Building the Economic System - "Digging deeper into Steem" (Part 2)

In this article I'll focus almost entirely on how demand could develop for the Steem Dollar. I'll look into several side and sub-chain examples. 

You see... the real key to this Steemit economic puzzle is in finding use cases for a stable currency and to provide a compelling argument for mass adoption. We have the supply, the Steem Dollar printing press is chugging away, vote by vote - but what does the demand look like?

By the end of this article I'll hopefully have taken you a step away from asking if the payouts will be sustainable... to wondering if we'll even be able to keep up with demand - can we print enough Steem Dollars?

The basic crux of my argument in the first part of this article was that investors and speculators saw potential growth in the network effect of Steemit so they demanded Steem now, pushing up the prices and providing people a way to cash out. 

I'll now develop this further so the capital inflows don't just rely on external investors looking for network effect growth but on what that network effect growth will mean for the Steem Dollar as a stable currency. 

...before we get involved with side and sub chains, lets have quick a look at what value is

When Supply and Demand meet you have a price... or value. Think to yourself why someone might demand a currency like the Steem Dollar...

...in very simple terms they'll want to use it to buy goods and services, to make investments, have experiences... basically anything you use money for...

In order for the Steem Dollar to be valuable and for Steemit to be sustainable and actually become an economic system, it needs to be used as a currency rather than a way of cashing out.

But what am I supposed to buy with the Steem Dollar? ...you may ask....it's just a way to get bitcoins, right?...

What if there were 'industries' or 'hubs' where you could spend those dollars without ever having to convert?

It's time for side and sub-chains to get their spot in the limelight....

What is a side or sub-chain?

The simplest definition I found here... by Jeff Coleman (edited)

Put simply, sidechaining is any mechanism that allows tokens (such as the Steem Dollar) from one blockchain to be securely used within a completely separate blockchain but still moved back to the original chain if necessary. By convention the original chain is normally referred to as the "main chain", while any additional blockchains which allow users to transact within them in the tokens of the main chain are referred to as "sidechains". 

In the context of Steem these chains will run alongside or adjacent to the main Steem chain. This will allow third-party apps such as a marketplace to run independently of Steem but still be able to switch Steem Dollars (for example) between the two chains.

How will side and sub-chains drive demand for the Steem Dollars?

If we view Steemit as the tree trunk, the 'main chain' then the 'sidechains' are branches and leaves.

In this visual representation, Steemit is the tree trunk which supplies the water (Steem Dollar supply) to the branches which provide the sunlight (Demand for the Steem Dollar)

Within the context of a social network think of the branches as apps. Like an Ebay app, a Fiverr app, maybe even an Uber app.

Within the context of an economic system think of the branches as demand providing industries. I like to think of them as hubs.

So what 'hubs' could Steemit potentially support...

• Marketplace Hub
  • A place where people can buy and sell goods and services using the Steem Dollars

• Music Hub
  • A new form of decentralized Spotify or iTunes. @thisisbenbrick I think you'd have more to add here and be in a great position to lead the charge.

• Crowdfunding Hub
  • Fancy investing in a new business opportunity with your Steem Dollars - backed by a smart contract?

• Art Gallery Hub
  • Where artists get a platform to present and sell their work, for Steem Dollars.

• Trading and Investment Hub
  • Where you can follow traders and investors and even invest in crypto funds like Satoshi fund. @andrarchy I think you'd have more to add here, you first talked about this when comparing Steemit to Tesla Motors.

• Education Hub
  • Provable qualifications on the blockchain, courses provided with Steem Dollars and a 'token' to represent completion on your Steemit profile.

None of these ideas or 'hubs' are new, what's new is that Steemit can provide a stable currency in which they can interact with and provide a diverse, large group of people to adopt that currency. That's the big 'aha' moment.

I won't go into excessive detail here about each idea. What I will speculate is that once these hubs are developed, then there's potentially a huge demand for Steem Dollars external to the system. 

Let's take a closer look at the marketplace hub...

The network effect in action... for a Steemit Marketplace

...each hub would have to go through a transition period... growing pains

Beginning

I think the first items sold will be some form of Steemit memorabilia. Artwork would do well here (specifically Steemit related commissioned pieces) as it can be visually advertised and then sold. We've already seen informal arrangements crop up, notably with @klye

Simple Fiverr.com style services, where geography isn't an issue.

Middle

As more people join the network and geographical areas become less of a hindrance we may see a developed form of Etsy.com develop. Along with more advanced services external to Steemit.

Original content and original handcrafted goods seem to go hand in hand.

Maturity

Something more like Ebay.com where you can buy anything and everything.

At the maturity stage we'll start seeing huge interactions between the different hubs. For instance someone could have developed a reputation as a cyber security specialist, they may have some blockchain based 'badges' showing their proficiency in several areas relating to their field - along with a long list of happy clients. At this point a specialized labor market could be established.

The possibilities, permutations and implications are huge.

Given enough of a network effect. Why would people chose a Steemit marketplace over alternatives? It's decentralized with very low or zero fees and the Steem Dollar provides a favorable interest rate. Why wouldn't you?

The network effect over time and with mass adoption could develop from a basic market, selling Steemit trinkets into a highly sophisticated employment market. This is just one of the branches, one of the 'hubs'.

There are currently around 57000 Steem produced per day and handed out for curation and content, of those 57000 a certain % is locked up in Steem Power. There's only a relatively small amount of Steem Dollars being printed everyday. 

If Steemit becomes the money supply for a whole multitude of future hubs that demand the Steem Dollar as payment do you really think the supply right now will be enough?

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My future plans...

In writing these posts and really digging deeper into Steemit, gaining somewhat of a voice on this platform I'd like to use it to start building the 'trading' tag up. I think the development of these sub-categories will add long term value to Steemit.

I'd like to see a lot more trading posts come up and I'll do my best to promote ones that I think add value, this is not 'an upvote for an upvote'. Who knows, it may gain some traction or may be ignored, but I'm willing to give it a go.

As a full time trader and baby dolphin I hope I can make a difference in this category.

Currently there are a few ideas swimming around my head after this post by @jl777  ... I'll try and band together the traders I've been in contact here to see if we can collectively build it up and announce a few of those ideas in the next few days.

Maybe one day we'll get that Trading and Investing Hub built!