I joined the STEEM blockchain in August 2016 and after intensely using it for a few months in 2017 I felt I had a good enough understanding of it from an investment perspective to publish some thoughts on it's strengths and weaknesses in the form of a simple SWOT analysis. It turned out that there was a whole lot about the economics of STEEM that I didn't know at that point - I didn't even know about the ninja mined tokens! Let's take a look at what I got right and what I missed...
A SWOT analysis looks at the Strengths, Weaknesses, Opportunities and Threats facing a business project - based on the available information at the time.
Strengths
All of the strengths I recognised were legitimate strengths, but as it turned out they were all undermined seriously by:
- Bid bots.
- Facebook/Google's crypto ad ban.
- Large stakeholders thinking that they had some kind of concrete 'right' to exploit the rewards pool without putting in any proven brain of their own. Many larger token holders openly stated that since the value of their tokens would drop unless they got post payouts, it was right for them to just post garbage posts. They denied that in doing so they devalued the network's public image, post quality and market value. Proof of brain requires proof of brain!.
All of the strengths still exist in potential, but we need to overcome significant hurdles for them to be realised. Maybe the Hive fork and the class action lawsuit against Facebook and Google being run by @jpbliberty will help out.
Weaknesses
The value of SBDs can fluctuate quite wildly when it is intended to remain fixed at being equal to $1USD.
I correctly pointed out that the price of SBDs could fluctuate wildly and since they are intended to be a 'stable coin' that this would bring the system into disrepute and again it would lose value in the public mind. Several times I have suggested just removing SBDs completely - I still think that might be a good idea, though I am open to other alternatives that are designed to truly create a stable coin.
Posts and information can be difficult to locate via the existing interface at steemit.com.
This is still a problem today - several years later! Communities and the better features at steempeak and peakd have helped, but none of the steem/hive powered sites I have used have yet developed a great search tool or really nailed post discoverability.
The financial rules of the system leave the door open to purely financially motivated voting and posting, resulting in an un-natural amount of low quality posts receiving large payouts and traffic/engagement.
Free downvoting has ironically improved this situation a fair amount and is one part of why the community has mostly been sceptical of Justin Sun's insistence that downvoting be removed completely. The inability to regulate payouts is not really something that benefits smaller stakeholders.
Opportunities
Competing cryptocurrencies and social networks are currently lacking the edge that Steemit has, so Steem has a window within which to become the largest cryptocurrency on Earth and to lead the way into an entirely new economic and financial period in Earth's history.
I realised very quickly that the development speed of Steemit inc. was WAY too slow for them to fully capitalise on any kind of 'first mover advantage' as a social networking cryptocoin. I suspect this was due to a combination of lack of experience of running such a team among the people involved and also that they were solving new challenges too.
People are looking for ways to break free of censorship and online control, so truly delivering a reliable and robust technology to meet those needs will make big waves globally - also further accelerating steemit's growth.
For the most part this is still one of Steem's strong points, but with the recent censorship from Justin Sun on steemit.com - it is probably now only a selling point of the HIVE blockchain and not one for STEEM.
Threats
Existing social network operators could copy the idea of having their own cryptocurrency and rewarding their already massive userbases - capitalising on the power of their ability to retain their existing users due to the daunting thought of them having to move their data and relocate to a new site.
This appears to be exactly what Facebook was planning with their Libra coin. They even copied the STEEM logo!
The value of Steem could drop so low that the value added to the system by being paid using and interacting with the site would be minimised.
This happened and to some extent this did occur. However, since the alternative is to use censored, corporate sites that pay nothing - many users continued to find value in STEEM.
The design of the Steemit service might not evolve in an agile enough way, resulting in stagnation.
This absolutely did happen with Steemit.com. However, Steempeak has picked up the slack.
A significant negative shift in just one aspect of Steemit can cause a chain reaction which devalues or removes many of the other strengths of the system - for example, if the currency is greatly devalued or if freedom is limited in some way then the other aspects may be unable to maintain enough excitement in the userbase for them to continue to use the system.
This has occurred imo for STEEM too. Hive is looking to be the main way for the sullied image of STEEM to be recovered at this point, though there are apparently other chains in development too by other development teams that might become the long term 'winner'.
Operators of competing systems may actively use social or financial/economic means to imbalance and derail the system for their own reasons.
This is something I have seen happen with tribe.net years ago and I am sceptical of the intentions of Justin Sun regarding Steem for this and related reasons. Since he has been censoring dissenting voices, I have to question what his intentions were all long - he clearly had no interest in understanding the culture of STEEM and helping it evolve in it's own organic way.
Is it possible for a competing group with large finances to ruin the steemit project due to it's dependence on Steem - using purely financial mechanisms?
It sure looks that way!
Will Steemit become such an influential platform in the future that the world's wealthiest people will be buying huge amounts of steem power to attempt to shape the thinking of steemit users to their preference - as they have essentially done with the mainstream media already? How would this hurt or benefit other users?
What do you think? ;)
At some point I might come back and create a SWOT analysis for hive too - let me know in the comments if that's something you'd like to read.
Wishing you well,
Ura Soul
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