Since my first days on this blockchain, HIVE is almost always in the negative when it comes to powering down and exchange transfers. More HIVE is moving out of vesting than in and more HIVE is moving out to exchanges than moving in from exchanges.
The incentive to hold HIVE as HIVE Power is not enough to keep people invested in the rewards and staking system. Combined with the general lack of interest and investment into the Hive blockchain, it seems that we are simply not connecting with market participants regarding either our social rewards scheme or our general return on investment. I have recently advocated moving away from social rewards on Hive’s base layer and opening Hive up as a more general-purpose chain.
But even if we do that, there still seems to be a problem with staking and incentives. The current incentive to stake tokens has a few potential payoffs for users.
- Influence on post reward distribution and personal return from post curation
- Interest rewards
- Influence on witness voting and development funds
- Resource credits for use of the blockchain
In terms of personal ROI, only #1 and #2 are relevant. You can directly earn ROI from curation rewards and from the interest paid on the amount you have staked – both coming from the inflation pool. The inflation is key, since the newly-created tokens are continually being devalued, all other things being equal. The interest paid on staking is meant to cover some of those losses from inflation and the curation rewards are designed in a way that you can potentially outpace losses from inflation devaluation.
I think the math is a bit screwy and actual ROI depends mostly on new buyers coming in and driving prices up for capital appreciation. We’ve seen that happen in short bursts here and there, but the gradual decline in prices over longer periods of time completely wipes out any of the short-term gains. This makes long-term holding of the token a lot more risky and a lot less profitable for most users. Factor in the relatively long power down period and it makes short-term gains that much harder to realize for stakeholders.
So we have a multifaceted problem with our current design and the interest in the chain that we’ve observed for the past 4.5 years. I just want to put an idea out there for further discussion, specifically regarding the inflation and staking incentives.
The Idea
We can remove the social rewards off of the base layer of Hive, or reduce them low enough to make them fairly insignificant, assuming that we already have an application-layer solution for our social content needs. Once we have that option, here is what we can do with the remaining inflated tokens and distribution.
Current distribution is as follows:
Social rewards – 65%
Staking rewards – 15%
Witness rewards – 10%
Development fund – 10%
The potential plan could be:
- Reduce post and curation rewards from the current 65% of the pool to 5%
- Direct 15% of the remaining inflation from the previous total to increase the share of staking rewards to 30% of the previous total
- Inflation reduced to eliminate the remaining balances
These actions will reduce overall inflation by nearly half – 55% of current totals – and give us the following token distribution:
Staking rewards – 55%
Witness rewards – 18%
Development fund – 18%
Social rewards – 9%
(Note that these numbers can be adjusted, such as changing social rewards to 5% and witness/development rewards to 20% each, or social rewards to 10% and staking rewards to 54%, etc.)
With staking rewards taking predominance over social rewards and current overall inflation being reduced to under 4.5% per year, there would be greater incentive to stake HIVE or to at least not power it down. This is not a guarantee to flip the current trend, but it does push in the right direction regarding staking incentives alone.
But let’s consider a couple more options to entice investment.
Blockchains such as Tezos and Dash offer annual yields of around 5-6% for staking their tokens. Cosmos rewards over 8% for delegates and validators. The requirements for earning these rewards range from delegating to validators, running “masternodes,” or locking up your tokens for a specific period of time.
Delegating to witnesses on Hive isn’t necessary and it actually runs counter to the premise of validators being “elected” to their positions based on community trust. We also already have staking rewards being constantly distributed. Running a witness node isn’t a prerequisite to earn the rewards either, but that could be an option worth considering.
We do currently have a vesting period of 13 weeks, in that it takes 13 weeks to fully divest your staked tokens, distributed as liquid tokens on an equal per-week basis. We can improve this vesting function on Hive to compete with other platforms.
To keep it simple, let’s look at our current staking distribution. We’ll start with an easy number of 10,000 tokens in the total reward pool to keep the calculations simple.
10,000 (current daily inflation tokens) x 15% (staking share of daily tokens) = 1500 daily tokens for staking distribution
10,000 (daily inflation tokens) x 55% (total pool after reductions) = 5500 total daily tokens for distribution
5500 x 55% (staking share of daily tokens) = 3025 tokens for staking distribution
Going from 1500 to 3025 is almost a 102% increase in staking distribution. Current staking yields on Hive are around 3%. All other things being equal, this would bring the yield to around 6%. That’s a very competitive number.
However, we can further boost the yields for stakeholders by changing a few things:
- Limiting distribution based on minimum vests
- Offering different tiers of staking rewards based on duration/amount of vested tokens
- Adjusting other rewards
- Adjusting inflation
Number 4 is the least desirable option. Having annual inflation is still fairly taboo, even if it’s necessary or prudent for a given period of time. By reducing it to below 5% and keeping the same rate of annual reduction, we will have already lessened token expansion by hundreds of millions over a couple of decades.
Numbers 1 – 3 would each be fine on their own, but a combination of them could maximize the benefits of staking and create the highest degree of incentives that would both mitigate large outflows and likely increase inflows.
Going off of our new potential distribution scheme, an example adjustment could be:
Staking rewards – 70%
Witness rewards – 15%
Development fund – 10%
Social rewards – 5%
This change alone would bring the potential yields for staking around 7 – 8% per year, making Hive one of the top chains for staking yield. While witness token distribution would be reduced, the rewards are paid out in the form of vests/HP anyway, so witnesses would still benefit from being staked.
Adding a minimum to vested tokens in order to earn staking rewards could further increase yields for those who remain or become staked at the minimum threshold. For example, setting a minimum of 10 vests (roughly 5000 HIVE Power today) in order to earn staking rewards would eliminate the distribution of tokens to accounts under the threshold and could entice users to purchase more HIVE to meet that threshold – consequently adding upward pressure on demand and prices.
Having tiered distribution is an option as well. An account that stakes 1000 vests could earn a higher yield than one that stakes 10 vests. Accounts that have staked for a period of 90 or 180 days could earn a higher yield than those staked for only 10 or 30 days.
Part of the change in vesting/staking would be to reduce the general lock-up period from 13 weeks to possibly 8 or 4 weeks. As powering down is initiated, the amount of vests being powered down per week would not be counted for rewards distribution. If you have 100 vests and initiate a full power down over a 4-week period, then your vested stake for distribution purposes would immediately be reduced to 75 vests for the first week, then drop to ~50 for the second, and so on.
These are points of discussion and debate that should be had and the decisions should be based on the success of existing platforms that have adopted the concepts. I encourage everyone to leave their input on the chain and have an open discussion about it.
Important things to ponder...
Is it too risky to invest in a staking platform where the rewards solely come from an inflation pool?
Could we implement fees for new Hive functions and services that would be distributed to stakeholders?
What kind of second-layer functions and services could take advantage of and reward staking on Hive?
We still need better documentation, APIs, and developer tools and should get this funded and done ASAP.
Note: Any mathematical errors in this post are not my fault. Quoted yields are based on latest searchable information at the time of this post.
It is a very good question and everyone is constantly trying to answer it.
To me the answer is simple.
A huge SEO funnel was created. Getting ad revenue from that is one clear solution and injecting that back into the users further incentivizing being vested and engaging.
I really do feel I could solve the issues here and promote HIVE but a lot of people have sort of been tossed to the side and ignored.
Without the additional revenue streams everyone is playing a hot potato game or in some ways HIVE becomes a cleverly disguised ponzi. A tough description but I really do think I could fix the issues with HIVE but it would take a lot of money to build a front end that would be more cohesive and allow video.....etc. Hosting expense is the hurdle but by gamifying the ability to unlock video upload capibilities or leveraging other hosting like DTube did with their YouTube upload option that saves a lot of space.
I think everyone wants to come up with some way to do what Richard Hart did with HEX where it becomes some mechanism to get everyone to chase the carrot with little to no actual work.
That was cleverly marketed to his existing following and he did a lot of interviews with other content creators.
There is no reason HIVE can't be a better mouse trap than HEX.
Honestly there are too many cooks in the kitchen and unfortunately the cooks are very technical but lack the ability to market to "normal" people. Also those in power are typically extracting enough out of the system to just keep doing what is going on.
I hate to say it but I wouldn't be surprised if in the next 6 months some group of guys break off and fork / rebrand HIVE again in another attempt to get the system right. No one can agree on it because no one owns it and has the ability to command subordinates to work towards the same goal. Everyone is going to go in every direction.
I thought this post had 1 comment as it is shown lol.
Yeah agreed with most what you said in this post. Now just within crypto space there are many ways to earn passive income, compared to those, hive with long locking time, and high inflation, isn’t competitive at all and ofc can hardly attract investors.
Social Media itself is flawed, there will be next gen knowledge economy coming one day, instead of the popular attention economy nowadays anyway, and for attention economy itself, nobody can beat Youtube, or Instagram UI etc , we don’t resources, so no need to try.
And these.
I think it's hilarious that in a world where many, if not most, of us are so sick and tired of seeing the bs on social media, we are expecting people to come to a place where they may potentially see even shittier things they despise on the mainstream.
Even for entertainment, there are plenty of funny things on the net already.
And it seems like a lot of people here haven't figured that Hive doesn't compete with existing giants. Not even by a long shot in its current form.
Right now I do not think following the steem model of chasing the reward pool system is needed. Prior to any change to reward pool function, or token function, the witness selection and retention system must be resolved. We need to finalize the foundation layer for Hive first. We have our first fork done with no messing with the financial side of Hive. We need to get the protection of the chain down as solid as can be next.
The changing of the reward pool system, token financial system, should be something that is only done at most once a year, not every hard fork like on steem. I am not an investor, but I see little reason for anyone to invest in a system that may change every two months.
How often does the financial system of bitcoin change? We talk about a trustless system and decentralized system, right now there is no, to very little, talk about the stability of the system. We have another 5 months or so to go till the one year anniversary. I would like to see the foundation layer of Hive firmly planted before we go tail chasing after the reward/financial system.
HF 24 was the fork to complete the separation from steem, now is the time to show the investment community that we are standing on our own, that we have a firm and truly solid foundation.
What I have outlined in this post would actually stabilize the rewards/financials of Hive, rather than constantly tweaking the social elements in order to try to fix what is constantly seen as "broken." By removing the social rewards on the main chain and allowing those interfaces to run with their own tokens and social mechanics that can shift their focus to social media functions and features, those interfaces can excel and can try their own systems to see what works best for them based on their own business goals.
Once that option is available for the interface owners, then we can shore up the underlying chain, financial products, and incentives for investing and staking. We can stabilize the economics and mechanics based on actual investment and proven financial demands in the greater crypto community. We can make the base token and chain competitive in the industry while also having the social media, gaming, and commerce apps on the application layer. We won't need to make adjustments for social needs that don't necessarily work for gaming. We won't need to make adjustments for gaming needs that don't necessarily work for everyday commerce. It would allow us to become more stable, predictable, and profitable - which is what investors crave.
Not often at all...because Bitcoin doesn't do what Hive does. It doesn't pretend to be a social media chain with a complex token system. It doesn't pretend to "get you paid" by submitting social content and seeking popular/stake-weighted supporters who are themselves seeking a return based on their activity. And that's my point.
Investing in Bitcoin is straightforward. Profits pretty much rely on capital appreciation. We don't have that here. Our overall ROI is negative. Steem's overall ROI is negative. Outside of the general FOMO of 2017-2018 - which was basically a market-wide phenomenon - this experiment has proven to be an unmitigated disaster for investors. It's great for bloggers who don't need to invest much at all, but not so much for the monied interests that allow for the "getting paid" part to work.
I'm old enough to remember a time when the goal was to simplify things. We talked about K.I.S.S. - even joked about it. But it never happened, despite it being what we actually need. If we don't figure that out and start moving toward something that can attract and retain both users and investors, then we're just going to continue down the same path.
But I just want to remind you that this post is meant to be an idea for what we can do with staking and inflation once the social rewards are already removed or reduced and a second-layer solution already exists. If we can't or aren't willing to do that, then this won't matter much.
Essentially, this is just the idea/planning phase before it can be drafted/coded. So input is welcome and I thank you for yours.
I wouldn’t mind if it went 30 social 30 staking to make it more attractive but honestly I don’t think it’s really a problem just the adoption curve
I’d say let’s first get RC pools and SMTs and then we can decide if inflation redistribution is needed
I think the consumer over on Twitch gets 100 "bits" to dish out to creators for $1.40. These popular platforms also take a cut of a creators earnings from donations or tips, and ad revenue. Roughly 50 percent at times.
Rather than mucking around with these percentages, why not simply show the consumers and creators this platform offers them all a better deal? Use top earners as an example. They rake in the dough, only see half and the consumer's money isn't even worth full value, so they're getting ripped off, heavily, especially when you add it all up. This place removes that middleman. Instead, everyone is the middleman and indirectly takes the cut that often only enriches a few. This platform could destroy the current going rate, making anyone using those methods look foolish. There's hundreds of millions exchanging hands every year. We have all the infrastructure in place but we can't figure out to attract even a few of those millions? The consumer. They outnumber the investor by a huge margin, so why not, after four years, at least make an attempt to appeal to that crowd?
This seems like an idea better suited for a fork of Hive in my humble opinion.
Why?
Social rewards have been the core function of this chain since leaving PoW. Replacing the core design function with a fundamentally different design would be a switch from everything we've been as a community and is the abandonment of a strong working project.
What makes you think this is a strong working project?
And why do you think moving social rewards predominantly to the application layer is an "abandonment" of that? Did you not run a tokenized second layer interface? Is LEO Finance not successfully doing that now?
If we had smart contracts and SMTs, this could more easily be done. Nothing is abandoned. Then we can focus our energy on development where we actually have experience instead of on social media where we clearly have none.
The near 10,000 DAU and 1M+ transactions/24hours is a good indicator of a strong working project to me. Why do you think it's not?
The abandonment is that of issuing rewards via social consensus. If you remove the layer 1 rewards then you are insinuating that it was a failed attempt. Why would that inspire any hope for layer 2 tokens?
If I'm being honest then I would say that attempts to remove social rewards are an attempt at removing the meritocracy of Hive. Instead of doing what everyone has done for the last 4 years of maintaining, or even growing, your account by the merits of interacting on Hive staking rewards activists want to just be paid because they hold the token.
Too bad the market disagrees with you.
LEO is a good example how second layer works and can surpass the native token.
The global reward pool is the core of reward disagreement and behaviours that harm the network.
LEO, while an amazing project, has not surpassed Hive yet nor will they likely do that. Hive has a $43m market cap while LEO only comes in around $1m. If LEO continues to grow it will force growth on Hive at the same time maintaining Hive's marketcap advantage.
The reason it's the core of disagreement is because it's the token people actually want. Those same behaviors will exist within subgroups when those communities have enough market participants to seek to hold their position as we see on the base chain. That being said disagreement is good and is a sign people are interested enough to stand for something.
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The first point is not accurate. After the exchanges were done powering down the amount of hive that they had vested after the Justing Sun fiasco the gross amount vested has increased slightly over time.
What this chart tells me is that in general the stakeholders are not selling their stake. What is happening is that most of the tokens issued via inflation (or via HBD conversions) are being sold on the market as evidenced by the price decline and the amount of hive on exchanges.
I think that before making any proposals to change the token economics we should ask two questions:
Is it the existence (or the size) of the reward pool or is it something else? Is the culprit the 13 week divesting period? Is it just lack of marketing? How can we get answers to these and other questions that are not biased by our own preconceived ideas?
One thing is clear to me...the price action is evidence that something is not right with hive...I am just not convinced that the problem is the social layer.
All that chart shows is that a lot of large and/or mostly dormant accounts aren’t divesting, so their accumulated vests slowly tick upward. The stats that track movement shows regular outflow that outpaces inflow.
After the colluding exchanges finished their power downs, we’re still in net negative vesting week over week.
HIVE is also leaving individual accounts and heading out to exchanges at a greater amount than the reverse, further corroborating the lack of vesting interest.
The first chart below is STEEM, which shows a 4.5-year trend of losing against BTC and a return to lows in Dollar terms. The same trend continues with HIVE in the second chart, once again corroborating a lack of desire to purchase and stake on our proof-of-stake platform. This is problematic.
Given the complete lack of growth and retention on the social media front after 4.5 years, I’m willing to say that being known as a social media blockchain isn’t attracting social media users or crypto investors. There may be many reasons for that, but none of them preclude moving that to the application layer like any other project.
But as I said in the post, this was mostly about what we could do with staking and inflation after we’ve already established that second layer solution for social rewards (or “SMTs”).
It's clear that there is very little interest in staking in the platform. What the comparison between vesting and divesting show is that in general the users of the network are more interested in treating Hive as a faucet. I am not convinced that removing the social layer will change that behaviour. If we do it stakeholders will simply shift from cashing out the curation/author rewards to cashing out their staking rewards.
Now that I say it out loud it sounds very bleak.
Although if we analyze what happens in the crypto world in general is that people buy into narratives. People buy into bitcoin because they believe the narrative that the limited supply makes it a store of value...for instance. So what is our narrative and what do we do to make sure that people that believe it want to participate?
Saying that we are the blockchain for web 3.0 (as it reads on the hive.io website) is not enough. What does that even mean to regular folks? Not much if you ask me. Even the steem.com site has more punch to it (it's a bunch of lies but nonetheless).
One thing is true...we can't sit around and wait.
Your level lowered and you are now a Dolphin!
Nope. I think #4 is the most important, but that's only true long term. The ability to rent out RCs for cash is why I invest in hive.
Right now RCs are abundant, but my bet is that more dapps and more users will use hive. So staking is okay, it doesn't need extra rewards, but I agree with the rest of the post.
The experiment of the social layer definitely failed. We need fragmented communities with their own reward systems, otherwise it's constant disagreement.