The Ugly Truth Behind Steemit
You post content, people decide if they like it or not and depending on how ‘popular’ it is, you get paid. Being able to monetize your content is great and it’s about time that we have a way to do it. However, when it comes to Steemit, appearance is deceiving.
Through a new account called ‘thereverseflash’, STEEM was launched on March 24, 2016 under the premise of Proof-of-Work, No ICO, No Premine.
At launch there were no compiled wallets and an error in the setup instructions which allowed only the developer to initially mine any STEEM. When users asked for assistance, none was given.
Later on, user ‘Eclipse Crypto’ discovered that the instructions given by the developer were incorrect, accounting for the errors everyone else was experiencing that was preventing them from being able to mine.
Once other users were able to join in on mining, the developer was confronted with another problem. Overnight, an error on the developer’s end resulted in all his miners crashing (for the second time). Other users continued mining STEEM during this time. The developer, upon realizing that he had lost some control of the supply, decided to re-launch STEEM to ensure that he alone had majority of supply (at least 75%+ of supply). As you can see the developer did everything possible to ensure almost complete centralization.
STEEM is not decentralized. From the beginning it was and still remains highly centralized. The launch of the STEEM network was heavily rigged to ensure that the developer and his ‘friends’ had control over majority of supply. Furthermore, this has major implications for the Steemit platform.
The top 247 accounts on Steemit (most of which are probably owned by the developer and his ‘friends’ through duplicate accounts) own ~87.50% of total stake, without including the main steemit account which is also controlled by the dev. Although any user can vote for content, the influence of your vote corresponds to the amount of STEEM you convert on your account. This means the typical user’s vote is almost meaningless unless they manage to acquire a high stake in total supply.
distribution of stake on Steemit
All content on Steemit is highly censored and centralized since the few actual users who own majority of the supply get to decide which posts make it to the front page and which posts get higher payouts. Accounts are easy to create and majority of the top accounts are most likely controlled by a small group of people making Steemit highly susceptible to sybil attacks. Simply put, for any content to make it to the front page, it is subject to the approval of the developer and his ‘friends’…
Are you an influential or well-known public figure? The developer and his ‘friends’ will give you a nice ‘payout’ so you feel good and start promoting their shady platform to the public. The number of people being lured in through this method is alarming and disappointing. Post something that the majority stakeholders don’t like and your post will never see the light of day despite being well-received by many users.
Reddit operates using an up-vote and down-vote system and every individual user can up-vote or down-vote content once. If a post gets enough up-votes, it can reach the front page.
Now imagine if each vote from the Reddit staff counted as 5000 votes. This is what is basically happening on Steemit.
Steemit is basically a version of Reddit that is almost completely controlled and censored by the creator and his ‘friends’. The content on Steemit and value of STEEM is also at their complete mercy. Unlike decentralized networks, Steemit is almost completely dependent on the developer and his ‘friends’.
Simplified overview of STEEM and Steemit.
Rig the distribution process so that you end up with almost all of the STEEM supply.
Create a platform that allows for the monetization of content.
Make sure certain users get extravagant payouts to lure in more users (the payout is a tiny fraction when compared to how much STEEM you and your friends own).
As more people are lured in, STEEM becomes more ‘valuable’, resulting in those who own majority of the supply getting rich along with the select few they choose.
The successful creation of a content monetization platform does not require the developer to create his own ‘token’ or economy but Steemit chose to do so anyways through the use of highly questionable methods. Yours Network (soon to be released) is an example of a content monetizing platform that is designed to monetize user content without the questionable ‘get-rich-quick’ scheme for its creator and does not depend so heavily on its developer and his ‘’friends’. You can follow progress on Yours through the Yours Network twitter account.
There are various other flaws and red flags present when looking at the economic model behind STEEM and Steemit which will be discussed by Tone through a comprehensive analysis of it’s whitepaper.
To be continued…