What is Steemit?
Launched in March and gaining prominence in July, Steemit, a self-described "blockchain-based social media platform", has seen this level of notoriety in just its first few months of operation. To date, it has polarized blockchain experts while winning scores of newcomers to the technology.
The brain-child of Daniel Larimer, founder of BitShares, and Ned Scott, a former financial analyst, Steemit aims to provide a place for individuals to create content, promote the content they believe is good and comment on stories — all while earning money.
But Steemit is more than just a website for earning spare change.
It’s an actual blockchain built on a piece of technology developed by Larimer called Graphene, which allows for the deployment of application-specific blockchains.
Scott, in interview with CoinDesk, explained that the team only had the idea for Steemit back in January and, because of the Graphene framework, they were able to quickly roll the project out.
The rest, like most things in the blockchain space, is a bit difficult to explain...
Translation: It's a pyramid scheme.
Crypto-currencies are pure fiat, just like government legal tender, except they don't have an armed government with a legal market to back them up. They will be exchangeable for real goods and services, until they won't be. The subtext to all this: if you can't explain what you're about in one declarative sentence, you're probably a pyramid scheme.
The Twitter thread above got me thinking about this old post titled, "Storing Paco" [reminder - it's all been said on here already]:
Tyler's metaphor, his pet dog Paco, refers to the fact that savers now have to pay the banks to store their money (Paco) instead of having their money run around and play (generate positive returns). Negative interest on deposits basically transforms cash into gold, implying huge, zombie-army levels of risk, like a survivalist who incurs storage and opportunity costs in order to hoard canned beans and ammo. But the risk doesn't seem to be out there, with healthy profits and positive consumer confidence. So this implies, to Tyler, that there is some barrier to new investment. (He loses me at this point--economic stagnation? wealthy entrepeneurs cashing in their chips?)
Tyler continues: "I liked Paco (more importantly Paco liked me), but I do not enjoy living in a Paco economy. I think of the calm before the storm and wonder how to reconcile the observed calm and the potential for the storm. I do not like the most obvious attempts at reconciliation."
In other words, something really obvious should be happening to explain negative interest rates (which, as a practical matter, are economically impossible) but darned if anybody can find it.
So what is "it?" And I think I've found "it." Every person I talk to is seeing their margins squeezed. Competition is pretty brutal on an inter-connected planet of 7 billion people. This doesn't mean we're all going to die; it just means our profits are going to be ever lower. Add in a constant stream of new money, and quality trends downward and more and more people see their living standards fall, thus driving high-IQ people who want to make a lot of money into value-transference activities like Steemit instead of, say, discovering how to repair damaged neural tissue.
Thus the conundrum for the rich: there really isn't any "next big thing" left out there, and bank deposits are only insured up to $250,000, so they're storing their money in cash equivalent: government bonds. There are a lot of externalities in play as well which I won't go into. But what this also means is there is a lot of over-valued trash and the rich know it, which is why they're stockpiling cash. Note too that they are counting on the current bond issuers (the EU, the US government et al.) still being around to honor their debt obligations. Of course, the issuers are going to do this by pure money-printing but productivity and markets seem to be growing just enough that this is not a problem for the debt holders. Yet.
The system is fragile in that the over-valued trash (like Steemit) must eventually reflect the underlying fundamentals, and the government is borrowing too much. I suspect the situation will flip and the flight to real assets (land, gold, ammo, vodka) will come when it's obvious that the future mean-90 IQ peoples of the US and Europe will not and cannot repay the obligations incurred by mean-100 IQ Americans and Europeans. So good news for my fellow 52-year olds: the system has about 30 more years left in the tank.
Finally, apologies for the delayed posting. I am going to try and follow my friend the Rat-Faced Man's advice and post weekly, even if (when) the quality suffers.