Tags are fine, there just needs to be incentive to moderate the content. Right now the quality of the content is indeed very low and moderators can't really do anything about it because downvotes actually HURT them instead of reward them.
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I think tags are a good start, but are not cohesive enough to aid the formation of micro communities within the Steemit ecosystem. Regardless, I was talking about groups in the context of improving content and there's clearly many ways to skin that cat. The downvoting system does indeed need some refinement too.