Steem Blockchain Suggestion: Increased Liquidity - For a Price
The current power down rules allow users to power down their STEEM at a rate of 1/13 per week. The first payment is made 7 days after the power down is started.
What if users want to power down faster than that? What if someone wants to cash out 100% of their SP today?
There is a cost to the network for allowing users to power down quickly:
- Large dumps can cause dramatic price drops.
- Users could double vote for content if they receive their liquid STEEM within the 7 day voting window.
It is in the network's best interest to have slow power downs, but it is not in the best interest of individual investors. Individual investors would like to be able to power down quickly.
What if we could setup a system that benefits both parties?
We could do this by burning a portion of the STEEM if users want to power down faster than the normal rate. This would give the individual investors the liquidity they want, and it would benefit the network by reducing the supply of STEEM.
| First Payment Delay | Number of Payments | Cost |
|---|---|---|
| 7 Days | 13 | 0 |
| 7 Days | 4 | 15% STEEM Burned |
| 7 Days | 1 | 25% STEEM Burned |
| 0 Days | 1 | 50% STEEM Burned |
This could be really beneficial if there is a huge price spike, and users want to take advantage of the high STEEM price. It can also help unhappy participants exit the network quickly, without needing to stick around for 13 weeks.
By decreasing the amount of STEEM coins in existence each time this occurrs, the value of STEEM would increase due to decreased supply.
Thoughts?
You know it turns out the liquidity issues with steem are a myth. Let me explain why.
If I purchase ethereum I can sell it seconds later if I want. This is true of all cryptos.
It is also true of STEEM.
If I purchase steem, I can sell that steem seconds later.
Where it differs is that I can choose to POWER it up and convert it to steem power. This is more akin to purchasing a CD or making a long term investment.
If a person is truly primarily concerned with liquidity and just steem as an investment then it is pretty simple. Don't power it up.
This is something that I hadn't really thought through myself until you wrote this post. I'd always seen the liquidity problem as a barrier.
Yet in reality that barrier does NOT exist unless you choose to power up.
Powering up is not a feature available to other cryptos, so if you treat steem the same as you would any other crypto then it is just as liquid.
earned SP is not powered up by choice, some users may want to power down faster and burn some to get the steem
This is true. Yet that is also a special feature to steem. There is no true analog to that in other cryptos. The closest it could be compared to is mining. It could be spun many different ways in terms of the outcome of our mining. It can be spun positive, or it can be spun negative. In the negative sense as has been the typical approach it can be "I posted and was paid in steem, steem power, and steem backed dollar, and I cannot get to the steem power very fast so it has low liquidity". It can also be spun in a positive way "Not only does posting pay me in steem backed dollars, and steem, but it also gives me an investement into the platform."
It is mainly a matter of perspective and how it is phrased, and looked at. If you approach it from the negative then yes you are given steem power as a portion of the income from what is effectively the method of mining for steem, and this portion has low liquidity. If you view it from the positive then you are getting steem, and sbd which have high liquidity AND you are also getting investment into the platform.
This could also be spun other ways. What if the mining were effectively halved and all you got was the steem, and the sbd, and the payouts were effectively halved because you didn't get the steem power side of things.
At that point the old steem power rewards that were no longer there would likely be attractive and missed.
The issue is steem/it/busy.org is being compared to other cryptos and there is not really a one to one comparison. It has several unique qualities that are like trying to fit a square into a circle hole (yes if the hole is large enough you can still do that, but you know what I mean).
So mainly my AH HA moment about liquidity was also about perception. It can be spun as having no liquidity, yet if you spin just the parts that actually can be compared to other cryptos then it has as much liquidity as they do. It adds MORE and this more has no analog within the other cryptos to compare it to.
So I guess what I am getting at with this realization is we can perhaps spin this into a positive thing when talking to potential newcomers by how we frame this perspective. If they are simply a crypto investor... they can buy steem and never power up and it is the same as buying/selling other cryptos.
I do see the appeal of being able to get to the steem power quickly in the form of a protest, or I need cash quickly for some family emergency and I know there is some in steem power that I can get to slowly. However, I also know this is how steem power works.
If we want to change this as a form of experiment to see how it works I am okay with that. With the caveat that if it doesn't work out too well we can take a step back from the idea. This is true of pretty much any idea for me at the moment. Let's experiment. I'd like to see a lot of experimenting, but one experiment per more frequent hard fork. When there are a lot of changes it is difficult to say with certainty which change led to which effect.
I agree that the liquidity is there as a choice, but having more options is beneficial too. Users may want to power up to have more voting power, earn curation rewards, and earn the interest on their SP. Having users make this choice is beneficial to the network, because it reduces the liquid supply of STEEM. If we added the 'enhanced liquidity' options, there would be additional benefit to the network for having users power up.
Yes, I don't disagree. It was more a perception and AH HA moment. I was seeing the liquidity as a barrier as I'd heard people like John McAfee say there was no liquidity. Yet really it has the same liquidity as ANY other crypto unless you decide to power up. That is optional, and people stating it has no liquidity makes it clear that people haven't really considered the distinction that powering up is totally voluntary and optional.
As long as they don't power up then it is just as liquid as any other crypto.
As to your idea about powering down. Like I've said many times... at this point I'm all for experiments. As long as they are controlled. We also have to be willing to say "that didn't work" if it fails and take a step back.
I'd be fine with this.
Tim is a wizard.
Watch out for white rabbits with big teeth.
I like this idea. It's a very good way to reduce steem supply and if there is a big price spike a lot of steem will be burnt in the process.
Interesting idea that is kind of like the penalty for early withdrawal of the time deposit or fixed deposit. Also like sacrificing the coupon/interest from a bond by selling out early.
That's a great analogy.
Thanks, hope it helps people in understanding the logic.
Interesting idea. I would like to see all of this algo tweaking halted though so that efforts can be focused on developing amazing front-end experiences.
I think front end and community retention is more important at this stage as well. This seems to be focusing on treating it exclusively like a crypto. It is more than that. This is something we can change later and it might not be a bad idea. Certainly worth some experimentation. Fixing the front end and focusing on user retention rather than user exit should be where our zots should be at.
EDIT: Also the liquidity is there for traditional investors. If they purchase it as STEEM and don't power it up then they do have instant liquidity. If they choose to power up then that is a unique thing to steem/it.
I think both are important. The change itself would not really be a big coding effort. If we increase the value of the coin, that is more money to pay out to users, which helps drive the growth of the platform. I do agree though that if it was a mutually exclusive decision that focusing on front-end growth initiatives is more important.
Keep in mind is that the slow withdrawal schedule of SP is a good safety mechanism in case your account gets hacked. An attacker wouldn't care about 50% loss if they can get your funds instantly.
That's a really great point - thanks!
I like this idea. It make sense from an economics point of view.
Uhmm @dwinblood & @lpfaust both have brought very solid & sober arguments to take in account about @timcliff proposal.
Me, like a novice investor and most important, like a 'liquid pauper' steemian contributor to this PowerUp/PowerDown game & discussion going on over here... I guess, I'll need a lil bit more of time to study thoroughly both sides of the coin first to come afterwards with a more consistent and coherent response.
It is not an easy task for me figure up yet, what my viewpoint would be if I were just a filthy wealthy chap swimming exclusively on cash. ;)
Excellent post sir @timcliff, many thanks for your point of view
Thanks @jlufer :)
That is an incredibly interesting idea. Certainly something to look into. I 'd max out at 35% burned to power down instantly but instantly should have a random 1-3 hours (anywhere in between) delay to help thwart crashing the exchange.
Good Idea!