Steem Soars 1,000%, Bypassing Litecoin, But Can it Work?

Steem, a new digital currency created to incentivize the use of Steemit, a new experiment in social media, has exploded in the past few days, taking third place after Ethereum, with a current market cap of more than $200 million, but can this actually work or is it just a fad? Ned Scott, CEO of Steemit, speaking to CCN described the platform as:

A social media website built completely on the public Steem blockchain, which brings all the benefits of cryptocurrency and immutability to social media. Beyond that, users get paid to post and vote, similar to how miners are paid by Bitcoin.

The platform has attracted increasing interest with now more than 2,000 active users posting and voting. In the past few days, it has begun attracting mainstream attention due to its experiment in incentivizing content production and voting (curation). It has even attracted a following with some users, such as pfunk, saying that they find the platform “fairly profitable, fun, complex, [and] challenging”:

“I think its biggest effect is that it encourages creativity with an interactive community and financial incentive.”

I signed up a week ago under aquentson to better understand the experiment and experience it first-hand. Although I tried to see if I could undertake some curating, I did not really find anything compelling, therefore logged out. The user experience leaves much to desire with the submission process requiring far more clicks than reddit and users unable to link a headline directly, but these UX problems may be fairly easy to solve. Incentivizing quality discussions in social interactions through money is a far more difficult problem. From a technical perspective, the voting algorithm is fully public. To game, it requires about two minutes for anyone who can code. Although Steem’s whitepaper, which is bereft of any technical explanation, says there are numerous measures to combat vote gaming, all such measures are public, informing coders of exactly how to make the bot look just like another steemer. Reddit uses incredibly complex measures to combat vote gaming while having a hidden algorithm and still often fails. The gains can be considerable even when no direct money is involved, while the cost almost nonexistent. Therefore, many are highly motivated to find the exact rules of the hidden algorithm by trial and error for the purpose of creating legitimate-user bots. With an open algorithm, streemers are just paying bots, but even with a hidden algorithm, as money is directly involved, it is very hard to see how this problem can be solved or even minimized. If we suppose that the decades-long hard problem of vote gaming is solved in a technical level, steem creates an even harder problem – getting the balance right in incentivizing intrinsic behavior, such as sharing, chatting, getting involved in public discussions, etc. The main reason for using steem rather than, say, reddit, is because of direct payment, but when money is involved people tend to become more selfish, more strictly rational and are more keen to disregard ethics or morals. My first post on the platform was one of the biggest news stories of the year. I posted it on the website immediately after the article was published, but barely gained any votes. Instead, it was copied within hours and the copied post gained far more attention, even though submitted much later. The platform is unlikely, therefore, to become a place where people casually submit or comment with the monetary aspect as just a bonus, but, primarily, a platform to make money. For ordinary users, sharing something interesting is likely to be a boring or annoying experience as no one wants to see their submission at 1 cent, which feels insulting, or stolen by others and see the stolen submission gain $200 while theirs barely gets much attention. Much of the content, therefore, may be left to bots or “professionals,” with the end result likely to be bland. Intrinsic behavior can be motivated by monetary incentives, but it is a delicate balance and far from a trivial problem. Certainly not as easy as straight up giving money to posters and voters which incentivizes unaltruistic behavior and turns a relaxing social experience into work. There are some spaces where money simply should not have a direct role. If a user is paid to read, the reading experience changes. If a user is paid to share, the sharing experience changes. If a user is paid to comment, the commenting experience is no longer the same. What previously was a huge gathering similar to hanging out with friends, steem turns into work with the focus not on relaxing or passing the time, but going through boring content to find the one that will gain most votes and thus most money with the majority barely receiving cents while bot operators or professional “marketeers” grab millions.