Failure To Grasp Dynamic Effects Is Extremely Common

By User:Wikimol, User:Dschwen - Own work based on images Image:Lorenz system r28 s10 b2-6666.png by User:Wikimol and Image:Lorenz attractor.svg by User:Dschwen, CC BY-SA 3.0, Link

A large number of people have stated their opinions about the upcoming Hard Fork 21 which is, by the way, a done deal. One thing I read today was that the curation window will be shortened to six minutes from the current fifteen and not to just one minute. Good to know.

Back to the topic at hand. Conversations of this nature reveal time and again the fact that estimating dynamic effects is really hard. While anyone can say that a 50/50 split between curators will take money out of the pockets of authors and put it in the pockets of stake holders doing curation, knowledge of what the split is makes it really hard to say how the system will behave when put to the test in production. This is the case because the Steem reward system is made up of several interacting parts that influence each other in various complicated ways. For example, I've heard people say that rewarding curators that much is a bad thing because with 50% curation rewards people can just buy STEEM, power up, set up autovoters, kick back and reap massive rewards. I find this argument funny because making investing in Steem Power lucrative is the very purpose of the 50/50 split. That argument ignores the fact that if people buy STEEM and power up incentivized by the improved ROI of doing so, that will increase the demand for STEEM as well as the fiat value of every author's rewards!

Someone in a conversation about this mentioned that investing a mere $200,000 and setting up autovotes and achieving 100% efficiency at curation (the average would be 50% post HF 21) would enable one to make about $110 per day, which is a living wage in first world country. That argument ignores the fact that earning by setting up auto-votes and kicking back without a thought given to curating won't work for long. Getting that good curation rewards requires timing one's votes carefully. That is not so easy. The profitability of autovoting a certain author's posts at a certain time is in constant flux. If you make really good curation rewards by upvoting someone's posts, some other curator can front run you and take a cut of your rewards. The larger your vote, the more profitable will front running your votes be and the more front runners will you attract, which will limit your profits. What about limiting the size of your vote but upvoting a larger number of posts? That, too, can work only so long as not too many people are not doing the same. Besides, that approach has the effect of spreading upvotes to new authors when curators are in search of something profitable to curate. Because most people will use their Steem Power as if Steem were a tipping platform, that is, curate altruistically at least some of the time, quality will attract more upvotes than trash. Any such posts will act like a nucleus around which ice crystals form in the sense that curators looking for new content to curate will upvote and resteem them in hopes of attracting more curators.

I'm fully aware that there most likely will be dynamic effects that I'm not aware of, some of which will nullify the aforementioned benefits. But I'm guessing the benefits will outweigh the drawbacks.