Yes, we are all excited about the Smart Media Tokens, right? Well, there are a few things you might want to consider before you go ballistic.
In the video about the Smart Media Tokens, @Ned tells us to read the whitepaper and share our comments on whether or not it is feasible.
The whitepaper is without doubt the most holistic crypto-currency white paper ever written, but we do have a few concerns and we will highlight then in this report.
Everyone only seen to be hyping the Smart Media Tokens, yet no one is taking time to consider the threats that could challenge it nor the potential challenges that could arise during its implementation.
This report is our response to @Ned's request for feedback and we hope the @Steemit team and community will find it useful.
Innovation is impressive but implementation could be messy.
The Smart Media Tokens
Instead all rosy stuff, another reality could be;
- Law suits from investors who invest into coins which later become undervalued.
- Bugs due to the fact that Steem developers hardly contribute to the software. Would you believe that @fabien is the only developer who is actively working on Steem JS - the very API which allows every other Steem developer out there to develop Steem applications?
- Unnoticed bugs will lead to millionaire hack exploits.
- The ease of creation, anonymity and trade will attract scam coins which mimic other Smart Media Token coins. The Numerical Asset Identifier directory system will not be fast enough to identify and assign the "BlackListed" state to scam coins.
- Legal crack downs could follow when abuse of the protocol become eminent.
- Deflation of Steem as a failure of the system draws people to other Blockchain networks.
Talk about waking up the Titans
What do you think Bitcoin is up to? Where did Ethereum, mighty NEO, Lisk and formidable EOS go, huh? Let us brief you about some of the things these Titans are up to which could post as a threat to the Smart Media Tokens initiative.
Bitcoin
Everyone keeps on saying Bitcoin transactions are slow and costly, that may be true but no one knows Blockchain technology better than Bitcoins - the very creator of Blockchain technology and Crypto-currency.
After SegWit has been deeply activated on Bitcoins, it will unleash the Lighting Network and lay to waste several alt-coins by scaling up to support billions of transactions in seconds for FREE.
Damn, and that is only the beginning. The lightning Network will allow Bitcoins to become a platform where we can code up DApps - yes, talk about Bitcoin DApps like on Ethereum and EOS yet they will be INSTANT and FREE.
Ethereum
Like with Bitcoins, Ethereum fees are high and transactions are not instant - but not for long. There are several infrastructures in development for Ethereum that will soon make extremely fast and real cheap, one of these protocols is Raiden Network.
Lisk
Lisk is a Blockchain platform to build apps. Each apps is built on a sidechain - keeping the MainNet light, fast and secure.
Lisk is written in Javascript and all applications would be in Javascript - yes Lisk is a complete Javascript Blockchain platform for building DApps like Steemit, and anything else including Smart Media Tokens.
NEO
Of all the crypto-currencies and Blockchain platforms out there, the most undervalued is NEO(formerly AntShare). NEO is built as a holistic Blockchain framework and platform for a Blockchain powered civilization.
NEO has identity, storage, tokens generation, smart contracts, privacy, cloud computing and trade system inbuilt. NEO was designed to support every single programming languages available and is implemented as a public project with the government as a stake holder - unlike other crypto-currencies where the government is sworn the enemy.
When China gets over its fears and NEO returns, there will not be enough space for any other crypto-currency. If you are a fan of the Matrix, then you should already know what NEO stands for.
EOS
EOS is designed to be a Blockchain platform with the same fee-less protocol that Smart Media Tokens promises. What do you think will have when someone codes a Content Management System(CMS) on EOS - an EOS powered Wordpress?
We would simply have an EOS version of Steem and the Smart Media Tokens. What will happen next is that people will move to the EOS-powered Content Management System as publishing there would make your content uncensorable.
Tao Chain and Maid Safe
Tao Chain and Maid Safe are also two formidable Blockchain experiment, their only short comings is the fact that they are developed by voluntary developers which has slowed down their development.
Honest review of potential pitfalls
Weakening Steem tokens
@jerrybanfield rightly pointed out that the ONLY advantage Steem has over the other Blockchain networks which is why only Steem can implement the Smart Media Tokens is the fact that transactions on Steem are instant and free.
However as we have seen above, speed and fees will soon become a commodity among the exciting Blockchain networks, yet Steem will gradually slow down.
The more people begin to use push-and-dump bots(which will be the upvoting bot version for SMTs) to trade Steem for countless vanity trades of Smart Media Tokens, there would be countless trillions of Steem transactions per second and that will definitely slow down Steem.
It is for this very reason that Bitcoin implemented the miner fee and also why Ethereum uses the gas system with the intention that charging for transactions will reduce vanity transactions.
With no transaction fee on Steem, vanity transactions would be the norm as new Smart Media Tokens use vanity transaction volumes to create the impression that there is a high demand for their coins. Countless vanity trading bots and services will be developed to push and dump new Smart Media Tokens - just like we already have upvoting bots.
Exchange fees are mythical
It is true that there are no direct exchange fees on Steem, but it is only true to an extend. Try to use @BlockTrades to convert your Steem Dollars or Steem to Bitcoin and suddenly the advantage goes away.
There are no transaction fees for Steem tokens, however indirect exchange fees will still exist whether on the internal market or by third-party exchanges.
Exchange fees between two different Smart Media tokens will be very high as there is no insurance against their value, while exchange from Smart Media Tokens to Steem will be even higher due to the high demand for Steem.
Exchange fees from Smart Media Tokens to other crypto-currencies and fiat currency will be the highest.
Despite all the complicated market price protocols, eventually the hierarchic value structure will be something like;
- fiat and main stream crypto-currencies such as Bitcoin and Ether will sit at the top since they are the final real world spendable currencies,
- Steem tokens which is now the medium of exchange between the Smart Media Tokens and the fiat or main Stream crypto-currencies will be stuck in the middle - due to a drag from low value coins,
- while the Smart Media tokens will sit in the bottom due to their ease of creation and lack of scarcity; there is no way a Smart Media Token will outvalue Steem since it is built and powered by Steem
Too much coins for feasibility
Every crypto-currency insider knows that the PRIMARY factor that drives up the prices of crypto-currencies is SCARCITY - not features or superiority.
If we simply open the system to allow just about anyone who can click a button to create a coin, then soon there would be more coins than people alive. In that case, the coins will be worthless and maintenance cost will increase.
Crypto-currencies do not die, so even after the reason they were created for is over they will still exist. For this reason we need to make sure that they are only created when necessarily;
- music artists will create coins for every song,
- artists for every art,
- bloggers for every blog,
- car makers for every line of car,
- smart phone makers for every brand of phones,
- event organizers for every single event,
- shops for every single local branch,
- this list will go on and on and on
What will happen? There would be so many coins that the value of coins will go down eventually. Investors will begin to sue and governments will begin to crack down.
Unity is strength; by franchising the value of Steem to Smart Media Tokens, the value will go up while the system is still new and people are still excited about the idea and then bust when the system become congested with too much tokens and people are just tired of it.
What do we suggest?
Stick to what we do best
It would be great to create a system which will publishers to turn their blogs into Steemit-like where users earn money from curation and comments. However, the problem is the type of currency that will be earned.
With every blog having a different token, the would be little value for tokens earned. Steemit is already going well with Steem Tokens, turning it into a platform for launching ICO only takes us way off.
Why not first open up Steemit - instead of opening up Steem? How about making Steem more easy for existing website to adopt - instead of getting them to create their own coins?
It would be easier to create a Disqus like embedded comment system which will be powered directly by Steemit with SteemConnect login.
The system will alow both blog authors to earn money via the upvote system. Everyone would want to earn Steem tokens - which will definitely be of more value than any Smart Media Token created by anyone or any website/blog.
Institutionalize Smart Media Tokens
Steemit Inc is a company and companies are not well suited for such endeavors. Companies tend to raise too much question about ownership, incentives and motivation, management practices and more.
Obviously if the Smart Media Tokens are truly decentralized crypto-currencies, then they should be open source - not registered under trademark and copyright laws to Steemit Inc.
In that case, then it would be more profitable to buy shares/stocks in Steemit Inc than to buy Steem tokens. Yes, if Steemit Inc will own the entire Smart Media Tokens system, then they would only turn out to be another privately owned advertising company just like Google Adsense.
It would be better to found an organization to be in-charge of the whole Smart Media Tokens project as well as Steem. Organizations bring about openness and do not "own" technologies.
When established media giants like the Washington Post and Express decide to integrate the Smart Media Tokens, they would not want to interact with the inanimate code on Github or a corporate entity under the name of Steemit Inc.
They would want to cooperate with an organizational institution, that is how the Linux Foundation, Open Mobile and the W3C have helped transform the society.
Provide access in batches
Another recommendation on implementing the Smart Media Tokens would be to threshold access to it - yes limiting who can issue the Smart Media tokens.
This may sound undemocratic, but it would be a smart way to implement the protocol without unleashing a string of worthless coins which will only tarnish the whole system.
@donkeypong wrote a masterpiece about how this new technology could serve as the primary source of income for journalists and online media and end the paywall.
The irony of the success of his story however is that it worked only because in the narrative, they seen to be the only business in town to use the Smart Media Tokens.
If their journalists, editors and readers had all decided to become independent bloggers and create their own tokens then they would not have had anyone to work for them nor will they get any readers.
Again if other businesses in town had also implemented their own tokens, then they would not have gotten any requests from any other business requesting to join their network - as everyone would be busy with their own tokens network.
The only reason why @donkeypong's fictional firm succeeded was because they were the only once doing it and they did it well. That exclusivity which allowed only those who can do it well to get started first is what we mean by the batch access system.
In reality things do not work as nicely as depicted in the fiction.
How will our proposed threshold system work? It would work by giving access to the system to institutions in batches. We group our users into batches and slowly move them unto it.
This will make sure that only the high value users get to create the first initial tokens, and this will cause new batches to join the existing tokens networks instead creating their own new tokens.
By doing this, we will ensure that the best content producers(like @donkeypong's fictional firm) have first joined and launched their own tokens. This will give the system value and attract new member to join already existing networks rather than to launch new coins - just as in the story. This will reduce the need creation of redundant tokens.
If we simple open initial access to just about anyone who can click a button, then there would be too much vanity coins in the system and it will cause the established media platforms to stay away.
Steemit has been around for sometime yet no mainstream celebrity or blog is using it. One of the reasons for this is that they were not invited yet their account names have been taken up.
When a new domain TLD is created, all patented and trademark holders are given a grace period to register their trade marked domain names on the new TLD before it is released to the public.
That way, http://Apple.fuck will still redirect to http://Apple.com . However on Steem it did not happen. @Google, @Twitter, @Facebook, @Obama and even @Jesus.Christ are all gone - yet not to the entities we associate with these names.
Again the Smart Media Tokens whitepaper makes it clear that users will not be allowed to select their own vanity Asset Identifiers for the Smart Media Tokens.
Formal invitation is known as partnerships, and that is how their giants will come.
By implementing a batch access system, we will have time to send out exclusive invitations as partnership requests to Wordpress.org, Blogger.com and FT.com to com try out the Smart Media Tokens.
This is how they will come - when they receive the official partnership request. If we simple dump the code to Github and expect Jezebel.com or Vice.com to jump on-board, it may not happen.
So how do we implement the batch system?
Simple: we use the system that developers use to release new software - alpha release, beta release and public release.
Alpha release will target ONLY existing reputable media blogs and authority blogs! After getting a few hundred of them to sign up to try the alpha - then the world will really give some attention and respect to it.
The Beta release could target casual blogger on platforms such as WordPress and BlogSpot. For WordPress users it could be a plugin while BlogSpot users will use a simple copy and paste JavaScript system - just like Disqus.
We could then work with WordPress and BlogSpot theme and template developers to include the heavy coding in their themes or templates for easy adoption.
The official public release will then follow and be available to every single website out there. By then, the best sites would have already adopted it and created enough value to cause new signup to join their networks instead of creating their own tokens which would only end up as worthless spam coins.
Conclusion
As we have said, we cannot rule out competitions from Bitcoin, Ethereum, NEO, EOS and others who are eagerly adapting to rule the industry. If we are going to develop the Smart Media Tokens, then we will have to do it well.
The batch system will allow us to target a specific group of people at a time and have time to fully meet their demands and customization before we move on to another group.
It will also allow us to get those who matter the most to jump aboard and add credibility to the system even before the public release.