Is this an accurate representation of Steemit&#x27;s business model?

penguinpablo (75) · 8 years ago (edited)

Compare blogging with Bitcoin mining.

Investors buy Bitcoin on the market
The price of Bitcoin rises
Rewards for Bitcoin miners go up
Bitcoin miners receive Bitcoin for mining blocks
Miners dump their Bitcoin to pay their electricity bill
The price of Bitcoin falls
Investors buy Bitcoin on the market
Meanwhile, more and more Bitcoin gets in the total supply (until 21M)
The price of Bitcoin keeps rising because demand is increasing faster than supply.

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7 votes

https://en.wikipedia.org/wiki/Network_effect

gavvet (78) · 8 years ago

You also need to put "network effect" into this equation.

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3 votes

defluyt (53) · 8 years ago

But can Steemit demand increase faster than the supply?

This image is from @fyrstikken

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penguinpablo (75) · 8 years ago

But can Steemit demand increase faster than the supply?

Only time will tell...
As @ocrdu said, demand is key. If Steem could be used to advertise on the network for example there would be more demand for Steem. In my humble opinion we should have more reasons to buy and hold Steem than just curation rewards.

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noagenda (58) · 8 years ago

This depend whether people can simply click on your image to view the original or they need to figure out that they need to right click and choose open in new tab.
(The UI sucks)
What are these number from ? 0.95 inflation ?

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ocrdu (71) · 8 years ago

Demand is key here, I think. Maybe the only way to get and keep the price of Steem up is being able to buy things with it in the real world directly in stead of through Bitcoins. Speculation and buying Steem just to be able to get a ROI through curating doesn't seem to be working well.

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https://en.wikipedia.org/wiki/Network_effect

gavvet (78) · 8 years ago (edited)

The value of "network effect" is missing from your equations.

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timcliff (73) · 8 years ago

Add in tons of users = something that can be turned into a revenue stream for SP holders -> demand for SP goes way up -> early investors retire rich ;)

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smooth (70) · 8 years ago

Revenue stream how? This has never been explained. There is very little that can be charged to users by SP holders that can't be charged to users by non-SP holders (meaning open competition will drive these revenues way down). The exception being maybe charging for access to the network itself, but that is such a huge long shot given current realities of charging for access to anything online, it wouldn't make sense for anyone to risk much money on the extreme outside chance that you can get users to pay a lot for a social media platform or a payment system "someday" in the future. Or am I somehow wrong about that?

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timcliff (73) · 8 years ago

There are many different ways to add revenue streams, but most of them would require a significant user base. Anything along these lines would be "someday" in the future things.

The most basic form would be some type of advertising model (similar to what Facebook has) where businesses could place advertisements on the site. @ned has mentioned in a few interviews the possibility of forming a non-profit corporation to facilitate/run an advertising platform on top of Steemit.

Nothing is decided / set in stone though. This is all just prediction / speculation what Steemit could become.

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smooth (70) · 8 years ago (edited)

Advertising would be a function of the UI, and in centralized systems revenue is facilitated by having tight control over the data and user metrics (for targeting). Again, competition would drive revenues down; users wouldn't even need to resort to the ad-blockers and do-not-track features that have become popular, they could just chose a UI that doesn't include ads or trackers in the first place. Furthermore there isn't particularly anything to ensure that UI operators actually pay any of that revenue back to stakeholders (in fact those that do would likely be at a competitive disadvantage on the advertiser revenue side because their CPM or whatever rates would likely be higher).

I think this is an extremely challenging problem, with solutions that may come in the future, especially as the platform evolves significantly, so I'm not overly pessimistic (and 100% agree that it all requires a much larger user base to be significant and doesn't matter now). But I don't see easy answers now like "just add advertising" as being good answers.

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5 votes

timcliff (73) · 8 years ago

That is correct and I agree with everything you say. I did not mean to imply that it is an easy problem to solve.

With sites like busy.org and steemit.com being the main ones (at least as of now) it would be up to them to decide on whether they want to include advertisements, and whether the revenue would be returned back to SP holders (in part or in full). @ned's proposal (which would be for Steemit.com) was that the revenue would be returned to SP holders.

As far as competition - sites would need to provide added value that could not be easily replicated in clones. That in of itself is a difficult challenge, especially when dealing with open source. It is not impossible though.

We need lots of engaged users first though, and in order to attract/retain more users there are still a lot of missing ingredients. My hope/belief is that we will get there. Not sure how quickly though..

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5 votes

defluyt (53) · 8 years ago

Spotted a translation error. What I mean with "Net-wise" is "overall"

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steevc (73) · 8 years ago

Steem has a value in the same way as any cryptocurrency, i.e. it's a scarce and useful commodity. I'm not too sure how much benefit you get by just buying it as the 'interest' on SP is not that high. I'm no finance expert, but I would expect that as more people start earning Steem and using it for buying stuff then it should gain value as it could be more convenient than Bitcoin. I'm sure others can explain it better

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smooth (70) · 8 years ago (edited)

Its not that "useful" and neither are most cryptocurrences. BTW, most cryptocurrencies are piss-poor investments with a horrifically bad track record for most long-term holders. So that comparison is not really a strong case in favor of Steem having a good economic model.

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steevc (73) · 8 years ago

I think that these coins need to be actually used rather than just treated as investments. They each have features that may be useful to someone, e.g. anonymous transactions. Steem has no fees and quick confirmations plus it can be used on Steemit to get influence. Being able to earn it here means anyone can get some. A few dollars may not mean much to me, but for someone in a poorer country it could make a real difference to their lives. If we can build up a market for goods and services that uses Steem then it will empower a lot of people.

Even with the low Steem price the Steemit account is worth millions. That should at least allow them to keep the web site going and possibly pay some developers.

The crypto world is pretty crazy. You have things like Dogecoin that were started as a joke, but are worth millions. There are some very clever people working in this area, but it must be tough to get people to adopt your coin.

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smooth (70) · 8 years ago

Oh I wasn't suggesting that Steem couldn't go up in value, it certainly can, just saying being "useful" right now is a pretty of weak source of value, at least at this early stage. You can't spend it anywhere and you can't earn it anywhere except (in small quantities for most, at best) on the web site. That's hardly much use. "Potentially useful in the future" is certainly possible.

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steevc (73) · 8 years ago

It's going to be interesting to see what people come up with. The technology is cool and I want to see where it goes. Cheers

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noagenda (58) · 8 years ago (edited)

You forgot the part were people pay to get extra attention to their content. It's called advertising and it's what drive almost all of the internet content economy at this time.

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