Thoughts on the Steem Proposal System (SPS)

We have another set of protocols to consider for a possible hard fork of the Steem blockchain. For this potential hard fork, we will be considering the Steem Proposal System (SPS) and the Economic Improvement Proposal (EIP). This post will discuss the former.

Steem Proposal System (SPS)

This proposal has been written by the @blocktrades software development team with funding support from Steemit, Inc. and you can read the history of its development on the @blocktrades account here on Steem.

My general view has not changed since the development project was first announced, when I made this statement:

I’m not sure that this is needed since we already have two different reward pools where “workers” can promote their projects and seek rewards. Users have been doing it for 2.5 years. They can also solicit delegations (which has been done many times) and direct donations. If their projects are valued, people will support them...with their own stake, not socialize the costs.

Since the SPS was to be coded anyway and is now being discussed as a hard fork proposal, these are my thoughts on how it should be funded within the context of Steem protocols, followed by how I think it should ideally be funded.

Funding Via Steem Protocols

If the SPS is funded via blockchain protocols within our inflationary system, then I am in favor of the following:

1 - Eliminate “interest” paid for holding Steem Power.

This so-called “interest” that is paid to stakeholders via inflation to cover the dilution from inflation is nothing more than additional and unnecessary inflation itself. At 15% of the current inflation total, this would be more than what most people are asking for funding the SPS – which has been about 10% of annual inflation. Stakeholders would be much better served with a lower overall inflation percentage year-over-year. So eliminating the “interest” inflation that only partially compensates for inflation dilution anyway, and sending 33% of that (5% of the total) to the funding pool for the SPS would likely better serve stakeholders that seem to mostly be seeking profits via capital appreciation.

2 - Reduce witness rewards for the top-20 witnesses.

With recent changes to how databases can now store Steem blockchain data and the drastically reduced amount of RAM needed to operate nodes, operating costs should become much lower than they currently are, even as the blockchain scales. Due to these reduced costs, reducing the inflation and rewards to these witnesses should yield better outcomes if some of those rewards are redirected to useful development projects.

Our top witnesses should be involved in or supporting useful development projects anyway – or at least participating in the development and testing of new code and ensuring that the existing code remains secure – so they will still have an opportunity to see their account values grow, either directly from SPS funding or through added value to the blockchain and increasing STEEM prices, or both.

If these changes were adopted, current inflation would be changed as follows:

• 75% to authors/curators (no change)
• 15% to SP “interest” (10% interest eliminated, 5% directed to SPS)
• 10% to witnesses (top-20 rewards reduced, directed to SPS)

A total of 10% of annual inflation would be eliminated, bringing the total closer to ~8.5% in the next year.

Author and curation rewards would actually increase as a percentage of the total inflation pool. Depending on how the witness math works out, the new numbers could be closer to 80% for authors/curators, 12% for witnesses, and 8% for the SPS. The total amount of inflated tokens would be reduced, but the value of STEEM would hopefully increase, thereby offsetting any perceived losses.

Ideal SPS Funding

In my opinion, large-scale development projects (which is essentially the reason this system was proposed) should be funded by actual investors and donors. If you don’t have the technical expertise or the funding to develop your own project and nobody is willing to help you with work performed or money invested/donated, then this should be your first and biggest clue that perhaps you’re trying to build something that isn’t wanted or that will fail – or perhaps you’re just not good at pitching your ideas. In either case, the SPS won’t help you succeed and that failure should not come at the expense of investors and the rest of the community.

The SPS, as I mentioned four months ago, is a means of “socializing” the costs of development. What I mean by that is this, which I also wrote four months ago:

When grants of money can be given so easily to developers with little to no risk to any individual voter, chances are that accountability will be lacking for both the fund allocators and the developers. After all, it’s not their money that’s being spent. It’s the same problem we see with government and tax dollars. Are politicians rushing to give their own money to the state projects that they so proudly support with their rhetoric? Of course not. But they’ll certainly use that shared pool of cash that didn’t come out of their bank accounts...and they have no reason to make sure it’s well-spent either.

For three years we have seen rather large amounts of the shared and limited rewards pool going to “developers,” “projects,” and “initiatives” that have mostly produced nothing of value to anyone outside of this blockchain community – and very little value to the people in it. The rewards are carelessly thrown around because nobody has any actual ownership of them. Users and their projects are not vetted before receiving large, repeated upvotes.

In fact, it seems that the less details you have and the less you’re known around here, the bigger your rewards will be for claiming to be working on the next “killer dapp.” I would not expect this to change with further vote-based distribution from the same shared and limited rewards pool allocated by the same stakeholders in the community.

The best way to overcome this problem is to attract professional developers, businesses, and investors that can use the Steem blockchain’s advantageous features relative to most of the rest of the greater crypto community. I am not convinced at all that any funds directed to the SPS via the blockchain’s rewards pool will be allocated well enough to attract such people.

Steem has a peculiar proclivity to completely waste vast amounts of reward pool funds on a large variety of development that is neither necessary nor useful. And just as those rewards have been mostly allocated or otherwise influenced by our larger stakeholders, so too will the funds for this new SPS. Expecting this to change without also getting a change in the stakeholder landscape or the general behavior of users is like waiting for the next Sam Smith album to be great.

It’s just not going to happen.

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Agree? Disagree? Indifferent? Tell me what you think!

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