Since the early days of the internet, there has been a constant movement of people, from mailing boards to Facebook and Reddit. Eternal September keeps chasing out the best who are then followed by the rest with the process now repeating. Although Facebook is one of the biggest companies on earth, few think it is cool – your mom is on it. Meanwhile, Reddit, itself a product of an exodus from Digg, has brought to the forefront a serious problem, private sector censorship of free speech. The duo of Daniel Larimer and Ned Scott, the former a techy, the latter from the world of finance, think they have a solution, Steemit. The blockchain-powered platform is a mixture between medium and reddit where users are paid for voting and posting in a new currency called steem, currently valued at around $0.23 per unit. Steemit users just received the first payout, $1.3 million in total, but can this really work?
The incentives of steemit’s design
There has been much debate on the use of money to incentivise intrinsic behaviour, such as studying, donations, or healthy activity. The jury is still out with one study concluding that the effects of monetary incentivization on intrinsically motivated behaviour, basically, depends:
“A considerable and growing body of evidence suggests that the effects of incentives depend on how they are designed, the form in which they are given (especially monetary or nonmonetary), how they interact with intrinsic motivations and social motivations, and what happens after they are withdrawn. Incentives do matter, but in various and sometimes unexpected ways.”
The incentives of streemit’s design were described by Larimer, speaking to CoinTelegraph In eight points:
No transaction fees.
Mandatory spending.
Liquidity rewards to bootstrap market trading.
Everyone who provides value should get a stake.
Don't ask for money, ask for time and energy.
Build value for people who don't buy in or use the platform (readers).
Natural marketing and SEO through producing content.
Make it fun.
Much of it is self-descriptive, but we asked for an explanation on “mandatory spending”. Larimer says:
“Under Steem, it doesn't matter if you vote or not, funds will be distributed to someone. This forces people to focus on directing funds to the best cause, rather than *if* they should fund something. The result of mandatory spending is that the platform gradually changes hands from those who do nothing to those who contribute.”
Distributing the funds
The monetary aspects of the platform are somewhat complex. First of all, it all runs and is stored on a blockchain, so it has miners. Second, it uses a mixture of proof of work mining, proof of stake and delegated proof of stake. To make it a bit more fun, it has three currencies. The “core” currency is Steem, which is highly inflationary with steem units doubling every year. Many, therefore, convert it to Steem Power (SP) which locks the currency in a stake for two years. Then there is Steem Dollars which aims to be pegged to the US Dollar. There is an even more complex method of distributing the funds which constantly inflate. 90% of the inflated funds are given to SP holders, the other 10% is shared:
“The accounting is complex, but fundamentally this is no different than Bitcoin. Bitcoin has allocated 10% of its market cap each year to pay for miners. Steem allocates 10% of its market cap to pay for curation (voters), posting, mining, block production, and liquidity.”
The 10% is allocated to four groups, “1% block producers, 1% liquidity, 6% authors and 2% curators,” according to Larimer’s estimate. There is no halving, so the currency continues to inflate at 10%, effectively, indefinitely. “It has really gained traction. New users are signing up every day. There is a constantly growing number of active users,” says Larimer with more than 700 active users yesterday and 20,000 pageviews a day.
Reddit’s heavy censorship vs. steem’s censorship resistance
One attraction, especially in light of reddit’s heavy censorship by both admins and moderators may be steem’s censorship resistance. As all is stored on a blockchain, unless 51% of node operators, miners and stakeholders agree, no content can be removed. That, of course, has two edges. After a terrorist shooting in Orlando, heavy censorship was implemented by reddit moderators, especially r/news which went so far as to remove a post giving information on blood donations. This brought the bubbling reddit censorship issue to mainstream attention, but only for just a day with no action taken. Reddit admins have taken a position that moderators can do whatever they wish in their own subreddits. The problem is of course that name domains are hot property as r/news retains a structural advantage over r/news2 due to most newcomers typing the former. That opens our great public spaces where we congregate to insidious overt and covert manipulation which may provide entities with powerful political or financial advantage at, perhaps, the expense of the common good. Many, therefore, think that reddit is ripe for disruption as new space seems to have opened to figure out a more equitable way of organizing our public discussions.
Is steemit the solution?
Whether steemit is the solution is not clear. The way it is currently organized seems to be limited to self-posts, rather than direct link sharing from the title. Moreover, the administrators of the website can, if they wish, remove content or comments, but they would remain on the blockchain and anyone can set up a website to reflect the blockchain just as there are a number of block explorers. This may be one way to address the other edge of free speech. Content that is fundamentally in breach of all or almost all values, although it may be on the backbone, stored on the blockchain, would not be displayed on the frontend. Nedd Scott, CEO and Co-founder at Steemit, described his ambitions to CT as follows:
“Our goal is to give [social media] back to the people by making it a public resource and a utility owned by the people. Ultimately the people who have say over Steem are the token holders and that’s what will drive its direction in the long run.”
From the voting algorithm to funding distribution, token market price, monetary incitivization, the use of the blockchain itself, there are many complex interactions, combining an instant market reaction through price, financial carrots and sticks through voting, as well as monetary reward for product creation together with a digital currency element. Whether this will work in its current incarnation remains to be seen, but it is one of the more unique attempts to try and solve the decades long social media problem with the results of the experiment, whether failure or success, undoubtedly closely watched by many.
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