Steemit Investor Guide – A Study/View on Crypto and Steem

bubke (60)in #investment • 7 years ago

This is a personal letter to some of my CEO friends but I post it here publicly as it concerns a different view of crypto, Steem and how to handle Steem once you have it.

It is a very, very long post, worth a read if you think about investing in Steem or want to know more about it. It comes with the usual “This is my opinion and no investment advice” although I have a university degree in Economics, I am a software Engineer and my father was a stock broker.

Dear …,

Many times we have met, many times I have overwhelmed you with blockchain and crypto. I know you still didn’t invest while I know you would love to. I know I joked a lot about the possibility of losing everything but you know me, I am a Mayan Blue Monkey, taking the piss with everything.

Let me for one time be serious today because there is a big opportunity that won’t last long and I want you to be a part of it.

Let’s first have a better look at what this emerging crypto-market is about.

The need for Trust and The Big Invention

We are living in times where nobody trusts nobody anymore. We don’t trust governments, we don’t trust companies, we don’t trust people.

There is a serious need for trust to feel more secure in this world. Trust in the validity of an asset, trust in the value of money, trust that things can not be taken away, trust in buying/selling assets, trust in sending/receiving money.
The blockchain provides this trust with the extra feature that everything you want to do, can be done anonymously. The entities registered in the blockchain are long-undecipherable keys that you can create yourself.

The algorithm of using public and private keys to send unhackable encrypted information was invented long ago. The invention is that the action is registered on an immutable long chain of events where every event is linked to the previous event and every event is witnessed by a bunch of computers all over the world. This solved the problem of double sending money, perfect identification of 2 parties with many witnesses who sign and verify the authenticity of the transaction.

This is a very big invention, a total revolution. The blockchain introduces a new kind of much-needed trust guaranteed by computational algorithms. Trust and security are the new elements in our survival and blockchain gives both, the awareness is unstoppably spreading around the world, the game has just started.

The Element of Fear

A veil of fear covers many potential and current investors. Fear to lose everything. Fear the technology might fail. Fear the governments will block it. Fear for the bubble. In fact, there is so much fear that the smallest tweet can triple a price or cause an avalanche. There is extreme volatility in the prices which only kindles the already existing fear.

It takes some time to fully understand the technology but once you do, you know the technology will not fail and the governments can not block it. Fear for the bubble remains but is nothing more than a lack of trust in other people investing in it, a fear that everybody will suddenly sell and the value will become 0.

It is important to know that there is also a strong segment of smart investors who see the big picture and they just buy and hold. I always have fun in the bitcoin forums when they are having sell or buy discussions. I don’t think anybody can beat the strategy of holding, my strategy since I got them at 250$

The One-Million-Dollar Question

We are entering a new era where there is not only +200 billion dollar invested in the crypto-market (still nothing) but there is also a lot of different crypto’s out there. A good investor thinks fundamental and tries to ask the One-Million-Dollar question: “What is the underlying value of this asset?” “Can we even call it an asset?”

Ask yourself the question what trust is worth in these times? And who do you trust more in the end? People, corporates, governments or a non-failing computational algorithm?

It is all about trust and that is why bitcoin is still king and leads or drags all the others. Bitcoin is the dino of the cryto’s, massive, super slow, old technology but it represents the new invention which many consider yet to be proven.

I remember you taught me the following. Marketing people always use one of the following 3 ideas:

Being the first
Being new, funky, different or full-featured
Proven technology

Bitcoin has two of them and you know the power of ‘proven technology’ in this. People want to see it working and believe in it. It stands for acceptance, compatibility, widely used already.

All +1000 crypto-currencies (altcoins) are correlated with bitcoin so Bitcoin should be part of a smart investment. Every investor should keep bitcoins in his wallet knowing that the father still needs to feed his 1000 children. No bitcoin, no altcoin, at least not in the coming 2-3 years.

There is another emerging reason to have bitcoin in the portfolio. Bitcoin is not about digital currency anymore, it is on his way to become the digital gold and if you think about it, it serves that function much better than gold itself. It is easily transferrable and it is 100% certain how many bitcoins there are. Imagine they manage to make gold from lead one day, there goes your fortune….

Second Investment

I could talk for hours about every altcoin but I will not. Except for the bitcoin-derivates, altcoins mostly fall in category 2, they are sly, funky, different, etc. and some of them also fall in category 1, first in a new series of ideas.

Most of them however don’t fit the proven technology category but there is one beauty out there that not only fits the proven technology category. It is also fits the ‘first in its genre’ category and the ‘full-featured, different, new and funky’ category

Cream on the cake 1, it is ranked below the 20th position, lots of space to go up

Cream on the cake 2, it has a lot of underlying value, I know you will like that

I am talking about the first social media platform that has been implemented on a blockchain. The name of the blockchain (and altcoin) is Steem. The first and best known application built on it is called Steemit.

I could say a lot about the geniality of the blockchain on itself.

First of all, it is superfast, truly a Ferrari compared to any other blockchain out there.

Secondly - a little bit more technical - It is a real world experiment of delegated Proof Of Stake, a much better concept than the traditional Proof Of Work which is very energy consuming and prone to a potential take-over by miners. While leading altcoins are still in research phase of Proof Of Stake, the Steem blockchain is 1 year up and running.

This is only the beginning. Steem introduced the concept of inflation coupled to a reward pool. The amount of available Steem increases with 10% every year, each year a bit less but inflation is there. This means if you just buy Steem and hold it for a year with no market movement, you would lose 10%.

Even with the current low price of Steem, this accounts for 20-30 million dollars / year, that is a lot of money. What happens with that money? A small part goes to the witnesses, the actual runners of the blockchain.

Most of it goes to what is called ‘the reward pool’.
The reward pool is only accessible if you participate in the social platform. Your Steem becomes Steem Power and you cannot step back immediately. It takes 13 weeks to reverse back to Steem. By converting to Steem Power, you commit to the platform.

You get money out of the reward pool if users like what you are writing and you can also get money by ‘discovering’ posts. The idea is that good content gets noticed and rewarded.

The concept of getting money for writing content attracts quite an audience. Think of the bloggers, youtubers who are working 24/24hr, 7/7d, making almost nothing out of their efforts.

As a user, you can make +/- 10 votes a day. The value of your vote is related to the amount of Steem you have. Needless to say that the more Steem you have, the more other users will want to connect with you.

Bottom line is that users want to buy Steem and this happens as soon as Steem gets into the ‘good value for price’ zone, currently between 0.85-1.05 USD.

This translates literally into a very interesting bottom support line if you look at the graph of Steem/USD. If the price drops below 1 USD, it will be back above that price very quickly.

At time of writing, 70% of Steem is circulating as Steem Power. As you need 13 gradual steps to convert Steem Power back to Steem, there is less volatility in the price graph of Steem compared to other altcoins.

Your fellow investors are not the fearful investors I was talking about in the first part, there is underlying value and commitment here.

There are currently around 30.000 active users on Steem who already own 70% of Steem. It is a growing community and I think it will be very interesting to see the moment we reach +/- 50.000. The demand for new Steem will be more than the 10% inflation supply, I don’t have to explain to you what that means, the price will go up.

When the price goes up, the reward pool will be bigger and more people will become attracted. The Steemit platform is also still in Beta and plans to open up the doors to the big public with their next release. I hope you are convinced there is some big opportunity here.

There are a lot more factors that point to a potential breakout of Steem.

After only one year, the amount of daily visitors on the Steemit website is around 370 000, that is within the range of the 2000 highest ranked websites in the world.

The Steem blockchain is in the top 3 of most used blockchains in the world.

Google is fully cooperating, +30% of visits come through Google already.

Steemit is just 1 application running on the Steem blockchain. There is an incredible amount of development going on with youtube alternative, messenger alternative, etc. etc. etc.

Investment 2 should be Steem but there are many ways with Steem and I don’t want you to be short-sighted on this.

Possible options on how to handle Steem

While strategy for handling Bitcoins is straightforward (just hold them), there are many options and things to consider when handling Steem.

If you just keep Steem, you will lose 10%/year due to the inflation. Unless you want to be able to sell quickly, it is probably best to convert to Steem Power.

Once you have Steem Power, there are options to get +20% return a year by basically doing nothing. You borrow your Steem Power and you get paid for that in Steem.

This strategy is absolutely not ok when looking at the bigger picture. A correct strategy should not give you more than 10% when doing nothing as you don’t lose more than 10% due to inflation and everything more is taken away from other users.

You are looking for the big bang on a 2-3 year horizon, not for some small extra narrow-minded 10% which will slow down the growth of the platform.

Unfortunately, some big investors are taking this approach not realizing how short-sighted they are thinking, I might post this letter to the Steemit platform one day hoping it will make them realize there is a huge difference between 10-20% a year and 200-300% in 2-3 years and it is all in their hands.

Some other short-sighted investors divide their Steem over 2 accounts, making stupid comments and posts and vote each other. Congratulations with your extra 10% gentlemen, how can you not see the bigger picture of Steem!?

I have recently explored both of these options to be sure I am not talking nonsense here. There is no stopping Steem in its growth but there sure is slowing down and I hope I make my point here.

The best action would be to participate in the platform by writing some nice articles and voting on articles you like but I know you don’t have time for that.

The next best thing is to give support to somebody who is very active on the platform in a good way, i.c. writing good articles and finding good articles to vote on.

You can make arrangements that you auto-upvote the same posts as that user, this will give you some rewards or you can just give him some of your power to let him use it in a good Steem promoting way, this will not give you rewards but I don’t think you should be focused too much on this ignorable 10%/year.

Whatever your choice, I can help you as I am myself not always active but I do know my way around a bit. I am currently a VIP on the ecotrain, an initiative to let good writers grow on the platform.

When I don’t have time, I blindly vote on the ecotrain posts knowing that good content is produced + I have some auto-voters on authors that really contribute to the growth.

Steem is the most underestimated altcoin on the market today. This is mainly due to some bad startup where inflation was 200% (poor passive investors) and some fishy practices that gave a lot of power to initial developers.

The latter turns out to be not too bad as their intentions turn out to be good and split-ups of the blockchain (aka hard forks) can be avoided etc.

Fact is that many altcoin investors stay away from Steem and that is why it is even more appealing because once the loco starts moving up, they will all jump in, I can see that smile on your face already.

With love,
bub

If you read this long post all the way, big fat congratulations :-).

I am sure you will consider investing or powering up more. If you are an active user and you can afford it, think about keeping your rewards, it has the same effect as investing and will help the growth.

Try to build out your network and stay away from goats and randomized whales, they are contra-productive for growth of this platform.

I would like to thank @greenman for letting me see the power of the invention of computational trust and @jerrybanfield for making us all excited about what we are doing here.

Both CEO's have bought Steem thanks to this letter! Mission succeeded :-)

Steem has a big future, be a part of it!