Does the 13 week powerdown period prevent investing in STEEM?
In a recent post @thecryptodrive is proposing to reduce the power down period from 13 weeks to 4. He justifies the proposal in the following way:
The premise behind this change is to reduce the barrier to entry for investment into Steem and PoB SMT's, currently it is daunting for investors to lock-up their capital for 13 weeks.
At first glance the proposed change in the code seems reasonable. But is the premise for it a proven fact or is it just a reflection of the desires of one group of stakeholders?
I think that the problem is framed incorrectly. The real question should be how do we increase the value of the steem network? If reducing the power down period helps to accomplish this then we should go ahead and make the change.
And here lies the crux of the issue...there is no data to backup the assertion. Has a study been done that proves it or a professional poll conducted among a group of investors that mentions the lock-up period as the main barrier to entry?
The answer is no.
First, let's start by looking at lock-up periods in general. From Investopedia:
There are two main uses for lock-up periods, those for hedge funds and those for start-ups/IPO’s.
Hedge fund lock-ups are typically 30-90 days, giving the hedge fund manager time to exit investments without driving prices against their overall portfolio.
For start-ups, or companies looking to go public through an IPO, lock-periods help show that company leadership remains intact and that the business model remains on solid footing.
The Hedge Fund market was valued at 3.53 trillion as of November of 2018 according to 2019-Preqin-Global-Hedge-Fund-Report.
It is worth noting that Withdrawals may also only happen at certain intervals such as quarterly or bi-annually..
So having lock-up periods plus limited withdrawal intervals does not prevent the Hedge Fund market to dwarf the whole crypto space. We can conclude that in general those two characteristics are not obstacles for investors. What investors look for is how much ROI can they obtain from commiting their money into a particular enterprise. The ROI comes from the underlying value of how the funds are allocated on the specific investments.
This brings us back to the question that I consider to be fundamental how do we increase the value of the steem network?. It is my belief that it doesn't matter if we reduce the power down period (or if we remove it at all) if the value of the network does not increase. For this we need adoption through various use cases. I can not presume to know which use cases can help us in this quest.
Also, we probably need to question if having a powerdown schdule is a good fit for STEEM. Maybe it is maybe not.
There are other issues to consider, alot of them were discussed in the post from @thecryptodrive and I encourage you to read them. The main concern that I have is that reducing the powerdown to four weeks (or even worse to only one) is that it can incentivize exchanges to flex their muscles (so to speak) and takeover the main witness positions and dictate the governance of the chain.
To conclude, this proposal if implemented will change the economics of the network and it should not be taken lightly. We need data and not take decisions based on our desires alone. Before commiting to this we need to justify it so probably it would be best if we use the SPS and fund an independent study (preferably by a non-steem entity to eliminate bias).
I think incentives drive behavior and it really depends on which type of crowd you want to attract. Having a long power down period will likely attract longer-term users/investors. On the other hand, reducing the power down period will invite more short-term speculators.
The ideal scenario will be to have a few lock-up options with different duration. Of course the longer you lock-up the higher the ROI. Loom Network is one such crypto project which is doing this.
Yes, just any bank around the corner would provide literary dozens different options to stake for its customers. And why? Because there's demand for those different options.
The arroganse of blockchain developers who are sure they can go on ignoring peoples needs is astonishing.
The current content creators, witnesses, etc. are already selling steem faster than investors are buying. Therefore 13 weeks is currently not a long enough lock up period.
Just my 0.02 steem!
Maybe we should just cut the inflation rate in half so that it equals Bitcoin's (at least before the halvening)
I feel like it needs to be dropped down by a lot. EOS set industry standard to 3 days, and we are wayyyy higher than that.
The "industry standard" has led EOS to be in a position where exchanges can (and have) used their customers funds to have a monopoly of the top witness positions. For this reason Dan Larimer himself is proposing to have multiple staking pools, the longest one being 10 years.
The question annoys me more than anything else. We are asking ourselves if we should greatly change our economics without even testing them out for a single market cycle.
Every time the price of Steem naturally loses value due to massive volatility we're going to try to greatly change the fundamental qualities of the blockchain? It shows a great lack of restraint and patience.
Hello, SPinvest is a steemit investment club that is 100% backed by STEEM POWER.
It offers anyone the chance to earn STEEM POWER rewards without the silly 13 week power down.
Many conflate 'investors' with 'traders'. Anything longer than an instantaneous power down will not attract anyone actively trading crypto. Also, what percentage of day or swing traders would actually power up and use their STEEM power to participate, if they know they will likely sell it in the short term? What about delegations and their cooldowns? Odds are this proposed 'steem investor' wanting a quicker powerdown might want to actually delegate and get a return. Do the powerdowns for delegations also get shortened for the same reason? What would be the consequences of that?
It’s always important to care more for people who speak quietly because the loud well... we already know their opinion.
I agree that there should be empirical evidence before implementing a change like this. Also, it's configurable in steem-engine tokens and (soon) in SMTs, which means different solutions can be tried and compared. Finally, setting @likwid as a beneficiary makes it effectively, 0 days anyway (minus a small fee). I can't imagine why this would be a priority for anyone.
Actually, it can't be configured in SMTs...but aside from that the main point is the lack of evidence that reducing the powerdown period will increase investment. I guess we can make the argument that making the change will increase the pool of potential investors. But without an increase in the value of the network that potential will not materialize.
Another counter argument for the proposal is that having a large portion of the supply locked-up gives day traders some insurance against large dumps on the market and that helps wih liquidity but I did not consider that as important overall.
Oh, I assumed that was included in the configurable parameters. I think there's a strong argument to be made for making that configurable in future updates.
@onthewayout You have received a 100% upvote from @steemguardian because this post did not use any bidbots and you have not used bidbots in the last 30 days!
Upvoting this comment will help keep this service running.
My honest opinion.
Yes it would be nice to have those funds available quicker if you have alot more invested.
But would that not affect the price? As the market would be flooded with steem every time the price gets a spike.
I think that we can all agree that reducing the powerdown period will have the potential to increase volatility since there could be a larger volume of tokens on sale in a shorter time span.