Investment Test: Steem Interest Rates (and liquidity sinks)

in interest •  26 days ago 

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I wonder how many people here don't even know they're earning interest on their SP even when they don't upvote. Probably a lot... although I'll be surprised if I get any comments to that effect.


I've powered up my account to 23k sp exactly.


As we can see, after a very short time period, I've already earned 0.02 Steem in interest.

Free money, amirite?

Truth be told, I don't like the way that Steem does this when regarding the consensus layer. The way it stands now is unfortunately underutilized and redundant.


Solution

Palnet had the right idea:

Offer virtual mining on a separate pool for users looking for ROI only and not community engagement.

Where supply meets demand, markets emerge.

We shouldn't be mad that some users are here solely to make money. We should expect it; it's a very obvious outcome of the cryptosphere, especially when considering most people live in scarcity.

How it works now.

To earn interest on your Steem coins, one powers them up. This gives users to ability to control where inflation is allocated via upvotes and earns one passive interest. We're getting rewarded in two different ways for powering up, and it's completely redundant.

Instead, we should move that ~15% apr to the vault (Savings Account).

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This would be a superior way of doing it.
Correct me if I'm wrong, there is no drawback.

A separate pool is created for users looking solely for ROI. They can't be downvoted; the rewards are guaranteed and liquid. In addition, the bank account only has a three day waiting period, so investors who are afraid to lock everything up for 13 weeks have an easy alternative, while still retaining the ability to lock up funds so they can't be stolen in the event of an active-key breach.

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Win/Win/Win

The developing time required to put this superior consensus mechanism into place would be trivial. It would essentially mimic SteemEngine virtual miners exactly... except we wouldn't be calling it mining... because it's not.

If you can't tell I have an issue with calling it mining... I find it to be somewhat of a confusing statement, like calling a crypto wallet a wallet (the coins aren't in the wallet, it's a keychain, and can be copied). Andreas Antonopoulus is to blame. Guy knows too much and he got to me.

Another obvious benefit to this system is that more coins would likely be taken off the market.

A separate inflation pool attracts more investment via locking up liquid coins. Pretty much all users that upvote on a daily basis would be fully incentivized to not participate in this new feature, and many of the bad actors that are here just for ROI would be incentivized to join the system designed for their mindset.


SBD steem.png

Other mechanisms designed for locking coins.

I've already stated this quite a few times, but we really need to implement smart contracts that allow anyone to lock up Steem coins and create SBD with this collateral. There are risks with this system, and it would take a while to implement, but hot damn would it be worth the effort. In addition to locking up millions of coins it would keep SBD firmly pegged to the $0.95 - $1.05 range (almost guaranteed). We'd finally have a real stable coin that the world would take seriously.

Permanent power ups

Here's another feature that has no risks, drawbacks, or overhead cost to implement. Allow users to transfer liquid coins that become permanent SP when they reach their destination, never to be powered down again. I know people would use this feature. Combined with a solid decentralized reputation system, it becomes harder and harder to transfer these coins because more assets (reputation) are being permanently branded onto the account.

No one's going to want to start from scratch if their reputation actually means something. Less people will want to buy an account that have funds on it that can't be transferred. It would allow the distribution of funds with the knowledge those coins will never again appear on the open market.

Conclusion

There are a more avenues we could be following that would allow the network to incentivize locking up coins and decreasing the underlying coin supply of the platform. Many of these ideas would be trivial to implement with very little (if any) drawbacks.

This platform will be but a shadow of its former self in five to ten years.

Count on it.

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Lots to absorb here. That's some solid reasoning; and worth a ponder.
Permanently, passively investing here for a decent return isn't really an option currently.
I think most of the delegating to bidbots activity was actually trying to get a good return without having to curate activity.
A completely passive return on voting power sitting at 100% would help attract a lot more investors.
Not sure about permanently locking up SP (tying it to a particular account). I did like the 104 week powerdowns we had originally; its a pity that 13 week powerdown won't be adjustable in the first iteration of SMTs. I'd like to see some experimentation there.

Not sure about permanently locking up SP.

Eh? Why not?

It would be a totally optional niche function that only a few people would use.
It can only add value.

Sure, I'm not going to argue against giving people more options. That said, if we roll out too many niche functions, the complexity can easily drive people away.
The number of newcomers who were warned away from converting SBDs to STEEM via the site, and told to do so via the market, instead.
People I'd recruited complaining to me that they can't understand it all, that the learning curve is insane; wondering why steemit INC lets them click a button that loses them money.
I like the complexity and you like the complexity; but its possible that's why we're the only ones still here :)

Yes, you are absolutely correct.
A function like this does not belong in the Steemit UX.
Just like the SBD conversion function didn't belong there.
Steemit should be the entry level noob version frontend.
That much is obvious.

Could you imagine trading $10 SBD for $1 worth of Steem?
LOL what a nightmare.

That's another reason I only tell people "I post and others upvote if they like it." part of the Steem. It's really too complex for a newbie.

Another reason I'm glad to be rid of the bid bots. I'd recruit somebody, then on their first post, five others would drop in the comments, giving them step by step instructions for finding, comparing paying and memoing bidbots, in order to get a slightly higher return on their posts week-on-week.
They all meant well, but when its just a regular person already struggling with keys and markdown it was too much.

I like a lot of these points.

Wondering about your last point though, regarding permanent SP that can never be withdrawn. Wouldn't it be better to have them burned up? Or is it better to keep the spent currency in a frozen state? Keeping a score of how much they put into the "dump" is a good idea.

Been wishing since I started on steem to have an interest rate on the savings wallet. There has been no reason to use it since most witnesses do not support an interest rate.

Right now SBD's aren't even being generated because the inflation is so high, and currency value is rock bottom. How many months has it been since we were earning SBD on posts?

Maybe I am misunderstanding. Even though we get ROI from powering up, for most people the account value has actually been decreasing because of inflation. I've tripled my SP this year, and my account value is more than half of what it was back then.

If people are not investing in buying steem, the inflation continues until people burn up and destroy enough of their steem to overcome the debt ratio.

Wondering about your last point though, regarding permanent SP that can never be withdrawn. Wouldn't it be better to have them burned up?

Uh, yeah... it would be better, but no one would do it.

This functionality already exists;

It's called sending your money to @null.


My idea is more about being able to transfer money to people knowing that they aren't going to spend it. I guess now that you got me thinking about it... it would basically be a
permanent-delegation rather than an actual transfer.
Thanks for the idea.


As far as inflation goes, everyone complains about it, but it's not really what's devaluing everyone's money. We only create 10% inflation here, but the value of Steem/USD has been diluted 5000% simply from market volatility. In one or two years the price of Steem will swing back to a crazy high number. It's just a waiting game and knowing when to cash out or hedge some of your investment. Stick around, it's gonna be a roller coaster.

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You're full of ideas! I enjoy reading your take on things as i learn to navigate the crypto realm. I feel more inspired to delve a bit deeper into what Andreas has to say about the space. I watched a clip (i think it was in your post) shared yesterday. Happy Birthday ❄🎂❤ and it would be fantastic to see a bull run gifted to you for your birthday! 🍻🎠🎈

Haha thanks! I'm not going to hold my breath... the market looks so damn bearish... keeps on squeaking lower and lower.

You're welcome! Buy, buy, buy! I began my career working with a Structured Products desk. I asked the traders for any inside secrets. The secret was "buy low, sell high Jilly" 😆 the market is surely going to turn around my friend. And, when it does it'll be a lot of fun! You've likely seen it multiple times in the past. I am looking forward to seeing that bull run man! What a blast that's gunna be.

I thought $1.60 Steem was pretty low at one point.
80 cents was really low :D

Yah, i think around $1.60 was the first I bought at too. It was a gift to @themarkymark for his bday July (if i am not mistaken) 2018. It was my first ever crypto purchase. 😊 it was probably about ~100 bucks. But, a huge investment at the time for me. It was so fun! I use Netcoins to buy tokens now. And, am just preparing to diversify my token portfolio a little bit. Am thinking to get some bitcoin cash, litecoin, ethereum, ripple, dash. And, have been thinking to add a few more bts & EOS. As i understand, i think i need to first set up wallets. Then i can stack a bit more tokens. I am considering BTC too actually. But, am not sure. Merry Christmas to me! And, my kids 'n mom. It's delightful to chit chat about cryptos!! 👍 are you having cake on your bday? How are you celebrating?

The first idea seems like a really solid winner to me. The current power down period is way too long for anyone considering Steem for passive investment ROI vs. other cryptos. Totally agree that separating it would naturally kind of filter out users into their respective camps; active users would continue to hold SP to gain voting privileges and rewards while those just into it for the ROI would quit spamming/scamming the system (and exposing themselves to downvotes) if a guaranteed ROI with only 3 day lockdown was available

Offer virtual mining on a separate pool for users looking for ROI only and not community engagement.

Agreed, not everybody are looking for an engagement.
I think this "proposal" should be discussed as fast as possible.

If a guaranteed ROI equal to curation ROI for doing nothing was available most would just do nothing and youve essentially turned Steem into a a barebones blockchain like Whaleshares that does something similar.
There is a point to curation.
If i understood you correctly i think thats a really bad idea.

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Well, any idea that guarantees $1 SBD deserves support.

I believe the actual system is good.

great offer - I support the idea

I think this is a great idea.