This is pretty straight forward to me. So the issue is about creating demand for a product rather than just relying on "upvote and earn" as your marketing slogan. I've not actually read the whitepaper for Hive but the fact that it can be printed indefinitely certainly won't bode well for the traditional investor.
What do you think is the long term potential of Hive?
So I want to make a distinction between demand for the product and demand for the currency. I will use myself as an example. I have demand for using the platform in that I post a lot and I engage a lot. I like learning and teaching.
Each one Teach one
My demand for the tokens are slightly lower because if I bought more tokens I don't really know what I would do with them? To be fair, I am lucky enough that you delegated enough for me to post on here without having a cooldown because of resource credits, but I think you have delegated enough where if I had more tokens I don't know what I would do with them.
Demand for the product and the token are the same for some people. They post because they want to make money and they are primarily here to make money. For those people who feel like the token is going to be worth a lot then there is some financial incentive for them to come to this platform and post and try to earn upvotes. There is also an incentive for them to bring in outside cash into the ecosystem and buy more Hive so they can power up and earn more and compound those earnings.
The problem for these people is that the economics actually have two effects that are working against each other. Allowing people to post and vote and print new currency lowers the currency value because it creates more supply.
Outside money coming in to buy Hive creates demand for the currency which will drive up the price of the currency. The question is which two forces will win. The force that drives up the price or the force that drives down the price. There are more than two forces. I just use these two as examples that are tied together yet working against each other. A force that solves one problem, but creates another. After accounting for all of the forces. It seems that the forces that are driving the price down are winning. See the chart below:
The reason I split demand for the token and demand for the platform into to separate categories is that it allows the managers of the platform to be strategic and be targeted in how they think about the ecosystem and how they solve problems in the ecosystem. If you want the token value to go up you need to solve the problems in a way that drives prices upward. There is a lot to be learned from economic history about inflation. Many of the problems that I see in the blockchain are just repeats of traditional currencies. Decentralized money has already existed before. The blockchain sees the central bank as a problem, but the central bank was actually a solution created to solve the problems of decentralized banking. I think I will write a whole article about this :)
I think Hive and Steem as a platform have long term potential as a social networks. At the moment I do not think the the coins have good potential. You can have a valuable platform in that people are engaged and happy using the platform and still have a poor performing token because the tokenomics are bad. I think the tokenomics for Hive and Steem are not great
Literally all your comments are insightful enough to be a posts 😄.
So taking the analogy of the two forces: demand and supply, from an economic point of view, what do you think would be a decent means of improving token value? Reducing supply? Burning coins? Or aggressive marketing to attract outside money? Something outside this list?
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Bring in outside money by getting people to invest in the platform and encouraging them to buy Hive to power up. This would be like getting people to invest or buy stock in your platform. Which would make the value of the stock go up for current holders.
The other would be to sell ads or solicit donations and use this money to do a "stock buyback" except with coins. Your platform has to essential earn money. This would be like having customers that pay you for your product and using that money to reduce the supply of tokens or pay a dividend in direct cash to token holders.
Then as you mention there is "burning". There is forced burning or burning via a vote. Every voting cycle you can have the delegates, witnesses, node owners, or whoever vote to burn currency or distribute. Burning will increase the per unit value of the currency by reducing supply and voting to distribute will increase the supply and reduce the per token value.
The other is algorithm proportional expansion and contraction which some people in the crypto world called "rebasing". The proportion that you have of the total money supply stays constant. So if you have 10% of the total supply you will still have 10% after the rebase, but the nominal number of coins you have in your wallet fluctuates daily. Amplforth (AMPL) does this.
Another way is to back your currency with gold or dollars or whatever currency god you pray to. Your supply of crypto will expand and contract along with whatever who you are holding in reserve as the backing currency.
Creating products that "consume" tokens. This can be done in a lot of ways such as creating a product that consumes tokens like toys or NFTs that can be used to "pull" tokens out of circulation and then burning the tokens once they are out of circulation. You can also offer services that pull tokens.
I am sure there are other ways that I am not aware of, but anything that reduces the total supply of tokens or anything that makes people want (demand) more tokens will improve the token value.
Leo uses ad revenue to buy back tokens and that's something that I figured hive devs would explore. All pretty interesting ideas though. A proper combination of them would lead to increase in token value but for now, there seems to be more intetest in development of the project than in the token value.
Posted Using LeoFinance Beta
Which is okay by me. Like we mentioned earlier. You can have good engagement and not have good token value. Bitcoin doesn't do anything and its super rich lol.