Does the 13 week powerdown period prevent investing in STEEM?
In a recent post @thecryptodrive is proposing to reduce the power down period from 13 weeks to 4. He justifies the proposal in the following way:
The premise behind this change is to reduce the barrier to entry for investment into Steem and PoB SMT's, currently it is daunting for investors to lock-up their capital for 13 weeks.
At first glance the proposed change in the code seems reasonable. But is the premise for it a proven fact or is it just a reflection of the desires of one group of stakeholders?
I think that the problem is framed incorrectly. The real question should be how do we increase the value of the steem network? If reducing the power down period helps to accomplish this then we should go ahead and make the change.
And here lies the crux of the issue...there is no data to backup the assertion. Has a study been done that proves it or a professional poll conducted among a group of investors that mentions the lock-up period as the main barrier to entry?
The answer is no.
First, let's start by looking at lock-up periods in general. From Investopedia:
There are two main uses for lock-up periods, those for hedge funds and those for start-ups/IPO’s.
Hedge fund lock-ups are typically 30-90 days, giving the hedge fund manager time to exit investments without driving prices against their overall portfolio.
For start-ups, or companies looking to go public through an IPO, lock-periods help show that company leadership remains intact and that the business model remains on solid footing.
The Hedge Fund market was valued at 3.53 trillion as of November of 2018 according to 2019-Preqin-Global-Hedge-Fund-Report.
It is worth noting that Withdrawals may also only happen at certain intervals such as quarterly or bi-annually..
So having lock-up periods plus limited withdrawal intervals does not prevent the Hedge Fund market to dwarf the whole crypto space. We can conclude that in general those two characteristics are not obstacles for investors. What investors look for is how much ROI can they obtain from commiting their money into a particular enterprise. The ROI comes from the underlying value of how the funds are allocated on the specific investments.
This brings us back to the question that I consider to be fundamental how do we increase the value of the steem network?. It is my belief that it doesn't matter if we reduce the power down period (or if we remove it at all) if the value of the network does not increase. For this we need adoption through various use cases. I can not presume to know which use cases can help us in this quest.
Also, we probably need to question if having a powerdown schdule is a good fit for STEEM. Maybe it is maybe not.
There are other issues to consider, alot of them were discussed in the post from @thecryptodrive and I encourage you to read them. The main concern that I have is that reducing the powerdown to four weeks (or even worse to only one) is that it can incentivize exchanges to flex their muscles (so to speak) and takeover the main witness positions and dictate the governance of the chain.
To conclude, this proposal if implemented will change the economics of the network and it should not be taken lightly. We need data and not take decisions based on our desires alone. Before commiting to this we need to justify it so probably it would be best if we use the SPS and fund an independent study (preferably by a non-steem entity to eliminate bias).
Good points!
I think it's important to differentiate investing in Steem aka buying and powering-up/staking of Steem.
The latter is needed if a person wants to be able to earn passive vesting-inflation, as well as being able to participate in the voting-game, which includes earning of curation rewards. Last but not least, staking is also necessary to participate in the witness-selection/blockchain governance. All of this requires the participant to accept a 13 weeks powerdown timeframe.
Now, the 13 weeks powerdown period is only preventing people from investing, who would only buy Steem if they could stake it with a lower powerdown time. However, I'm betting that the majority of people who have a problem with 13 weeks, will have a problem with 8 weeks, 4 weeks or even 2 weeks.
It's also important to note, that a certain powerdown timeframe requirement is good and necessary. Voting for witnesses for example, should be for those who have skin in the game and not just for exchanges that are using their customers funds to vote (which is happening on EOS). But also from a security perspective, having your "investment" being locked away for 13 weeks (while only 1/13 is available each week) is a great security bonus. Now, I obviously get that this is not for everyone, most people don't have a huge chunk of Steem in their wallet. Which brings me to the point I was making all-along within this subject:
Dynamic Staking Pools & Powerdown Periods
Look, if you want to stake Steem aka power it up and be able to power it down within 3 days, you should be able to do that, but with restrictions. For example you would only earn a fraction of the passive inflation. You wouldn't be able to vote for witnesses or the SPS. And you wouldn't be able to vote for content.
All of these different Steem espects could have their own minimum required staking period. For example: the passive inflation would grow depending on the locked up period of the user. (1 week = 0.1%, 3 years: 5% ~rough example) or voting for witnesses could require a powerdown period of 8 weeks. Voting for content could require a powerdown period of 2 weeks and the earned rewards could require a powerdown of 1 month, to reduce sell-pressure.
I obviously get the point about making Steem not too complicated, but this is the job of interfaces like Steemit.com, Steempeak, Esteem, etc.
If the question is: what is preventing investors for investing in Steem? and what can we improve to change that for the positive?, then the answer isn't just: let's reduce the powerdown period to 4 weeks. Sorry, but the answer to that is far more complex and will most likely require some kind of dynamic system which isn't enforcing one time/rule for everyone.
Instead of higher APR from staking for longer period, what do you think about witness and SPS voting power multiplier?
For example we can stake for 1 week, 2 weeks, 3 weeks, and so on with upper limit.
STEEM staked for 1 week has x1 voting power multiplier for witnesses and SPS
STEEM staked for 2 weeks has x2 voting power multiplier for witnesses and SPS
STEEM staked for 3 weeks has x3 voting power multiplier for witnesses and SPS
up to the upper limit
This will be very simple to implement (at least compared to separate inflation pools or multitiered privileges you propose above and I proposed before on thecryptodrive's post, vastly simpler than Dan Larimer's proposal while solving the same problems) and comes with completely custom stake periods. Power down will need a rework like example below:
All of my thoughts are very practical, so I'm not completely certain which way is the best to introduce the least overhead for Steem/the developers.
Whether we have separate inflation pools or one inflation pool with separate individual staking rewards (2 months = you get 5% of the pie, 6 months = you get 10% of the pie), as long as the end result is that stakeholders will have the ability to decide on how long they want to stake their Steem for, in return for benefits (increased APR, witnes & sps voting rights - maybe even with a multiplier, etc.).
This will result in a far more stable outcome, which can even be marketed in a really good way: Invest in Steem on your own terms, as if we'd go the quick and dirty road of changing the power-down absolutely.
Thank you @therealwolf and as long as I am able to stake my Steem for 13 weeks without anyone being able to withdraw my funds in less time, I'd be okay with people who were also able to take advantage of a shorter power down timeframe via your dynamic power down idea 👍
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I think incentives drive behavior and it really depends on which type of crowd you want to attract. Having a long power down period will likely attract longer-term users/investors. On the other hand, reducing the power down period will invite more short-term speculators.
The ideal scenario will be to have a few lock-up options with different duration. Of course the longer you lock-up the higher the ROI. Loom Network is one such crypto project which is doing this.
Yes, just any bank around the corner would provide literary dozens different options to stake for its customers. And why? Because there's demand for those different options.
The arroganse of blockchain developers who are sure they can go on ignoring peoples needs is astonishing.
Incentives always drives behaviour. Steem didn't have a rush of low-quality spam content by random. Now that we have semi-free downvotes, this is slowly fading away.
But you're very correct in your thoughts that Steem needs to cater towards different types of people: users, developers, entrepreneurs, investors, heavy investors, etc.. Just because Person A thinks the powerdown period is too long, doesn't mean a real investor wouldn't mind locking his stake in even longer for a bigger share of the pie. Steem isn't just going to magically change in 13 weeks. Things take much more time, but obviously people are frustrated when each and everyone has to stake it for the same time.
The current content creators, witnesses, etc. are already selling steem faster than investors are buying. Therefore 13 weeks is currently not a long enough lock up period.
Just my 0.02 steem!
Maybe we should just cut the inflation rate in half so that it equals Bitcoin's (at least before the halvening)
I feel like it needs to be dropped down by a lot. EOS set industry standard to 3 days, and we are wayyyy higher than that.
The "industry standard" has led EOS to be in a position where exchanges can (and have) used their customers funds to have a monopoly of the top witness positions. For this reason Dan Larimer himself is proposing to have multiple staking pools, the longest one being 10 years.
The question annoys me more than anything else. We are asking ourselves if we should greatly change our economics without even testing them out for a single market cycle.
Every time the price of Steem naturally loses value due to massive volatility we're going to try to greatly change the fundamental qualities of the blockchain? It shows a great lack of restraint and patience.
Hello, SPinvest is a steemit investment club that is 100% backed by STEEM POWER.
It offers anyone the chance to earn STEEM POWER rewards without the silly 13 week power down.
Many conflate 'investors' with 'traders'. Anything longer than an instantaneous power down will not attract anyone actively trading crypto. Also, what percentage of day or swing traders would actually power up and use their STEEM power to participate, if they know they will likely sell it in the short term? What about delegations and their cooldowns? Odds are this proposed 'steem investor' wanting a quicker powerdown might want to actually delegate and get a return. Do the powerdowns for delegations also get shortened for the same reason? What would be the consequences of that?
I agree with you @joshman
But do you know you are talking against the wishes of the head of the Chain of Command?
It is something he has been working toward for quite a long time
It’s always important to care more for people who speak quietly because the loud well... we already know their opinion.
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