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The 2nd Layer and losing rewards


4 days ago6 min read

I have been saying for quite some time that eventually the HIVE inflation pool will be removed from the current distribution model, where authors get curated for distribution. Instead, it will be primarily used for staked distribution and witnesses. However, this relies on having a secondary mechanism for distribution, something the @blocktrades has mentioned and given some insight on from his perspective recently - you can read it here.

However, Hive is a socially-driven blockchain and 2nd Layer applications will rely on a userbase to function - like customers. In order for this to really be viable, the second-layer applications will have to offer something of value that is outside what other "non-blockchain" applications can, which is blockchain tokenization. This is the economy that we are building here and currently it is all sitting on the same mechanisms, meaning the global inflation pool.

As @therealwolf has been talking about the last week, in order to empower the second layer, the *first layer (the blockchain) has to narrow its focus. I see this as the investment layer and always have as this is where investors stake - but it is also where there is the chance for distribution as people can earn from this layer. However, in regards to earnings, only about 1/3rd of the total HIVE in existence has come through the inflation pool, with about half of that 1/3rd (1/6th) being distributed to authors, with the rest being on interest, curation, witnesses etc.

However, considering one doesn't have to have capital to earn HIVE stake, this actually isn't sucha bad deal, considering that most of the content that has attracted HIVE value over he last 4 years would like get nothing anywhere else on or off the internet. The "great post" is actually by far, an exception in the pool of content and this was even more the case in the early days. For four years, the users of the blockchain have been enjoying over valued content. Don't get me wrong here, some of the content could likely earn elsewhere and probably is cross-posted or like the art, sold IRL for earning - but not many are able to sell a blurry picture of their lunch or a meme for anything.

With the introduction of Hive-Engine tokens, we have seen that there has been the potential to add value to a token that doesn't draw from the global pool - for example the LEO token for @leofinance. However, even though this is great, it doesn't satisfy me as a stakeholder, even if it might as an author. The reason is that Hive-Engine is a third-party application that is privately owned and operated and doesn't lay within the blockchain consensus model - meaning that it doesn't live by stakeholder rules.

There is nothing wrong with this at all, however, I as a stakeholder would be highly unwilling to push the future of the blockcahin out to another private company and without SMTs, this is what would have to happen. If the future of the blockchain is dependent on 2nd-layer applications, that second layer has to fall under consensus rules and be "protected and secured" by the decentralization of the blockcahin through the stakeholder model - otherwise, what kind of investor would buy?

If we look at the Hive blockchain as a business, it would be ludicrous to outsource the core competence of the business to a third-party as that undermines the very purpose of the blockchain itself. The core competence of HIVE is the security, speed, stability and the consensus model that allows for stakeholders to guide development in a decentralized manner. I agree that after 4 years and all that has happened, the blockchain needs to innovate and grow, but I think that in this case, removing the global reward pool from author access is putting the horse before the cart - meaning that the infrastructure to support the 2nd layer has to be implemented prior. Not only this, it has to be battle tested and have a few iterations to work out the kinks. This takes time and a lot of thought.

My point of writing this quick post is just to make sure that those who are having the discussions and those who are reading the discussions understand that this isn't a decision that gets made quickly or easily, it is a discussion that has come up many times before and an idea that in some way or form, has to likely be implemented eventually.

A lot of current authors are likely going to be "upset" by the drive for the first layer of the blockchain to become the investment layer as they (like me) believe that is where the value is - but, I believe it has value because of the consensus, not because I can earn it and sell it weekly.

I say "current authors" because with an effective SMT layer that supports second-layer applications, those who onboard through these gateways will come in never having had access to the global pool at all. They will have a better understanding of the division of "labor" where there are investors and users. They themselves will be able to both invest into their chosen applications or at the first layer of the blockchain, with the latter being through a direct purchase and staking - this could happen through fiat or second-layer tokens for example - but a purchase would need to be made.

For all the people who are here now however, this would be considered a large change in the usage of the blockchain and create all kinds of fears and problems, as it will fundamentally change their experience and behaviors. Scary, right? But, the same people also want the development of the chain to happen so that there can be millions of users supported here and based on the global reward pool, that is unlikely to be possible.

Hive is more like the internet than Facebook or Twitter - it is an infrastructure that can house experiences (similar to websites are for the internet) built upon it like those and tie them all together through a highly diverse and borderless economy. The value of Hive is potentially immense, but it can't forever continue to act as if it is a website alone (as it is now as a blogging site), it has to expand and become the tokenized internet that can support everything else.

Anyway - these are some quick thoughts as mentioned and hope that they will add to the discussion, improve clarity or ease some fears (perhaps create more) around this topic. What I do hope people take away from this is that the value of HIVE for an individual is not being able to earn and sell it on an exchange, it is being able to stake it for a future where it supports everything that is to come. At the moment you can earn it, but eventually the gateways to that tap will close.

[ Gen1: Hive ]

Posted Using LeoFinance


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