Thoughts on post promotion after two weeks of Steem token burning
Introduction
Pixabay license, source
On May 22, in the comments, @steemcurator01 launched the #burnsteem25 initiative. This isn't the first time that token burning has been tried - and it's not even the first time I've participated in such an initiative. I'm fairly confident, however, that it's the first time an initiative like this has gotten so much organic traction.
I have already written on the topic, here, here, and here. Additionally, I started some "proof of concept" work on a browser extension that offers some visibility to authors who make use of post promotion. That is described here and here.
In one of my posts this week, I introduced a graph showing all burn activity, and @event-horizon asked,
Could you please add more details like total STEEM distributed in that period?
So, this morning, I found a way to do that with PowerBI and these pages from steemdb.io.
In the following sections, I'll show an update to the original graph with current data, then another section putting that into context, and finally - based on this data, I'll argue that curators and developers should start to think of the Steem blockchain as a platform for "visibility as a service" (VAAS) and token burning as the fuel to power that service.
Token burning activity
Here is an update to the first graph, covering just the amounts burned.
In the first row, we see the amount of SP burned as beneficiary rewards each day. Not shown in the graph, it should be remembered that a corresponding number of STEEM and/or SBD are burned at the same time.
The second row shows the same information, broken down by month. In total, the number of SP burned since the launch of #burnsteem25 is 1,424.
The bottom row shows the amount burned in transfers as STEEM (no promotional value) on the left, and the amount burned as SBD transfers on the right. As previously described, SBD transfers can add a post to the /promoted list.
The information comes from here.
Post promotion in context with 90-days of rewards
And here is the newly created chart, showing burned tokens and SBD transfers to @null in the overall context of blockchain rewards:
From top to bottom, the lines are as-follows:
- Top line (powder blue): SP to curators, with the scale on the right hand side. This is running a bit under 30,000 SP per day.
- 2nd line (royal blue): SP to authors. This and all of the remaining lines have the scale on the left axis. Generally in the neighborhood of 13-14K per day.
- 3rd line (navy blue): SBD to authors. Until May 12, this was running around 4,000 per day. After May 12, there is a lot of variability due to the frequently changing print rate.
- The 4th line (orange) represents STEEM to authors. It ran at 0 until May 12, when SBD print rates started fluctuating.
- The 5th line (red) is where we see burned beneficiary rewards, running on the order of 500-800 per day. For this line, I doubled the burned SP as a crude estimate of the corresponding liqid rewards that are also being burned.
- Finally, line 6 (green) represents SBD transfers to @null for post promotion, which is basically still at zero.
Not shown here, it should also be remembered that another 30K or so SP per day is going to witnesses, the @steem.dao, and SP holders (as "interest" for staking).
Interpretation
The first thing we see is that the burned rewards are fairly small (so far, about 1/2% to 1% of all rewards). If our only goal is to raise the price of STEEM/SBD, this makes the scale of the challenge clear. I'm going to argue, however, that raising the price of STEEM should not be the direct goal
Instead of seeing token burning as a supply-side tool, I suggest that we should look at it as a demand-side tool. Authors who burn tokens should do so in order to reach a larger audience of readers and curators. If developers and curators make sure to reward authors with upvotes and visibility for burning tokens, then it becomes a value for value exchange. This gives utility to the token, and if the value of STEEM will go up, it will be driven by that utility.
The second thing I notice is that post promotion - by SBD transfer - is still not being used to any significant extent. I would suggest that developers and curators should focus on driving that number up even more than the burned beneficiary rewards. I suggest this for two reasons: First is because it only burns SBD, which is retiring outstanding debt, for which STEEM is currently serving as collateral. In contrast, burning beneficiary rewards burns an unpredictable mix of SBD, STEEM, and SP.
The second reason I suggest for prioritizing SBD transfers for post promotion is that this is the only conceivable way to switch the blockchain from inflationary to deflationary. If post promotion is properly rewarded with visibility and upvotes, the total amount burned can (in principle) exceed the daily inflation. On the other hand, since beneficiary rewards are always a percentage of inflation, it will never be possible to burn more rewards than daily inflation.
As described here, there are a number of reasons why an author might prefer beneficary burning to SBD transfers, and I think authors who choose to promote their posts this way should also be rewarded by developers and curators. However, for the latter stakeholders, I think this data suggests that the priority should be SBD transfers to @null.
Conclusion
When it comes to burning tokens, people like to think of it as:
"burn tokens" -> "supply goes down and price goes up"
but @danmaruschak and @stef1 have argued that maybe it's not so simple (here, here, and here).
After considering their arguments and reviewing this data, I am of the opinion that it should be more like this:
[ "burn tokens" <-> "platform provides visibility" ] -> [the better the visibility, the more valuable the token]
Basically, in the original spirit of @steemitblog's Post Promotion Announcement, we want token burning to be like buying a service from the blockchain. If the service provides value, more people use it, and that brings value into the ecosystem.
We see a similar dynamic in place with TRX, where burning tokens does seem to be protecting the value of the token, but the burning isn't done haphazardly. Instead, the burning is done as a transaction fee or in exchange for minting USDD tokens, both methods of token burning represent an exchange of value for value.
What are your thoughts? How can the Steem community help to make token burning into fuel for a valuable and sustainable service?
Thank you for your time and attention.
As a general rule, I up-vote comments that demonstrate "proof of reading".
Steve Palmer is an IT professional with three decades of professional experience in data communications and information systems. He holds a bachelor's degree in mathematics, a master's degree in computer science, and a master's degree in information systems and technology management. He has been awarded 3 US patents.