In this article, I will try to explore some issues regarding the future of Steem and Steemit. Regardless of my enthousiasm toward this project, I think it is necessary to pinpoint the challenges this project has to face. Hope for the best, plan for the worst and never takes things for granted.
The economic situation of Steem
Sell pressure. In the long run, more and more people will start powering down and cashing out their steems. In the meantime, we will see more and more newcomers cashing out their steem dollars rather than powering them up. This two behaviors will create a continuous sell pressure on the STEEM/BTC market.
Buy pressure. On the other hand, it is hard to see why people would buy STEEM. For two reasons: 1) The inflation is very high 2) People can get steems if they start blogging. In a market where you have no reason to buy an asset, the value of this asset drop to zero. Right now, the main reason to buy STEEM is to get voting power. Is it a sufficient incentive?
Beware of the bad snowball effect
Steemit is a very innovative project that takes into account human behavior and motivation to build its internal monetary policy. But one key actor is disadvantaged on purpose: the trader. This is one of the reason why STEEM is very different from other crypto-currencies. But if traders have no incentives to hold long position on steem, once again the value of STEEM can only goes down.
No matter how much the system try to retain people, if the system scales, there will be even more steemians may that start to cash out. This can creates a bad snowball effect: Sell pressure gets even higher, value of rewards goes down. And if you add the fact that the ‘blogging difficulty’ will rise, you will end up with a situation where there is less incentive to contribute. High level bloggers who have already a good audience somewhere else and don’t need extra-cash may not feel enough incentivize to join.
This may be necessary for the platform to reach this level, to reach this point of equilibrium, so it can find the real starting point from where to buid its community.
Make Steem irrelevant
Truth is one should not consider STEEM as a currency but more as a token. You can’t buy anything with this currency. Steem is a token that gives you access to the digital economic space of Steemit based on steem dollars. Which mean that one major way to reduce the sell pressure of Steem will be the creation of a thriving market based on steem dollars.
The paradoxical situation is that if the founders succeed in building a steem dollars backed marketplace, it will be even less relevant to buy and sell steem or even to powering down to steem. Having steem power and steem dollars will matters even more. At that point steem price can drop to zero and it won’t be an issue for anyone.
And you, how do you see the evolution of the Steemit ecosystem? Please feel free to comment, debate and give counter-arguments.
nb: sorry for my english, french guy here!