The following reply is copied from my comment on another post.
There is some sort of myth that witness pay is a handout that serves only to enrich witnesses. Perhaps that has been the case in other coins but it is absolutely and utterly false in the case of Steem. Those funds are used to support extremely valuable and important development and community initiatives.
In my case I'm currently running a deficit of about $1200/week continuing to fund these initiatives above and beyond the entire $800/week I'm getting from witness power down (yes I am in the process of rationalizing the budget, but I also don't want to cut off good projects abruptly). My time is volunteered and nodes are paid for out of my own pocket. In other cases there are witnesses who have left their regular jobs and gone full time on Steem-related work, supported in part or whole (though the latter is getting harder by the week) by witness pay. These witnesses are developing and supporting services that you may very well use every single day.
Secondarily, hosting is only a small part of the core job of a top 19 witness in Steem. Witnesses also have very important responsibilities in evaluating updates and deciding whether they are in the best interests of the stakeholders, serving as stakeholder representation in offering feedback to developers on direction (in part since developing updates that won't be accepted is foolish), maintaining the SBD peg, planning for scaling of the infrastructure, and other management and leadership roles. Recently there has been discussion of adding more witness parameters aside from the SBD peg. If this occurs, then the responsibilities of witnesses in deciding on and maintaining these parameters will increase.
The Steem ecosystem benefits greatly from both the work of the witnesses and the witnesses' use of funding to support decentralized development and community initiatives. Top 19 witnesses have critical decision-making and leadership responsibilities and not only should be compensated accordingly but failing to do so increases security risks since the primary incentive for honesty and diligence on the part of witnesses is the threat of being voted out. If the pay is peanuts, getting voted out becomes a blessing, not a threat.
Cutting witness pay by 7/8 is extremely short-sighted and harmful ... [rest of reply not relevant here]
In addition two factual corrections, and one strong difference of opinion.
Factually: 1) about 34% of daily rewards go to witnesses and miners, not 50% (and it would be 25% if liquidity rewards were turned on); 2) daily reward to a top 19 witness is 1371, not 1500, and it is SP, not STEEM, which means none of it can be used for expenses nor investments in the ecosystem of any kind other than by powering down, something you inexplicably suggest is some sort of sin (and BTW, as a newly-elected witness, the power down is initially tiny; one is required to work as a witness -- and cover expenses -- essentially for free until the accrued vests reach the point of producing a significant value of weekly-power down, which takes months).
As a matter of opinion, I could not disagree any more strongly that there are "many more slots still hogged by witnesses who aren't showing much results for their income". That is absolutely false as I just went through the list and I identified 14 of the 19 who clearly based on my personal knowledge and experience have made and continue to make huge contributions that easily justify the amount of pay based on their skill set and effort level, time and money spending on valuable development efforts, etc. (And that does not mean the other 5 aren't carrying their weight, and from what I've seen they probably are; it means I'm less familiar with the specifics.) Frankly you are slandering the work and character of some very good people by calling it "embezzlement and ficticious jobs" and also demonstrating that you are horribly out of touch with what is actually going on here. What you describe may have happened in Bitshares (I don't know, I wasn't there), but that is another project and you should leave that baggage where you got it. I've seen very little if any of that here.
Smooth, you are one of the rare witnesses, together with the new four witnesses I named in the post, who are actually doing a lot for the network, and providing full transparency. I totally agree that the projects you have been supporting are important and useful, and that these projects should be funded by the community.
What I don't agree with, however, is that witness pay is the right mechanism for that. Witness pay is an old and inadequate artifact inherited from Bitshares' DPoS at the time where there was no alternative way for the network to fund development, marketing and outreach efforts. DPoS, at the core, is exclusively concerned with securing the network, and posits that the blockchain should be validated by a quorum of delegates elected by proof-of-stake as being the most trustworthy and the most unlikely to collude. Optionally said delegates would receive an indemnity from the network to compensate for their cost running a node. But there was no assumptions grounded in game theory that would justify any form of causal link between delegates receiving a compensation and their being trustworhty. Thinking about that objectively, who would trust someone whose trustworthiness would be a function of income?
The reason the larger delegate pay was introduced as a way to pay for developments, marketing etc is entirely orthogonal to trust and to the original role of delegates as required by DPoS / federated consensus. Back then at the time it was introduced in Bitshares, there was no real way for the blockchain to "hire" people, so it was proposed that, since delegates would receive an indemnity for running a node, it would be possible to bump up that indemnity to a more significant sum and use it to hire useful people who could contribute to developing the network. This was a hack. Nothing more than a hack. And a dirty hack by all standards. First, it was actually defeating the security model by making it less important to hire delegates based on trust and integrity, and more important to hire delegates based on technical or marketing skills. Secondly it was completely broken from a practical and economic perspective because since every delegate had to be paid the same amount to avoid a complicated decision process at consensus level, paying people the right salary for the job was near impossible and led to even hackier system with people taking several delegates (hereby weakening further decentralization) and/or foregoing a part of their witness pay etc. Another way this was broken was that there were far fewer delegate slots than contributors to the community, so whereas the most politically apt or largest contributors managed to get one or several delegate positions, smaller or less politically apt but none the less sincere and valuable contributors were entirely left out of the scheme and expected to contribute for free when their peers were being paid by the network. This in turn created some recent in the community, as it always turns out to be the case when introducing money and favoritism in a community of volunteers. The end result was terrible and we all know how things ended. Even paid delegates got a massive dopamine crash when the price went down and their delegate pays ceased being perceived as attractive. By then the volunteering spirit had long been dead.
The mistake Bitshares made was conflating two functions that had no business being conflated: that of trustee in the delegated consensus, and that of employee of the blockchain. A trustee should be voted in based on his/her trustworthiness and integrity. Being trustworthy and acting with integrity should be his/her only function. Because trust and money don't mix well together, a trustee should be a volunteer, and shouldn't receive any significant pay other than a basic indemnity for covering node management costs that should be a fixed sum decided by the network and applied equally to all trustees. Because a trustee is a volunteer, overhead should be kept at the absolute minimum. This trustee is what a delegate in Bitshares should have been, and what a witness in Steem should be. You don't want highly skilled developers for that role. You want very reliable people with a high reputation at stake, and from very different backgrounds so that the chance they would collude is minimal. You want to have organizations as Wikileaks, the FSF, the EFF, some cypherpunks, some activists, some highly trusted people from the Bitcoin community etc. Again, money is totally orthogonal to this role, because real integrity is something that no amount of money in the world will be able to buy. These are the type of people we want to be witnesses in Steem, and if they are the idealist and visionary type that we really expect in that kind of position, they will appreciate the honor and won't care that much about what you give them as a compensation for the tiny job of running a node.
Now for the role of employees of the blockchain, you want to pick people exclusively on the classic hire criteria including their technical skills, past experience, salary expectation etc. And you want to give them the right level of salary based on their market value. Even better, you want to hire them to do specific things, and pay them per project. That wasn't technically easy to achieve back then in Bitshares, but that a totally different story in Steem, because Steem has got an extremely versatile and powerful funding mechanism built in: inflation-powered vote-based funds allocation. So far, in it's very basic current form where people just upvote what they like without the possibility to set clear financial targets, this system has already allowed to finance a large number of projects, including some that you have been instrumental in pushing. This mode of funding has worked suprisingly well, and can easily be improved further by introducing kickstarter kind of features like a minimum funding threshold, multiple funding levels with different levels of achievement, and more flexible time targets.
In other words, unlike in Bitshares, there is absolutely no need in the case of Steem to try to shoe horn hiring and funding into the narrow and very restrictive model of fixed pay delegates, in particular when doing so is actually defeating the security model of DPoS. Just an example: I won't give a name, but among current witnesses, there is one witness who has been found to recklessly game the liquidity reward mechanism and derive very high profits at the expense of the network, which led core developers to removing liquidity incentives altogether. Is that a good example of integrity and trustworthiness? Can we trust this witness not to side with an attacker if this can net him a large profit? I for one would much rather have trusted community members regardless of their skill levels beyond the simple skills required to securely run a node.
So to go back to your case, and to the case of those other witnesses who may be doing some projects on the side, there is absolutely no need and in fact no justification for these projects to be funded from a fixed witness pay or to be connected at all with the function of witness.
Witnesses and hiring + project funding should be entirely separate functions, with the former sticking strictly to the DPoS requirements and voted in by PoS based on the sole criterion of trustworthiness and integrity with minimal indemnity meant to cover the costs of running a node, and the later being funded directly, on a case by case basis, by the community. Since the funds currently allocated to paying fixed gorgeous salaries to 19 witnesses would be reallocated to the reward pool, this wouldn't change the funding level enjoyed by those witnesses who are sincere and honest in their desire of serving the community and furthering the reach of Steem. On the contrary, because all the free riders will be off the tap, I expect funding level of deserving projects to be actually much better, and the overall confidence in Steem to recover promptly which would help the price and further help funding projects.
My real world experience directly observing and interacting with the other witlessness, and being a close and careful (and at least as often as anyone else critical) observer of what is going on with the platform as a whole over the past six months trumps your bogus (and offensive to those who have and continue to pour their heart and soul, and wallets, into building out the Steem ecosystem supported by witness funding) theories about witness pay being 'embezzlement' or 'fake jobs'.
Secondly, the "powerful and versatile" funding mechanism that you claim exists in Steem is totally unsuitable for the task of funding development and initiatives. First of all the system is designed to have the properties of a lottery, already making it unsuitable for any sort of consistent funding less deliberately manipulated. Secondly, as curation guilds have developed with a mission to reward a larger amount of quality original content, the ability of posts to serve as a funding vehicle has been numerically reduced. It may have worked early-on when whales could easily vote large (even if deserved and justified) rewards for development posts, but that isn't the case any more. The only initiative currently able to be consistently funded in this manner is Curie, which self-votes its own daily posts with whale accounts to which it is given access for content curation purposes. Not only is this consuming too-large a portion of the reward pool to be even remotely scaleable or suitable for something not directly tied to rewarding content (if it is suitable in this case, which is questionable) but it is a practice that many (including the head of Curie itself) are not comfortable with and will probably not survive indefinitely even in this case.
It is clear from the erroneous statementa and baseless assumptions you keep making, along with a generally hostile and trollish tone (especially in the OP), that you have some sort of personal vendetta or agenda against the concept of well-paid witness slots and based apparently on that agenda you have made a number of statements and proposals which directly contradict the facts on the ground. Rather than continuing the blindly push the agenda, you should instead learn what is actually going on, which witnesses (hint: nearly all of them, if not all) are actively involved in supporting or directly working on important and expensive initiatives (since you are apparently unaware of at least the 14/19 where this is completely clear and unambiguous) and then, perhaps, your suggestions would appear better informed.
Finally I disagree with you entirely that there is no game theory supporting the trustworthiness high level of qualifications and good performance of witnesses. There absolutely is, but it requires that witnesses be well paid so they compete for the position and self-regulate to avoid being voted out. I've seen personally how the system is working well, the cream is indeed rising to the top, and poorly performing, less qualified, or less-available witnesses have been voted out or voluntarily dropped out. Your proposal, if adopted, would directly damage this mechanism, and in doing so directly damage the operating, governance, and development of the entire Steem platform. Only short-sighted investors would support this in order to keep a little extra money in their own wallets rather than spend it on something that so clearly to me adds tremendous value and safety to the network. You've been on the wrong side of this issue as you have relentlessly, almost blindly, pushed it for months without any consideration for what is or is not actually working.
Smooth, you are overreacting. Calm down, read again my post, and try to be objective. I'm not asking you to concur given your personal position in the matter, but don't jump the gun and start calling me names, all the while ignoring many of the points I took the time to develop. I'm not attacking anyone personally. I'm just pointing the finger at the absurdity of the witness pay system, that essentially consists in handing over half of the budget of the network to a small group of mutually appointed folks to share among themselves and use at their entire discretion, hope that they'll make good use of it, forego all control over the outcome and generally end up with little to no transparency about how the funds have been used, what has been done and who works on what. Even private companies and governments, for all their defaults, are more transparent and accountable than that. Is that the best that blockchain technology can achieve in terms of transparent and decentralized governance? You seem to think so. I beg to differ. Shouldn't that be open to debate?
I'm sorry recursive, but when you refer to "embezzlement and fictitious jobs" you are attacking people. You are the one who needs to be more objective about things.
Frankly I found your original post to be trolling (i.e. abuse) and considered flagging it. That was not based on the content or ideas at all; I upvoted @fyrstikken's post where he also proposed cutting witness pay despite not agreeing on that point. Steem has thus far largely been a platform where people are most often respectful and don't engage in the sort of hostile trolling or name calling that is common elsewhere on the internet, and which is present in your post. Please consider adopting a more respectful tone.
You again repeat your error that it is half the budget, when it is not (it is currently about 1/3). At least please study and understand the system first before proposing changes to it.
Like @recursive said, it's not a good idea to mix witnesses with development. It didn't work very well in Bitshares 0.x. In Bitshares 2.0 witnesses were invented to separate block producers from other workers. The job of the witness is to witness all transactions that users make and record them into a block.
The governance model of Bitshares 2.0 is pretty good. Block producers (witnesses), blockchain parameter adjustment (committee members) and development (workers who are paid by the blockchain) are separated roles. I was a little bit disappointed when it wasn't copied to Steem.
I think this is the meat of the argument here:
And to illustrate the point:
We may be taking for granted that witnesses are honest and acting in integrity and ideology for the site, hence the title. Any witness NOT in accordance with this should be nixed. And I agree that mixing witnesses pay with development may be hazardous for this very reason.
HOWEVER, in @smooth's defense, many of the operations a witness manages in effort to protect the integrity of the site are also the qualities that make them witness-worthy. Meaning, we vote for witnesses because they are doing things like this. A lot of the "witness" functions are simply inseparable from the dev functions, at least at this early point in the game.
But in the end, I agree with @recursive. It may not be a good idea to mix witnesses with development. If witnesses are doing things to progress the platform full time, including donating their own money, perhaps they should be getting paid a lot more than $6,000 a month--but not as witnesses.
The problem is, who has spare time to be a volunteer witness with all of the projects they're running?
Sure, it's an honor. Bla bla bla. But when it comes down to it, if these witnesses are getting nothing for running a node, then that node should be a pretty simple thing to run. Or we're taking the WITNESS for granted. They have a lot of work to do, and they have influence with which to do it. This needs to be rewarded.
I don't particularly care what did or didn't work in Bitshares. what we have here is working here (at least this part of it is). That's what matters to me. As I suggested to @recursive, you should leave your Bitshares baggage there and approach Steem as its own platform with its own strengths and weaknesses, which it is.
This is absolutely incorrect as I noted in my comment. The job of witnesses certainly and inherently includes other functions and while it isn't necessarily inherent that it also include funding of initiatives, development, and personal contributions of time by high qualified individuals, that role is also working well in Steem.
While I do not have personal experience with Bitshares, I do know that Dan has written a few things about his experiences with Bitshares and how things that did not work well there informed his design for Steem. Apparently stakeholder voting on individual funding tasks did not work very well there given apathy, lack-of-expertise, and lack of coherent vision on the part of many stakeholders. By vesting a group of well-qualified, reliable, and trustworthy well-paid witnesses in Steem to personally perform or hire-out/delegate these functions in Steem, these and other well-recognized problems with direct democracy are avoided.
@smooth What initiatives are you running? You haven't reported any project you're doing now so I am curious of them.
Smooth continues to be the largest benefactor to @steemcleaners, still giving thousands a month ($700 this week, which in turn goes to other community members via the steemcleaners reward).
I am also witnessing first hand the effect smooth talks about, of the 'ramp up to powerdown' ability. As much as I would love to be able to solely support my project with my witness pay, despite that every single steem I power down I transfer, it's still such a small amount compared to the whales. I am incredibly thankful that @smooth and @nextgencrypto have been donating so much.
I consider attempting to personalize this discussion to be off topic and inappropriate here, when the discussion should be about the role and performance of witnesses generally. I'm one of, if not the most, accessible witness on steemit.chat every day. I'm happy to discuss or answer any questions there about the initiatives I have supported and/or continue to support both financially and with my time and talents.
I agree witnesses have done a poor job on SBD. The problems are likely contributed to by issues with the design (including some early issues with the now-disabled liquidity rewards which complicated matters), but witnesses still could have done better. Since this issue came to light with Dan's post on supporting the peg, I have been doing my best to try to better understand and improve the situation, but it is a bit of too-little, too-late.
It wasn't really, not from the start. That's why it was set up as a ninamine/fastmine. If they had wanted it to start decentralized they could have been more open about the launch and distributed most of the stake over a much longer period (months or years) instead of a few weeks more or less in secret.
It was intended to start centralized and may eventually become more decentralized as insiders and early miners sell off (and in the case of Steemit, give away) stake. That may have been a good plan, it may have been a bad plan, I can't really say. Either way, whatever you believe, don't thank (or blame) me, it wasn't my plan.