A missing central point of failure

10 months ago
7 Min Read
1413 Words

One interesting factor going forward on Steem to consider is how value is distributed, which sounds silly to bring up since pretty much that is the main consideration and discussion on Steem most of the time. However, the discussion is very Steem-centric without thinking much about other factors or similarities to other systems. We can talk about centralization versus decentralization in a number of ways, but value flow could be where the real value lays.

In the future, Steem is hopefully going to be an ecosystem that offers a robust, fast, secure and scalable platform for applications to be built upon to handle the transaction flows. This makes it much more than a simple appstore the like of Apple and Google operate as the platform itself is integrated into the application and this creates a very important distinction. Rather than just being available on the platform, the applications are actually a part of the ecosystem itself, which provides additional value in all directions as well as a stabilization of infrastructure and additional leverageable potential for applications.

There is another aspect that differentiates the Steem blockchain from other centralized platforms also - there is no central ownership. Obvious? yeah of course, everyone with Steem is an owner and potentially can act like a business, but this in itself makes a much more attractive and "protected" ecosystem from a value flow perspective.

The job of a company is to increase shareholder wealth and as we can see, this obviously comes with many risks which are amplified once that same company is operating something like an application store. Their very nature as a corporation is going to look to expand its profits and that will eventually encroach upon the profits of their clients, in the same way middleman banks skim from their own customers through various mechanisms. The Google and Apple cut on application sales through their platform is 30%.

Not only does the distribution corporation want to take a cut, it is also a very top-heavy organization that requires a great amount of resources to function. This means that not only do they have to make shareholder profits, they have to maintain their structure in a number of capacities. Google has around 100,000 employees and in 2018 its revenue was around 136 Billion for the year, that is 1.36 million income per employee? How many of them are making that kind of scratch? GM totaled about 147 billion, but have almost 80,000 more employees. Quite a difference - especially considering they make something that is very tangible in factories.

So, the platform companies are of course going to try and increase shareholder wealth for themselves and they have a massive advantage in this area as they hold the reigns of income flow, it all goes through them for distribution, them being a single entity wanting to maximize profits, and they can change the rules at anytime in any way they choose. This includes how they distribute to those very shareholders they are looking to enrich.

This is not the case on Steem even though there is a central point that the value flows through, the Steem blockchain. However, although singular like an entity, the Steem blockchain code handles distribution and while it can change, it handles it in a uniform and predictable manner for all participants and a transparent set of rules.

The biggest difference is that the Steem blockchain does not care at all about profits of any kind.

Sure, we as users care about the value, but the entity that is the blockchain is only there as distribution infrastructure that is designed to serve content and attach economic values to it through tokenization. This makes it much more objective and predictable and therefore attractive to build upon however, it doesn't not have a middleman function in and of itself - the blockchain doesn't skim.

When "profits" are made, for example as prices increase, everyone with stake or who is holding Steem has relative increase in their own value and they are free to do with that value as they choose, with the mechanisms in play the code that allows, incentivizes or disincentivizes behaviors. The distribution can't be held hostage, it is what it is and that is definied by the code that is in play at any given time.

Not only is this in itself revolutionary in many ways, the decentralized nature of the platform makes it much more viable and requires a great deal less resources in order to function effectively. And then, any value creation that does happen is not going toward the centralized blockchain, it is being distributed directly to the various users of it. This means that lower amounts are required in order to distribute the same amount of value to the user groups that a centralized platform requires.

While a platform like Facebook generates a massive amount of value through the multitude of businesses built upon it, take away "Facebook in the middle" and nearly all of those business models collapse. This is not true for Steem as the very applications themselves become integrated into the ecosystem, they are all part of Steem, all owners and all able to run their own nodes in order to keep the chain functioning, even if the largest stakeholders collapse. Even if Steemit Inc who does the majority of blockchain work ceased to exist, the current code can be run until another team picks up the reins and continues development.

This is something that can't really happen on any of the centralized platforms and this in itself is a risk considering how top-heavy many of them are and, how profit-hungry their shareholders can be. Their is a cut-off point where it is no longer viable for the business to run and as they approach that point through for example loss of revenue through loss of users, they will look to find ways to generate more profits, which comes from their user base, the applications and end users. This is a death spiral as the more they crush for profits, the faster retention falls.

As we can see over the last two years and even through all of the complaints, even with low price and value the Steem blockchain has continued to tick along every three seconds, even as users went inactive. All users can go inactive and as long as @gtg (who loves running nodes it seems) or any one of the witnesses keep their node up, it will tick over.

This makes it quite a unique development environment as the barriers of entry are very low and the potential time to profit could be faster as one doesn't have to continually pay middlemen for access in fiat. Enter in the various SMT distribution as payment, and those enablers on Steem can get paid in tokens that do not even exist nor have use case yet, and then it is "just a matter" of building a business that attracts demand to add value to those same tokens.

The problem with the centralized and top-heavy platforms is that they must profit in order to survive and their survival dictates the survival of every user and business on their platform. This is a single point of economic weakness and eventually, they are all going to come under pressures where they will not be able to maintain their structure, and the death knell is struck.

Steem works more like an organism that can scale to any size and shift any amount of value across the network and then scale back. Businesses can come and go, viral applications pulling in millions or billions can collapse, without affecting the infrastructure that enables it. This makes it robust by nature and due to the protection it can offer applications and users, it could even be considered antifragile in some ways as pressure and failure will not kill it and therefore, it will continually prove itself worthy to invest into.

What I find the coolest thing about the Steem blockchain in comparison to the centralized platforms of today is, while they are looking to maximize their own wealth by leveraging their users, Steem is looking to maximize the wealth of users. While the distribution mechanisms will continue to be imperfect and everchanging, the fact is that the Steem blockchain will never keep a cent of what is marked for distribution - and that distribution is directed by us.

[ a Steem original ]