Can Steem Engine go bankrupt?
The last few weeks I have been quite happily playing with all the new tokens and tribes that appear on Steem and Steem Engine. It started with the appearance of PalNET. As I wrote before I invested a portion of my fiat savings to acquire a nice potion of staked PAL. Because of that staked portion of PAL I got a sizeable amount of LEO in the airdrop of SteemLeo. The rewards in LEO were quite high in the first days of that new tribe. With the rewards in LEO I acquired a sizeable staked portion of SPORTS. Point being that I did invest money to buy Steem, converted it into Steemp in Steem Engine and used that to buy PAL. After that, I used the rewards and airdrops to build my stake.
With the rewards in SPORTS I can perhaps grow my SPORTS stake, or perhaps use them to acquire a position in GG or any other new tribe that appears on the scene. Having a basis to build on, the growth of my staked assets is significant. At the moment I have around 30.000 SPORTS staked. The ratio of staked tokens versus rewards in SPORTS seems to be rather unbalanced. Each vote is worth some 4000 SPORTS. Meaning that if I use 10 votes a day, I generate 40000 SPORTS a day. More than the portion I have staked! Each day! At the current rate that is worth around 240 Steem.
To extract some of that value I have of course to convert the SPORTS (or PAL or LEO or GG or, o my God, a new token in my wallet: intrepeneur; where did that one come from??) to Steemp and transfer it to my Steem-wallet. Some of that Steem might be the Steem I put into the systeem to buy my portion of PAL. However, the value in Steem of all Steem Engine tokens I currently poses far outweighs the value of Steem I put into the system.
And I guess that goes for everyone who invested in Steem Engine tokens. And as time goes by, the difference between what I put into the system, and what my assets in the system are worth in Steem wil become larger and larger. Will it ever be possible to extract the full value out of the system?
I have the feeling that as time goes by, the total value of all Steem Engine tokens, expressed as value in Steem, will be larger then the total amount of Steem available. Is that a tenable economic situation? If a sizeble number of Steemians decides to extract there vaue from Steem Engine, the system might collapse. In effect, the classical bankrun.
Of am I, in thinking these things, a typical blockchain newbie, and am I missing some crucial point?
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Well the way I'm pretty sure it would happen is that if you wanted to sell a few hundred PAL let's say, you could get the current value for that, but in these early days, if you sold say 20k PAL, it would crash the price dramatically so by the time you sold PAL number 20k, it would be being bought by a much lower buy order.
So ideally what you'd want to do is hold on to your stake and let the market mature. Maturity is it being less sensitive to bigger and bigger moves. I just bought a little over 300 PAL and the price moved. So it's still super small.
So in short, the technical value you see now, you'd never be able to get out currently. I'm referring to you @partitura specifically because you're considered a whale there, not in general, as I mentioned smaller moves wouldn't have much of an impact.
I've seen the same effect. And you're right, If I were to sell all my PAL now I would drive the price down.
That is of course the normal effect of supply and demand. What is not normal is that in all these Steem Engine tokens more value is generated, expressed in Steem, than there is Steem added to system by buyers of those tokens.
Over time the difference between the generated values inside Steem Engine, expressed in Steem, and the actual Steem added to the system gets larger and larger. And I have no idea what the consequences will be if the difference gets really large (say 10 fold or 100 fold).
Ahh, I see what you're saying. For instance You buy 1000 PAL, then earn another 1000 on the platform. Where does the second 1000 get it's value? I think that as the total supply goes up the price should reflect this by going down to match. Of course it's mixed in with people buying and selling and burning so I think it should find a balance, at least that's how I think it works.
Yes, that is what I meant. As long as people keep buying, selling and burning it'll probably find an equilibrium like you say. But it could go wrong. Or that's what I think with my limited knowledge of economics and blockchain.
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One of better comments in this topic @midlet
Pleasure to read it :)
Piotr
that's a really interest idea. I'm lucky to have staked my pal and gotten some leo which I think is the most viable token at this point. I have a few sportalk and Im happy about that because of the potential for that community if it can tap into the sports subreddits and pilfer users. The rest is happening too fast for me and I'm not really adept in trading. I will just go with the flow for the time being and try to learn how to do it all. Right now I'm feeling some fomo for cheap steem. I work hard in steem and want to collect more but I have no fiat. I have 1200 liquid and I'm wondering if I should power up at these prices or diversify. I only hold steem
Based on my experience one can generate more Steem inside Steem Engine than in Steem itself. The question I pose is whether I will ever be able to extract that value. Probably in small portions, yes. But never the total value. I'll offer no other advice than: choose wisely.
Yea, I need to understand it better to make my choices I suppose. It is definitely interesting times on steem
Hello @partitura. This is an interesting question. My understanding is, that the basic currency of Steem-Engine is backed up by real steem (as you have to load Steem into the system). If prices of other tokens go up there might be virtually more value within the steem-engine, but if it comes to selling only the number of steem that was uploaded into the engine can be retrieved. When every token is exchanged to Steem-pegged (sending its value down to 0) it can never be more than what has initially been uploaded into the system. Until Nixon changed it, the US Federal reserve (Steem-Engine in our case) had the number of dollars (the Tokens in our case) in circulation pegged to the exact amount of gold (steem in our case). Therefore I think Steem-Engine can not go bankrupt.
Wouldn't that mean that the system as a total would never be able to generate more value than is put into it? And as an individual I can only extract value if somebody else is willing to put money/steem into it. Perhaps I'd better start trading bach to Steem sooner than later.
It would take a lot for that to happen. I don't even think it would be possible really. In order to sell your tokens someone has to put steem up. So unless every token became worthless and all the steem that was locked up flowed out of steem-engine it wouldn't fall. At least that is my view on it from what I can tell at the moment.
So the profit someone can make inside Steem Engine comes from someone else buying in and the system as a whole is not generting new value?
Would be the same as eth,tron, and eos and the tokens they issue. It in essence stakes those coins putting less in circulation but I could be wrong.
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hi @bitcoinflood
I also think that only in theory it could happen. Very unlikely that we would ever experience such a run. Especially knowing that most tokens are staked and powering down takes so much time.
Cheers
Piotr
Dear @partitura
Great publication and solid read. I'm sure you're aware that your title is very catchy (good click-bait:)
May I ask you a question? Wouldn't you think that all those new tokens are reason why currently price of STEEM is so low? After all people who are investing in those tokens, usually they are doing so by trading their STEEM and it results with increased selling pressure. Just curious what's your opinion.
What if PALnet (and others) will create more ways of burning tokens (sending to null, the way promoting post does). Would it change anything?
You nailed it. That would surely be possible. But very unlikely to happen.
Yours
Piotr