correct. The whole system is circular, so in the end, success derives from utility and user base. Bitshares had utility in spades, but few people knew about it, could get on it, or understood how it could help them. Steemit must focus on getting users onboard easily, giving them reasons to use it, and promoting that message like crazy.
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" Posters make more when they can vote for themselves and kickstart the curation of their own content."
That is the reason "I don't get" why we must manually vote for our post... It should auto-vote our post with our voting power when we post anything.
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What if you don't want to use your voting power on your own posts though? The option is good to have.
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Yep, sometimes you want to wait to vote for your own post until your voting power is back to maximum for example. It could simply be made into an account setting though, letting you enable or disable auto-voting for your own posts.
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yep! frustrating to vote each post
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Fine post. Thanks for bringing this to my attention. The decision to buy a coin should be based on real analysis of the coin. I found that people keep buying coins without have any knowledge of them. This is considered high risk. I really advice people to take a look at: https://www.coincheckup.com This site lets you check investment stats, And does a complete background analysis for every single coin. That's tradable on the market.
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@kawaicrush pls... 3years ago 🤔😂
Everything is inferred, hence intrinsic to the observer. Free energy principle
Great post. Where are the great posts gone
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