The hidden costs of middlemen

For a long time now I have had a delegation with @ocdb, the non-profit, whitelisted bot that is run by @ocd, a manual curation initiative. Over the last 2 years I have been far from a proponent of bidbots and was one of the earliest and most outspoken against them, however in a decentralized and stake-based platform, there is only so much that can be done.

While I would not delegate to any bot just for profit, I have so much respect for what @ocd does and tries to do on the platform that I became one of the earliest supporters and my stake was used in testing with very little return. For me, I don't sell Steem so I have used earnings from it to power up - it is funny how rare that seems to be these days for people to do. After the coming Hardfork however, I want to be able to utilize my downvote capabilities so will take some of my stake out and leave some in to keep earning until the waters are tested.

Over time, I have bought Steem off exchanges and delegated it to the bot for a return and watched as more people did similar and, the whitelisted accounts that used it grew their personal stake with the relatively static 10% benefit from the vote. At some point, A very large delegator (@freedom) added their stake to the bot which helps make the @ocdb vote one of the largest on the platform, which is what provoked this post today.

While I am not great with numbers, I do like to poke around and see what is going on around the place and today I decided to compare some of the bidbot returns. Because Freedom delegates both very large and quite even amounts of Steem across several bots, I thought it was a good place to start on https://steemworld.org/@freedom - and as I scrolled through the transaction in, there seemed to be quite big variations.

@ocdb being non-profit means that all value it generates goes to who it votes on and the delegators - there is no middleman cut for the management or maintenance of it. 10% for the buyers, and the rest including the curation goes to the delegators.

I know some of the others take a cut but I was curious to see what that might look like. I also hear that some of the bids run a loss for buyers due to the way they work, but I don't know how they work as other than @ocdb, I don't use the bidbots.

Looking at the numbers over the past 30 days of payouts that went to Freedom (with the help of a friend to pull the data I asked for, as I am inept), the differences are quite severe.

The "STEEM" number includes what was paid out in SBD and converted to Steem at today's price. While not perfect, it is close enough for these numbers today. The % return is the percentage on the stake for the last 30 days, and that would work out to about 18.5% for the @ocdb delegation in the year.

With @ocdb as the reference as the highest returner, we can compare the leakage from the others.

bot	approx percentage difference
@bdvoter.pay	-12%
@appreciator	-15%
@rocky1	-16%
@upmewhale	-18%
@therising	-19%

In a year, @ocdb would return around 561,000 Steem to @freedom for the 3M+ delegation (and by default, all other delegators relatively). Now, "less" might not sound like much but then, if all things remain equal for a year we can see what these percentages means for the investment compared to if they all offered the same @ocdb deal.

bot	approx percentage	Approx. Steem difference p/y
@bdvoter.pay	-12%	-11,000‬
@appreciator	-15%	-42,000‬
@rocky1	-16%	-45,000
@upmewhale	-18%	-33,000
@therising	-19%	-53,000

These amounts are approximately the middleman "fees" for running the bidbot, a total of around 185,000 Steem a year (all things remaining equal. That is quite significant isn't it? Now, while I am sure there aren't many out there that cry for @freedom's lost revenue, all other delegators to these particular bots are being charged the same management fees and they differ quite a lot when using @ocdb as the reference point. And remember that these can offer a negative return to buyers, whereas @ocdb gives the relatively solid 10% positive return to every buyer.

Of course, while these are approximate figures, my math might be quite wrong also.

However, these are credit card level fee percentages. Seems pretty extreme for running what is also happily being run as a non-profit service.

Again, I don't know much about these things but after seeing such discrepancies between the delegations, those who are delegating to bidbots might want to consider the fees they are being charged for the service, as after all, these are used as investment vehicles by many. At the moment, bidbots aren't likely going to go anywhere soon and while everyone can do with their owned stake as they choose, I do believe that for the smaller delegators, they would be better off using their stake to build their network the best they can.

I think that after HF21 there is a good chance that the randomization downvotes will bring will disrupt the earnings on bidbots, especially if the largest users are voting on shitposts that the community feels don't deserve the value as this affects curation. This changes things again and hopefully in combination with the convergent curve and 50/50 curation encourages more manual curators back to Steem. I also think that the SCOT frontends without the bots generally have healthier looking payouts and Trending pages.

Perhaps at some point, the bidbots will run at a loss for all buyers as they will only be used as marketing tools by companies looking to promote their products across the Steem ecosystem of experiences.

What I like about Steem is that all of this information is out there and available and we can use it to hopefully find a better balance as a community of diverse people, with diverse talents and motivations. The other thing that I like is that while we all might have different ideas of what has value on Steem, many experiments of various kinds can be run simultaneously by anyone in the community willing. Personally, I am looking to the shakeup the EIP could bring to Steem and the development and innovation that the Steem DAO could encourage.

Taraz
[ a Steem original ]