Long wave riding: Stabilizing Steem though RCs
What is a long time to prepare for something? A year, ten, twenty? If you have a current career, how long did it take you to get there? The average salary in Finland is around about 3200€ a month and for that level a general level of completed formal education is required meaning, school and possibly university. Keeping just school in mind, that is 12 years of unpaid work to get to a point to earn the average salary. Include university and it is another 3 at least. Not only that, people don't usually start at 3200, they start around 2200 and have to work their way up.
So, what is a long time to prepare? If one works for 15 years earning the average salary, factoring in the preparation (school time) what is the return? in Finland it is 1600€, which is just above poverty level. Yes, it is an expensive country. Factor in all of the costs to even get to the point where work is possible and it drops down again.
What people consider a long time these days is rarely long at all and it is because of this that so many are unable to really benefit from investments as before they really mature, people sell. Of course, there is a range of risk across investments but that is part of the game, will it work or won't it?
Below is a chart from Apple since 1980. Look at that flat line for 23 years where price was between zero and 1 dollar for the most of it.
In 2005 it jumped incredibly to 5 dollars. Lets say that this was my buy-in point and I put 1000€ in and held until today. Without thinking about dividends paid, that 1000 would be worth 45,000 at this point. That 1000 is ~10 days of an average Finish salary (back then it was about 2600€) meaning that those 10 days had a future value of almost 1.3 Years of work.
Yes, this is easy in hindsight, isn't it?
Last night I proposed a potential future for Steem based on RCs where I predict that due to the way they work, Steem is going to be very valuable. Without getting into specifics here, RCs are a unique resource required by the system but, they only exist when Steem is actively powered up, unvested Steem doesn't create RCs. This means that when Steem is powered down, RCs disappear making the resource scarcer.
So, now there are two scarce resources that are in a constant battle with each other.
When demand for bandwidth rises, the demand for RCs rise also, which means in a market economy, value of RCs increase which encourages more powering up. When more people power up, there is less STEEM on the exchanges but there is still demand because of the will to power up and own RCs. This pushes the price of STEEM upward as there is low supply but high demand. But, as STEEM price increases, there is also the will for holders to sell which adds supply again on the markets, but the powering down takes away active SP meaning less RCs for bandwidth. This of course increases the value of RCs making the decision harder to sell.
So, who sells?
Well of course the ones who have just bought STEEM at a highish price to have access to the RC market aren't likely to sell, it is the ones who were able to get in cheap and as we have seen in the past. When prices increase, people sell which is natural but, now they have to decide if the price of selling is worth missing out on earning through RCs. So, who sells? Whales, orcas, older accounts who got Steem cheaply enough or invested early enough that they can take profits very comfortably. This dilutes the strength of the large accounts slowly over time as the cycle continues.
How much time does this take?
I don't know if it is even possible but if it is, the increasing demand on Steem, the way RCs can be used to empower users in various ways, and the price rises means the system becomes not only attractive to investors but to content producers looking to earn. People are worried about new users in the short term having to pay-to-play but in a few months I would say that it is no longer an issue at all. This means more people will be able to join and interact as well as earn without having to pay but, with the possibilities of investing in the Steem to create RCs that allow it, they are more likely to want to pay to play at another level.
Freemium vs Premium
People have different view of this but as I see it the Free version where one can join and have delegated Resource credits to interact allows users to be part of the community and earn rewards on their interactions and content.
The Premium version however allows this plus access to revenue streams that just so happen to allow the Freemium users have access to the Steem infrastructure.
The idea of Freemium is that the paying members subsidize the free members but there has to be a compelling reason to want to pay. Think about the Apps you use on your phone and you likely have some you pay for for added features or no ads and some you don't that are in their default settings. Apps make their revenue from those adverts which means going premium loses the app that stream but, it has been replaced by the cost of upgrade.
If we take the same idea here, instead of just getting access to more features, buying-in to Steem gives access to the income that is generated by the Free users, the 'Ad revenue' the App companies receive. This isn't ad revenue though (yet) it is access to increasing demand for RCs and the associated price rise in Steem. The basic user will not have to buy in but, the invested user gets additional access to earning potential. Whereas an App upgrade gets not much more, a STEEM upgrade is a true investment.
Price increases demand
Just as price falls decrease demand on the Steem blockchain, price increases drive it and if you do not know, the higher the price of Steem, the harder it is to earn, and the more people on the platform, the harder it is to earn. This is because the pool is limited and gets spread across all vested votes on all content. When there are a million posts a day getting voted on, there is still the same amount of Steem in the pool. But, all of those posts need RCs to interact meansing that there is going to be limited Steem and limited RCs. Less sellers so less possibility to buy, higher prices, scarce resource, higher demand and at some point you know what?
I think that because the choice to sell Steem will be in direct competition to holding Steem to earn from it in various way including the magical disappearing RCs, eventually an equillibrium will be reaced where there aren't many sellers but there is a lot of active users wanting to earn. This makes what comes out of the pool each day highly valuable as it is among the only new Steem that has a chance of making it to the market.
Of course, there will still be people selling which is those who have enough to allow it or those who must due to various personal reasons. This means the Steem eventually trickles onto markets at high prices but there is still the potential to earn some on platform, even without paying for Steem.
How long will it take?
I still don't know but the short-term volatility and FUD that is being spread about new accounts needing to buy in is just speculation also because with a few alterations to the way we use Steem, no one needs to buy-in. But, if they want to have access to increased earning potential through, curation, SMTs, self-voting, supporting projects, airdrops and now leasing RCs (yet to come but I am predicting), they have to buy-in. Freemium.
The difference between a freemium model on an App and Steem is that instead of the centralized app taking the value, it is distributed back to the people who upgrade.
This is far from my area and I might be completely wrong in the way all of this will play out but I am looking well past the turbulence of a Hardfork, the struggles for the next few months, SMTs failing left and right and into a future that is 5, 10, 15 years down the track now. As I see the future at these distances, it makes investing into Apple 13 years ago look ridiculous.
For a little bit of fun, to get to the same return as Apple over the last 13 years to today it would be (at a very basic level):
45 x 0.90 = $42 dollar STEEM.
During that time, people with that 1000 would be able to outperform any dividend Apple could offer percentage-wise by using it actively on platform. If that is 1000 STEEM, 20% curation return for 13 years almost triples the initial amount of Steem meaning that if Apple did the same, instead of returning 45,000 it would be closer to 130,000. That means that those 10 days of value invested would now be equivalent to almost 4 years of average salary.
I am not great with numbers so did this in a very, very basic way.
So, how long is a long time?
There is a forest from the trees problem here and although we tend to focus on the every day dramas heavily, if we take the view that there is a much longer game at play, the peaks and spikes of today are potentially flat lines compared to the future. Still have to get there though and there is a lot of risk and complication to come.
Out of curiosity, what if just one of the Dapps is iPhone successful in uptake?
[ a Steem original ]