Of late there have been some quite rancorous discussions regarding development. Stinc has been the sole source of development for Steem since day one, although other folks have created dapps, bots, and other applications that create benefits to the community. There are a lot of ways that folks have been seeking to get paid for their development of dapps and bots, with greater or lesser success, but that's not the development we're talking about here.
We're talking about the basic Steem blockchain that @ned and Stinc have crafted, and how best to achieve improvements that are necessary and advisable going forward. Things like SMTs, Communities, Oracles, and more either need to be created from whole cloth, or they won't exist to increase the price of Steem, and our community will not profit from them. Bugs need fixing and hard needs forking.
@ned has instigated the formation of a foundation to do this, and some users have been tapped to get that ball rolling. @steemalliance has held a poll on Discord to select a working group tasked with setting the foundation up to effect funding development, and I reckon they are hard at it today.
@blocktrades recently posted two posts. One to discuss two proposed mechanisms to fund development, and another to poll folks on which of the two mechanisms they prefer. You can see these posts here and here. Essentially, the two mechanisms proposed are only donations, or donations and a tax on rewards.
On the discussion post, I carefully read the post and all comments, and eventually realized that taxing rewards will decrease what the rewards are paid out to increase. I note that @ned has been in discussions regarding making a substantial donation to the foundation, and it's possible others will donate as well. He may not donate at all if others do not, I have heard. This will start the foundation off, but I don't think anyone expects @ned to simply keep donating to fund development. After all, he has been funding development himself since Steem began, presumably for pay.
So, I posted that the only reasonable mechanism to fund development (SPS) is to tap stake. @spectrumecons had an alternative proposal and we began discussing the matter there. That discussion has grown quite long, and I want to make sure that the issues addressed are shared here on my blog as well.
I'm going to post my last reply to @spectrumecons here, as a post, to do that. I am not confident that @blocktrades blog is where I want that discussion confined. I wonder if some folks are seeking to offshore the costs of development to others, so they can reap benefits without paying for them. It happens. Bringing the discussion here puts it in more than one place, and here I can encourage a diversity of views and continue to dissect the issues until I am satisfied that I have come to the best understanding, and it's not fair to @blocktrades that I use his blog that way.
Here's my last reply to @spectrumecons:
I don't disagree that there is a plethora of examples of blatant greed evident on Steem. However, what we're discussing is how to fund basic and essential development of the blockchain, and that is likely going to be voted on, with stake weighted votes. While individuals may prefer to avoid costs they can, there are ways to tap stake that aren't avoidable for folks with Steem.
Donations are voluntary contributions, and I reckon we agree that won't be sufficient to reliably fund development. Non-voluntary contributions, whether from all rewards, only author rewards, or stake, are a tax, and the only realistic way to tax Steem users is code.
The only way to avoid such a tax is to not hold whatever is being taxed.
There's going to be voluminous debate and resistance no matter what form of tax ultimately is chosen, and for those that desire to remain invested in Steem, tax will be a facet of the token.
I have explained a couple times that taxing rewards decreases incentive to create good content, and we already have problems with content quality. It will also decrease incentive to join Steem, and remain, and we have a dire problem with retention now. Author rewards are the most problematic source of funds because creators are already the weakest link in the chain that creates value for Steem. Taxing author rewards will close the spigot from which the value of Steem originates - content.
Witnesses are in some cases below break even already. Taxing their rewards will definitely reduce their number, and that reduces the security of the blockchain, a terrible thing we do not want.
Curation is already horrible, since it is largely (at least by those greedy folks we discussed earlier) only being done to gain profits. It's not really curation at all, but mining Steem, and that's why there even are bidbots. Decreasing the incentive to seek rent via curation doesn't strike me as a particularly bad thing to do, TBQH. Even so, basing tax on curation rewards lets folks that don't curate get a free ride.
Folks that don't earn rewards won't pay tax that is based on rewards. This is a huge incentive to not create, curate, or witness, and we already know that greedy profiteers will do whatever is most profitable. That's why if we want to create an incentive by making it possible to avoid the SPS tax, we sure as hell don't want to incentivize them to avoid rewards - since rewards are doled out to encourage the things rewarded.
The only reasonable basis for an SPS tax is stake, and no stakeholder then gets a free ride and can avoid the tax by not doing the good things we want to encourage, the things rewards pay folks to do. Stake will choose what is funded. It's fair that stake then funds it. Stake will benefit from the development effected through capital gains. Stake should invest in the development equally to it's portion of benefit, and stake tax does that.
Taxing rewards will harm Steem. Let's not do that. Let's do what will produce the best result in terms of equity and gains, which is to fairly apportion the SPS funding to the stake that will benefit from it. Some folks will squirm, and some might even leave. Folks that leave because they don't want to fund development that will benefit them proportional to their contribution aren't folks we really want to do business with anyway. They are only willing to be here if we pay the bills while they reap the profits.
We need development if we want our investments in Steem to produce gains, and not dwindle as the blockchain becomes irrelevant. Reasonable investors and redfish alike will be willing to contribute their fair share to grow their stakes.
Thanks!
Edit: that's my comment verbatim, and though I'd prefer to edit it some to make it more readable, I'm not going to, to maintain total faithfulness to the discussion in which I made the reply.
If you have any thoughts, disagree, or have any comments at all, I'd like to read them. I particularly seek folks with stake, devs, witnesses, and dapp creators and folks with insight into improving and maintaining Steem. If you have something to say, I'd be happy to read it here.
The nice thing about taxes is that we can use the tax to pay for things that the entire community benefits from. Let's say roads and water treatment plants. The needs of the many outweigh the needs of the few.
The bad thing about taxes is that someone is in charge of the money and they will funnel it back into their own pockets if given the chance. Let's say the prison state and infinite warfare via politicians.
And so, we have cultivated a bunch of ignorant self-righteous citizens who think they are funding roads and foodstamps when they are really paying for legalized slavery and death
And so, until I am shown a decentralized proposal to fund development where no one is in charge and the rules are difficult to game and not worth the risk... I must assume all ideas put forth are inherently fatally flawed.
There seems to be quite an urgency to get the ball rolling all of a sudden. Did people just now start caring about blockchain development, or do they smell blood and desperation in these bearish waters and want to use that fear as leverage for more power?
I very much agree with you. One thing that has alarmed me about this present circumstance is the sudden discussion about taxing rewards, before any decisions regarding how to allocate those funds have been undertaken. I see this as shaping the debate, and precluding discussion of alternative funding sources.
It is for this reason that I made this post: to broaden the debate, and include what I think is equitable, for all the reasons I stated.
Thanks!
Ya know, with the high amount of STEEM being paid to the top 19 witnesses, they should be funding things in part.
1,800+2,100+ STEEM per week, times 19, is 39,900 per week. Voluntarily funding things with a portion of near 40,000 isn't much to ask, given the easy mining of being a top 19 witness. Not all projects can get some, but some can, if those witnesses want to do it.People on other chains develop and mine to fund it, but they can just run rigs to mine. On Steem, you can't, the top 19 witnesses are the major miners. They make so much STEEM by just running hardware essentially. Help fund good projects with all that easy mining if you're not developing projects of your own where you need that funding yourself, no?
Also, posting about the project development and having the community reward it, is doable right now. That's voluntary stake-based rewarding.
Nothing new needs to be added. A tax is just bullshit. If people want funding to happen, it can already happen. I make posts on my development. Maybe when I actually release the app I'll get more support, or maybe I won't because people won't value it, or some people don't like me lol. But we shouldn't be just taking STEEM and allocating it to projects just because they have a project.
The free market value should be voluntarily determined. If no one values a project, then you can still develop it without getting rewarded by the community.
I am convinced you know more than I about witness rewards. What about witnesses not in the top 20? Aren't ya'll far less compensated?
I basically agree that voluntary funding is righteous. However, @smooth points out that the inflation that funds rewards is a form of tax, and it's just built into the token. If we're gonna have to pony up for development that Stinc won't anymore, we should not go after rewards, because that defeats the purpose of rewards.
If we're gonna get taxed because folks demanded Stinc let them control development, that's the last way we should do it.
I posted regarding a voluntary program to fund development recently, as you may recall. That's far preferable to what I am seeing discussed now. I'm just trying to keep rent seekers from killing the goose that lays the golden eggs as best I can.
Thanks!
That's why I only stated the top 19 for the mass of STEEM they are mining ;) Yes, all rewards are created, based on previous rewards created, and this is an inflation compared to producing no new rewards which would be 0% inflation. Witness, comments, posts, and curation are all getting new tokens that are part of that inflation. Inflation is not a tax, it's a result of creating more of what was: STEEM tokens, in this case. The alternative is no new tokens are created. Then what would happen to this platform?
As I said, voting on posts of development would be allocating author rewards, and the top 19 witnesses can send some of their rewards too based on what they value. They make a ton each week. At around 9,000 per month, with their servers costs not being close to that, and the future of RocksDB reducing server hardware requirements, they will have even more STEEM left over. Voluntarily funding work being done on Steem is something they can do, if they want to, if they want development funding to happen, rather than expect Steemit to pay people...
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TrufflePighey @valued-customer, wanted to thank you for this writeup, it helped me tremendously in grasping the issues at hand, still far away from a full understanding though.
Rushing this bill is the last thing we want to do as I see much confusion and little understanding right now in posts and comments (feeling similar myself) - yet some people (with vested interests) seem somehow keen to get this bill finalized as quickly as possible before it has even been discussed. Called it bill for a reason. After years of communication drought, an era of indecision and no apparent steemit movement forward besides some empty promises we suddenly have to sign something the majority of steem users do not even understand?
I'd rather read up on your and others' comments and find a concensus of the best ideas before we start building that system to basically allow for finding concensus in the future.
Dictating the start of this proposal system from the top down seems entirely dissonant to the spirit of a proposal system itself. Especially since there are already alternative systems that have been creative at finding other ways to fund development (as you also mentioned).
I hate to be so blunt but is this a community of people with a shared interest and passion for where we are going, able to communicate and find concensus NOW (based on the best pros and cons and an objective preemptive discussion) or is this a monarchy where the little people have to simply accept any and all decisions by the king and his staff of advisors which will then be used as consent for more centralized decision making of seemingly large ramifications...
Well said.
Thanks!
Edit: I note my understanding is evolving as the day wears on. I expect that to continue as I gain the benefit of criticism which refines my grasp. Still, the basic principles I have espoused remain essential to the paradigm: users create the value of Steem, and decreasing the incentive for them to do that will not grow the value of Steem.
Aye, I will do the same, formulating my minimal grasp on it once I feel it is somewhat comprehensive.
Reallocating rewards from interest to the SPS would have similar effect to taxing stake. Interest plays a role of encouraging users to hold Steem Power even if they are inactive. Curation rewards are also an incentive to hold Steem Power. Therefore, interest may not be critical. However, auto-voting and delegating to bots could become even more popular as the alternative passive income.
Another option, which has been taken off the table, is creating new inflation. This would put pressure on lowering price. The extent would be hard to establish as the SPS would create upward pressure on price. From what I have read, investors consider the higher inflation of Steem compared to other cryptocurrencies a deterrent to investing.
You make a good point about interest. However, stake being dependent on capital gains for profit is the key to creating capital gains. Allowing profiteering by letting investors harvest the product of the investment vehicle is completely antithetical to creating capital gains. Curation rewards, self-voting, circle-jerking, and etc., are nothing more than profiteering and the opposite of investing.
Further reducing incentives to create content by reducing author rewards will exacerbate Steem's retention tragedy. It's bad enough now, and reducing author rewards can only make it worse. Stinc spent stake to fund development, and has substantially reduced it's stake doing so. That's been the mechanism that funded development, and regardless of whether folks think those funds were efficiently employed, it did not tax author rewards and decrease the incentive to create value of Steem.
I propose not changing that mechanism, but neither confining funding development to Stinc alone, as affected parties have convinced Stinc to let them participate in funding development too, and now seem to be seeking to offshore the costs of doing so to the sole source of Steem value: the content creators.
I can't think of a better way to degrade content quality, or make retention worse, which are the best ways to decrease the value of Steem.
I want to thank you for the lively discussion. I want to just round up my position regarding SPS.
I strongly believe such a system is necessary for more decentralised development of the platform. The extent of the valued added is uncertain, we will get a better idea once proposals are made.
Funding appears to be the biggest challenge. Adding inflation is a likely deterrent for investors considering Steem has relatively high inflation as it is. Donations will be unreliable. I expect we can see them drop off once users donating realise many are not contributing.
That leaves us with existing inflation. Cutting witness rewards at the moment when prices are this low will strongly discourage anyone becoming a witness. Many good existing witnesses may drop out. This puts the whole blockchain at risk. Curation rewards are very low compared to passive income such as vote selling and delegating bots. Barely 15% of inflation goes to curation. I would like that closer to 40%. Curation rewards are an essential incentive for investor engagement. Curation is also essential for authors.
Interest is also important for encouraging holding Steem Power. It is less important than curation rewards but some form of passive income is still necessary. It would be risky to reduce it.
That leaves us with just authors. I have argued many times that author rewards should be reduced in favour of curation rewards. Reducing author rewards in favour of SPS partly achieves this. Based on the figures above author and curation rewards are about 22/78 split. After accounting for SPS, it will be about 30/70, which is still strongly in favour of authors. I believe 50/50 split would be fairer but quite possibly still not sufficient to encourage active curating (I proposed an algorithm which could make this possible). Otherwise, a split as drastic as 25/75 would most likely be necessary.
As it stands, funding through donations is winning the poll. Looks like some of larger stakeholders are volunteering donations. If this is implemented, we will see how long it lasts.
I also appreciate the discussion we have undertaken. It seems that we are unable to reconcile, and I accept that: I expected it.
Last word from me are that the poll is basically on whether to tax author rewards, as initially donations are a certainty, and no one expects voluntary donations to provide a long term solution to SPS funding IMHO. So, the failure of taxing rewards is essentially a plebiscite to reject that offshoring of development expenses from the present source, which is large stakeholders (Stinc, to date).
Given that this is a stakeweighted poll, I consider that a significant statement by actual investors, who care enough to spend the tiny VP required to decide the issue, unlike profiteers, who are so short sighted that they are unwilling to invest that practically infinitesimal expense to prevail in the poll.
That is a very telling statement indeed!
Thanks!
When you say 'tap stake' I'm not sure I understand what you mean. Would that be a % tax on your Steem, SP or SBD? Would the taxable amount be direct debited from your account? And what would the taxable event be to trigger the tax?
Thanks in advance
Those are all questions I have not seen anyone address, and I haven't addressed them either. The discussion has been simply regarding from where funds are drawn to fund development.
Thanks for raising them, as those are all matters that will need to be considered, no matter where funds are extracted.
My only concerns are those I have raised: decreasing rewards decreases the things rewards are intended to increase. I don't think we should. Basing any SPS funding on stake doesn't do that, and it also ensures that folks holding Steem are going to involve themselves in how to spend those funds - which is a good thing. The more parsimonious the folks funding the proposals are, the harder they will hold devs feet to fire, and drive productivity with great zeal.
Lastly, I don't want to see worse oligarchical 'democracy' here than we see in the real world, with funds drawn from those with less of them to pay those with the most.
If we're not going to play fair, we shouldn't play.
Thanks!
As a simple content-creator, most of this is over my head. But I do thank you for doing what you think is necessary to improve the blockchain.
Thanks!