Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Ned Scott: Steem – The Blockchain-Based Social Media Platform

Episode Date: December 21, 2016

Few crypto projects have gotten as much attention and caused as much controversy as Steem. The blockchain-based social media platform launched early this year and managed to gain real user traction building up a vibrant community of contributors. The Steem token quickly entered bubble territory reaching a market cap of almost $400m and losing 90% of its value since. Steem Co-Founder and CEO Ned Scott joined us to discuss the ambition of the project and its short tumultous history. We also discussed some of the accusations against Steem and its unorthodox launch. Topics covered in this episode: How Steem was launched out of the BitShares community The different components and tokens of the Steem system How Steem rewards content contributors The controversial Steem launch and criticisms of the project Why Steem transitioned from Proof-of-Work to Proof-of-Stake The potential disbalance of power due to the Steem distribution How Steem managed to build a vibrant user community Episode links: Steem Website Steemit.com Why Every Blockchain Needs a Constitution Charlie Shrem Article on Steem Launch The History of Steem Launch in Words of Dan Larimer Bitcoin Talk Thread on Steem Launch Bitcoin Stackexchange: What is Steem? This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/162

This is Epicenter, Episode 162 with guest Ned Scott. This episode of Epicenter is brought you by the Ledger NanoS, the hardware wallet which sets the new standard in security and usability. Get it today at ledger wallet.com and use the offer code Epicenter to get 10% off your order. And by Jax. Jacks is the user-friendly wallet that works across all your devices and handles both Bitcoin and Ether. Go to J-A-A-DoubleX.io and embrace the future of cryptocurrency wallets. Hi, welcome to Epicenter, the show it talks about the technologies, projects, and startups driving decentralization and the global blockchain revolution. My name is Sebastankuju. And my name is Brian Fabian Crane.

We're here today with Ned Scott, he's a co-founder and CEO of Steam It. Now, probably a lot of you guys have heard off Steam It before. Steam It is a project that has realized the vision that we've actually seen a whole bunch of times on the show, at least realized it to a bigger extent than those other projects, which is this idea that people can kind of generate content and have this cryptocurrency that's used to reward content creators. It seems it's gotten a lot of traction with certainly more traction than any of these other platforms, and it's gotten also very high market cap at one point, which has since deflated quite a lot.

And yeah, today we have a net on just to run us through what the vision is, how, Steam It works and how the project has developed. So thanks so much for joining us, Ned. Hey, thanks for having me on, guys. Cool. Well, let's get where I started. Can you tell us how did you become originally involved in the cryptocurrency blockchain space?

And how did that lead you to co-found Steam It? Yeah, it was 2013, beginning of 2013. I recently graduated school where I was studying psychology and economics, really just loved, you know, the science behind behavior. And when I found Bitcoin, it just felt like the perfect match for me because the way I began to understand is that there was this system that was made possible and secured by people's motivations and incentives. I just fell in love with how that worked.

It was like poetry to me. And I quickly asked Bitcoin to be my girlfriend, and I spent every night with her thereafter. And I'm sure you guys have, you know, did something. similar. But, you know, it was, it was just something I was, I was in love with. And I dug my toes into every, you know, a piece of information about the technology and tried to meet as many people as I could. And quickly started thinking about, you know, what else is possible technologically. And I stumbled into a few projects. I started looking at counterparty when he came out. And then I found bit shares. I found Dan Larimer, who I ended up co-founding, steam it with, also with the Ethereum.

I just follow everything I can in the space, and I've just tried to be doing it constantly. And I had another job. I went to work for a family, the Geller family, based out of New York City. And that was great, and I was kind of balancing these things. And then halfway through last year, I approached Dan. I said, Dan, you built Bidshares, which is this decentralized exchange technology. And it's kind of in line with what a lot of the banks are looking for in New York. or at least what the consortiary are selling people,

you know, there's potential there with the consensus mechanism that you've come up with in delegated proof of stake and just with the technology in general, the idea that you have this asset issue, and it's the idea that maybe you can have a pegged instrument on the blockchain. So, you know, I was pretty proficient in all of it, and I started bringing it to firms in New York and just jumping up interest.

Meanwhile, you know, talking with Dan saying, you know, let's figure out what the next mainstream application is. And the conversation turned towards mutual. AIDS societies, which was really the concept of micro-insurance and how can you bring together a group of people on this technology, this blockchain technology, in such a way where they can pool capital, and they can compensate people in specific cases of loss and then make claims all through this blockchain. And it's the question of, can you make things more efficient? Can you provide services to a market in a more efficient way or to a market that wasn't being

served prior? But as we were having these conversations, we quickly, realized that, you know, there would need to be a forum directly built into the blockchain, that all the conversation, all the claims would need to be immutable and be tied to the account. And all the cryptocurrency aspects would need to be tied right in so that you could have auditability of claims. And once you're at that premise where you're talking about putting a forum on a blockchain, trying to figure out how that could be scalable and all that, well, we quickly realized it was going to look like Reddit. And things started to snowball. and we're thinking, okay, we kind of have, you know, a social media platform on blockchain,

and just through some, you know, through some strokes of luck, we were able to come up with some algorithms that reward people subjectively for participating in this cryptocurrency economy. And what that really means is that we came up with the concept of STEAM as a Dow, a decentralized autonomous organization for rewarding content creation. So there's this special algorithm in there that rewards a set amount of tokens every day to people who are creating content and finding good content. And that's one of the true innovations here. The idea that there can be content creation rewarded through a blockchain where people aren't paying directly to read content or access content, it's being paid in a socialized manner through this sort of firehose of tokens and points.

So, you know, essentially, you know, I started a cryptocurrency, got into the 2.0 stuff, the exchange stuff, started thinking about insurance, and then ended up in social media. And here we are, you know, we kind of have the idea in January. We were able to string up a blockchain based on other open source protocols, grapene, and a lot of the tools that were developed in past projects. We were able to string up the blockchain by the end of March and get it launched via a public announcement on Bitcoin Poc, Poc, several, stages later, the steamit.com have been released as the flagship interface into the Steam blockchain. And then finally in July, the Dow kind of turned on and started actually rewarding people for content creation. And it's been a wild ride since we've seen a lot of people come to the platform. There's been more than 100,000 accounts created. There's been more

than 100 applications built on the Steam blockchain. So what that means is there's a lot of entrepreneurs and developers being attracted to this system. And, you know, that's neat. And what it's forced us to do is really come up with a way for changing the way the internet works as a whole. And ultimately, what I see Steam becoming is a new content network for the internet that is censorship resistant and, you know, lacks sort of middlemen that can tell people what they can and can't do with this data.

And that's powerful. Because if you look at institutions like Facebook and Instagram and Twitter that are taking our time and our energy, creativity, and attention, and then monetizing that and turning it into profits for their shareholders, we can now flip that model. And we can allow people to monetize their attention without any sort of middleman and without people giving up the value for all the work that they're doing. There's been quite a few projects in this space that have taken up some of the first. those same ideas. I remember very early on, we did a podcast episode with GEMS, which was a sort of a

WhatsApp type thing, but where it had the same kind of idea that, you know, you would reward people for creating content. You might reward them for seeing ads. And then, of course, let's talk Bitcoin as well, with LTP coin. So this idea has been coming again and again or the URS Network. We did a podcast with them a few months ago. And it's interesting that you guys have seen such traction. Do you have, why do you think that is? Why have you guys seen significant adoption? You know, if we're talking about gems or yours,

you're really talking about tipping and you're talking about micro-pagance. And Steam is very different from that. The rewards in Steam are much more like Bitcoin mining. And the way that, let's say there's 100 new Bitcoin created today for miners. You could say that there's 100 new Bitcoin created today for miners. You could say that there's 100 new steam created a day to pay people who create posts. So really, it's a public competition to get a post most upvoted by the community.

There's a special algorithm in there that distributes the steam according to how well a post does on the blockchain that can give it a day. So it's this very new set of algorithms and token or point issuance that makes this robust and makes it attractive. beyond that, all the content sits directly in the blockchain, which makes it completely censorship-resistant, which means you cannot delete the data from the blockchain, which means, you know, people, you know, if you think about Twitter or Reddit where, you know, every so often there's, oh, they're censoring us, or they deleted so-and-so's account, that really cannot happen in this system. And I think that the other platforms you mentioned don't hit on either of those points.

So let's talk about these algorithms then. I think for most people that listen to this show, they have a pretty good understanding of how mining works, how proof of stake works, other consensus algorithms like proof of authority that we see in consortium-style permission blockchains. Can you explain then how the Steam-It algorithm creates and distributes tokens for people who create content? So SteamIt. Steamat.com is just one web interface, one web application that plugs into the Steam blockchain. And

the algorithms would be the Steam algorithms. And essentially what they're doing is every day they're tallying all the posts and all the stakes, all the stake that went into the votes behind each of the posts. And then it's basically mapping that to the entire

rewards pool. So the rewards pool is just this set of tokens there that the blockchain is ready to distribute and it just maps them together and the post that got the most stake weighted boats behind them received the most rewards, receive the most steam as reward. So the rewards pool is something that is defined by the algorithm? So is it similar to, say, in Bitcoin where you have a mining reward for each block, there is a reward pool that's defined by the algorithm that will get distributed?

Yes, absolutely. In relation to the amount of, say, upvodes or comments or some sort of set of parameters, these tokens will get distributed to those posts. There's essentially, the rules of the algorithm have defined sort of the supply of tokens. And there's a digital scarcity. There's a predictable and set rate of tokens that can be created at any given day. This year, there's 9.5% inflation on Steam. And every year for about the next 20 years, that rate reduces by about 0.5% until it gets to a total effective inflation rate on Steam of 0.95%.

And that inflation is primarily being paid to the content producers. And then a portion of it is being paid to the witnesses who are part of the delegated proof of state consensus and are. securing the network. They're being paid to produce blocks and are essentially, you know, caretakers of the network who can be voted in or voted out at any given time. And when it's familiar with group of states, it's essentially a system of elected block producers by the steam holders, by the stakeholders. Okay, so let's get into the different components then. perhaps a good place to start is who are the participants in Steam? And so you mentioned witnesses.

I'd like you to go into details of what is their role. We have obviously content creators, content producers, content curators, and then perhaps even the different platforms that are plugging into the Steam database and acting as sort of a window to this sort of block explorer, I guess, if you wanted to compare it to Bitcoin. but one interface to the blockchain. Describe all of the different participants and what specific roles they have

within the entire network. Sure, yeah. So let's start with the people who are directly participating with the tokens and are maybe taking a piece of the new token creation. So, yes, you have the witnesses. And the witnesses are block producers.

They're responsible for running full nodes, making sure that all the data is replicated. These people are running. nodes or these groups of people are running nodes that support all of the content that is pushed to the blockchain. So the content is replicated, it's uncensurable because it's being run all around the world. And these people running these witness notes are being paid to do that. And the only way they're really going to fulfill the job and get paid is if they are producing the entire set of data. So that's like being, it's sort of like being a minor in Bitcoin.

except it's an elected position. So there's the top 19 witnesses who are expected. So there's a round of block production. There's 21 slots of blocks in each round. And 19 people who are elected top witnesses are pretty much always producing. And they can be voted in and out. So it's fluid. But there's the top 1915 positions always have one slot in that in that queue of 21.

And then there's another slot for proof of work minors. There's actually a subset of proof of work in the civil. So the miners are competing for that 20th slot, and then there's the backup witness slot, and there can be an infinite number of backup witnesses who are being chosen for that slot depending on how much stake weight is behind their position, essentially. And so there are recurring rounds of block production. So why is there a proof of work and proof of sake? Can you explain that?

Yeah. So the governance and the consensus is realized. on proof of stake, delegated proof of stake. And proof of work is a simple way for people to participate in the network who are minors in other chains. They can obtain tokens and essentially participate that way. It's also a way to anonymously create an account name. You can mine an account name into existence.

This way, no one has to, you know, if you create an account through a web interface, then, you know, someone has your IP, et cetera. but through the mining process, you don't have to spend funds, and you can do it anonymously. So it serves that purpose. So anyway, the next position would be the content author. So anyone can show up to a web interface like Steam, which we'll talk about the interfaces in a second, but anyone can show up and create content.

They can push it through steamit.com. They can push it through the CLI wallet. They can push it through. There's another site called busy.org. And, you know, essentially it's like creating a post on any other social media site. As you do that, then the community comes around. And if they have stuff you like, they outcote you. And then your post is subject to that rewards algorithm.

And at the end of the day, you'll potentially be rewarded with steam tokens with steam tokens. And yeah, there's lots of people doing that. I was just in Hong Kong. And out of the blue, one of the top bloggers on the site said, oh, hey, I heard your in Hong Kong. I'm in Hong Kong, too, and I met up with her mother, and we went out with dumplings and all that. And, you know, this is just, this was, if you think about the crypto world, this was a very unique interaction. This is, you know, someone who never would have been exposed to cryptocurrency before, just some, you know, 22-year-old girl, you know,

who's a travel blogger. And, you know, about four months ago, she got involved with Steam it and has been doing really well on the platform, earning the Steam, you know, has become a cryptocurrency enthusiast from all this and has used Polo and all these other tools that exist in the crypto industry. So it's been really special to see how many different types of people have been attracted to cryptocurrency through this platform. There's another group of stakeholders in the system, and those are the voters. So if you hold steam power, the more steam power you hold, which is just the staking version

of steam, there's only one core token at the center of this platform. there's steam and then there's this staking version of steam, which we're talking about the curators. And if you are staking your steam, you get more voting power. You get more influence over how rewards are paid to different content. So that's one of the value drivers is that people want to have influence over the network. And so they have steam and then they power it up. You can power up or stake your steam instantly. can de-stake it over the course of 13 weeks.

So what that does is it, well, for one, it helps protect against the tax for that rewards out for them. And it also encourages people to be long-term holders. There's a tiny bit of interest in terms of points that are paid to people who are staking. So there's additional incentives there to be a sort of long-term participant. But, yeah, curators are essentially competing to be. ahead of the curve to be smarter than other people to find posts that other people are going to upload because if you if you upload a post before the whole other side of the community upposts it

and you stand to earn more steep from that vote it's sort of like a prediction one yeah so so that's the authors curators witnesses uh yeah then there's the web interfaces and actually there's there's been 100 applications built on the steam blockchain since July, more than 100 now. There's new ones being built all the time. And some of them are quite formidable, I would say, are actually competitors to steam it. But, you know, we actually implore that because the more applications, the more social media websites that are built on this blockchain, the faster the network can grow, and the more robust and redundant the system becomes. So another one is called Busy. You can check that out.

They're in Alpha right now. And there's tons of others that do statistics. You can go to steametools.com. We can see this just massive list of applications. And I have a whole Slackroom filled with more than 100 developers, you know, people who are just interested in building things on this blockchain. So there's this whole contingency of developers and entrepreneurs who are looking to build, you know, the next competitor to discuss

or the next competitor to WordPress. You know, ultimately we see a path forward for turning. in Steam into the content network for the entire internet as a censorship-resistant system with no walls, no barriers to entry at all. You model an application on it, like discuss. Now you can go to every network like the Huffington Post, the New York Times, WordPress blog after WordPress blog, and say, integrate this comment switch. Now, every time you have a post, link that post into Steam and then use the comment section

derived from the Steam blockchain, and now you have access to this entire network of people, and those people have the potential to earn rewards for commenting on your post, and you have the potential for this new revenue stream by linking your content to the Steam blockchain, so it's a win, win, win. So that's the sort of thing we're looking forward to,

is I think today we have a proof of concept and Steam it and some of these other apps, but ultimately the goals are very big to provide a censorship, ship-resistant layer to the entire internet. Let's take a break to talk about the Ledger NanoS, the new flagship hardware wallet by Ledger. I'll pass it over to the Ledger's CTO, Nicola Baca,

who can tell you all about Ledger's security features and SDK. The Ledger NanoS is a personal security device based on a secure element, a screen and button, so that you can verify everything that is done on device and make sure that you are really doing what you wanted to do. Compared to our previous solutions, this device is based on the latest generation secure element, the ST-31 from ST-MICOR. The SC-31 is using a secure armcore, which means that you can have the same ease of development that you would have on a generic microcontroller, but benefit from the security features of a secure element.

Security features include an application firewall at the lowest level that lets you protect applications from each other, other which means that you can load multiple applications on the hardware wallet even post-issurance and you as a developer will be able to leverage these features to load your own application without our authorization and without any kind of authorization from the vendor we will be providing this device with an open SDK that let you do anything you want with this device we provide sample applications for cryptocurrencies different cryptocurrencies so bitcoin etherom We will also provide a Fido Authenticator, and you will be free to add everything you like. For example, you could add some secure messaging, some encrypted chat,

and you'll see that the solution is quite powerful and very easy to develop with. The NanoS sets the new standard in hardware wallet security and usability. You can get yours today at ledgerWallet.com, and when you do, be sure to use the offer code Epicenter to get 10% off your first order. We'd like to thank Ledger for their support of Epicenter. So Steam, it's a very controversial project, right? There's been lots of, lots of criticism, lots of accusations of, you know, wrongdoing, it being a scam and stuff. And, of course, there's positions on both sides.

But one sort of area where there seems to be a lot of focus is on the kind of the launch and how Steamint was created. So can you run us through, you know, when the launch. was and what exactly happened then? Sure. You know, you hear a lot of these criticisms and some of it you have to expect in the crypto space where people have incentives in different places. And what I've noticed is every single Bitcoin person

or cryptocurrency person that I've spoken to or have come across and talked to about the platform ends up getting very, very excited about it. So my personal experience is people who have been, you know, out, you know, wildly critical, wildly critical and outlandish in the way that they make their criticisms are usually, I don't know, it's like they're upset because they didn't get a white glove invitation. And that I find ridiculous. Other times you talk to people, and it's like every other criticism they have contradicts what they said before, and it's very hypocritical.

What we did is we were very careful about the way we launched the token so that it would be, you know, it wouldn't violate any regulations. laws in the United States where we're based, and we're very conscious of the issues with the different regulatory authorities around. So we were very careful to mine the token into existence and not hype it up, not make a big sale out of it. There was no sale. It just was software released on Bitcoin talk. There was essentially a test net that ran for a couple of days. People got exposure to that. You know, people probably spent only a couple thousand dollars in total sort of doing that.

And then there was another full net launched a couple of days later that has become what steam is today. But essentially it was mined into existence over the course of a month. And people who read the code. So on that one, you said there was a test net launch and then sort of full net launch. I was reading a little bit around there. And there were basically people saying that, well, there was two. well, there was a launch that was then aborted and sort of relaunch,

but that wasn't communicated as a test net launch. Well, we had to call it a test net because ultimately there was a stack overflow. And, you know, I wasn't actually participating in this. And I think you guys know Dan, but Dan's our CEO. And, you know, if you were here, you could give you more details. But I can tell you this, that everything that happened in the code is completely auditable. You can go back to GitHub and see exactly what was in the code. You can see the exact bug.

And ultimately what that did was it gave people two days of additional exposure into what this blockchain was capable. And ultimately, we spent thousands of dollars to figure out how this thing could, you know, operate successfully and gave people more time and more education and insight into what it would become. So honestly, you know, a lot of those criticisms are just, I don't know, they seem ridiculous. So you said Steam it was mined into existence over what time frame was that and what percentage of the, you know, the steamits that exist today were mined in that time? Sure, so Steam, Steam. Steam is the, Steam is the website. Right, right, Steam. Steam is both the blockchain and the native point system token. So actually the software was announced at the very end of March and then through the,

the very end of April. It was being mined. It was pure proof of work. And I would say that our company obtained about half the token supply with the intent of growing the network and decentralizing the network over time, understanding that everything, most of the things that we kicked into this thing were very experimental and were expressed as such. And it was fully our intent, and is our full intent today to decentralize this network and to grow it as best we can. to support the community. So those funds are portioned out for doing exactly. So you mentioned before this aspect of it being locked up, right, when you have it, it's just steam power, right? They get staked and then they get locked up for a certain time.

And it's my understanding is that in beginning this was 104 weeks and this was changed to 13 weeks. Is that right? And what was the logic behind that? Yeah, so when this thing started out, it was very experimental, and we had this idea that it would be very great for the social network to create a system that supported long-term holders. Because it was our experience that most of the people who get involved in cryptocurrency projects or cryptogeal projects want to support it for the long run if it's an innovative idea. And so we came up with a model that would essentially support that, where the steam, the core token, wouldn't be considered a currency at all because it would be. was being hyperinflated, but rather it was a door where people could get into the system and then begin to stake and get voting power through that and get voting influence in the network. Ultimately, that ended up being very, very experimental and not ideal in the community's eyes.

And they had asked us and began to rally around the idea that Steam should reflect more of the properties of some of the other crypto tokens out there in terms of the inflation rate. So it was last week that a heart fork went through where all the witnesses upgraded actually well in advance, all the backup witnesses, or majority of the backup witnesses upgraded, to basically patch in a version of the software that took the inflation rate from being very high on steam to being very low and narrowing over time. So this steam can actually compete as a viable currency. So this is something that happened last week only, that it went from 104 weeks to 13 to 13. So what that means is you can power it up and then you can begin powering down. And essentially each week you get an equal distribution until it's fully distributed back into steam. Oh, so you get like a 13th of the coins back every week over 13 weeks?

Yes. And there's no hyperinflation at all. also, you know, people can be in either bucket, steam or steam power. The issue the community had with the other one was that as soon as you move into steam, it's like a hot potato or a melting ice cream, and you just kind of want to get rid of it. And we understood that, you know, I think everyone learned a lot from this experiment. It is an ongoing experiment. And ultimately, I think this is worth a conversation about what is the purpose of blockchain.

We get asked a lot, you know, what is a blockchain? Why is what you guys are doing in the blockchain? Ultimately, what it's really about is consensus and censorship resistance. And delegated proof of state is a consensus model that actually acknowledges and embraces the idea of governance so that a blockchain can be a tool for supporting community interests. And so that's exactly what happened here, is the community's interest was changing the model. And I think the community's interest is also instability. This was a big change, but ultimately the community is going to find value in being stable and not having things change.

Today's magic word is Steam, S-T-E-E-M. Head over to let's start bitcoin.com to sign in, enter the magic word, and claim your part of the listener award. Coming back to the launch, you mentioned that it was mined into existence over the course of a month. Was that sort of a linear way this happened? So like 3% of the supply per day? Or was that some different? Yeah, it was probably very linear. I actually don't mind.

So I can't say exactly what the algorithm was, but it's all there on the blockchain and publicly auditable. Right, because one of the criticism was that, you know, people giving like wrong instructions so that people didn't Nobody actually knew how to mine except the people who actually created the software themselves. So I'm of course curious that, you know, did it sort of have this effect where you have this super quick mine in the beginning? If you had a linear mining over a month, then this might not make such a huge effect. If it's a few days only the people created it can mine.

But if you don't know, then... Right, right. So the real purpose here is to make sure that the system comes into existence in a way that will allow it to be viable and successful in the long run. And that's exactly what we executed on. And as far as the token being, as far as the software being released, it's all there absolutely public and audible. People can read the code and figure out exactly what they want to do with it. But you don't remember how the mining actually took place in the beginning. No, no, of course.

I was, I was thinking of it. I wasn't mining it myself, I suppose. But you're the co-founder of this company and you don't know how it happened. How, what happened? How the mining, what the algorithm was for the mining. Like, how were those coins mined during the first month? They were mined over the course. Was that a linear or some different ways? Sure.

You can quote me on that. I didn't write the algorithm for the mining. With regards to, you mentioned the company has mined about 50% of those coins. how much does the were coins sold off and in what proportion and when and how much does the company very slowly we still have almost all of the tokens that we started with and it's all dedicated

to the advancement of the ecosystem actually right now we're considering non-profit foundation model for you know essentially moving the assets into something where they can be publicly demonstrated in promise to be used and certainly we've already made those assertions in many ways that you know we're using these tokens to develop the ecosystem as a potential promotional sign-up tool to bring people to the platform. So when you say very slowly they

were sold off can you give numbers? Yeah we haven't sold from that account into any exchanges directly, only by a sort of shape-shift method and through other shapeshift type companies. So how much did you guys sell? We can go back and look on the blockchain, but it's probably a couple million. Yeah, I just wanted to ask whether you guys also mined personally, like you or Dan or whether it was only the company that mined. I didn't mind personally.

everything that was mined by people here would have been company property. So regarding the launch, if we go back into those Let's Talk, or sorry, if we go back to those Bitcoin talk posts, the person who was making those initial posts, the reverse flash, do we know who that person is? And does he have a role with Steam it, the company today? Yeah, yeah, of course. That's us. That's, I mean, you can say that's the company. Okay. But is that person identified as like a member of the STEAM team?

Yes. Okay. Regarding rewarding content, I'd like to go into detail about how content creators are rewarded. It, yeah, so could you explain when a content creator makes a post and posts to the website, or through the CLI or through busy.com, please explain how the algorithm figures out the content reward. When we're looking at it, it's unclear, there seems, I mean, perhaps simply because we don't really understand how it works.

There's some things that seem inconsistent. Like we'll have posts with a lot of comments and a lot of upvotes, but zero rewards while others obviously have rewards. So can you go into detail about how that works? So the algorithm, this is where it's very different from other platforms. It uses stake weighted voting. That is used because it prevents civil. If you have civil attacks in a system like this where there's value on the line,

then people can essentially just clean up and take more points just by creating more accounts. That's an attack. So it uses stake weighted voting. And what that means is the more steam power you have, the more influence you have over the rewards that hosts receive. So if something has a handful of oats, put a lot of steam power behind it, then maybe it's getting a larger steam power reward at the end of the day. But if you have lots of oats, not so much steam power behind it, it may be getting less.

There's a few things, you know, we've thought about tweaking here. There's one particular idea that I like a lot, which is the idea of curation guilds. where essentially people can pool their voting power and then share that voting power with people on the system in a way that's more democratic. And that would be one way to increase the fairness across the platform in terms of, and also just increase the wisdom of the crowd. Because the more people you have voting on things, essentially the more accurate you are in finding good stuff or representing more of the community's interests. We one could argue the opposite and say that people who have more stake have more financial interest in voting on things that are essentially more valuable to the community. But I see it going the other way.

And I think that duration guilds are making more democratic could actually be more than you. You mentioned before that the inflation rate currently is 9.5%. So it's kind of the way it works as the steam power holders. they up vote and download content, and they then determine with those up and downwards, how those 9.5% get allocated to content distributor. That's 100% right now. It's 75% of that 9.5% is what's being distributed to both the authors and the curators, and the remainder is going to.

But yes, it's essentially those upboats that are determining where that inflation is allocated towards. Because I also read something about there being an inflation of steam that goes partially to steam powerholders themselves. Sorry, yes. There's a small interest rate, essentially. It's 15% of the total inflation, so you could say 15% of the 9.5% and then it's 10% that's paid to the witnesses. So 75% of the authors and curators, 15% to the people who are staking, and then 10% to the witnesses who are producing.

Okay, so 75% of the new Steam gets created goes to the content producer, 10% to witnesses, and 15% of their stakeholders. Yes. Okay, no, so I was a bit unclear about how the economics works. I mean, I feel like this is a general bit of a concern here for me. I said, you know, I tried to read the white paper a bit. And it is one of the most confusing and hardest to read white papers that I've ever seen. And also long.

So it just seems a super complex system. Now, you know, maybe this is necessary. Maybe not, you know, or, but it's, it's just, it makes it, it makes it hard to understand. I think what exactly is going on. In the beginning, the objectives were so kind of experimental, and there were so many different hypotheses that we wanted to test. And ultimately, I think that we learned more than we would have with the simpler system, but it's really become clear to us now that this thing has sort of moved out of, you know,

being such a, you know, a lesser-known experiment into something. that people are using every day, it's become clear that simplicity is where there's much more value. The community is driving towards that, and they're requesting these features over and over to simplify the system. For instance, now that, you know, there's no hyperinflation, now that the staking period is much shorter, there's not so much tension between those two parts of the system. And there's also, you know, because there's no hyperinflation, steam is kind of like a lot of the other cryptocurrencies that are out there that don't have ridiculous inflation rates. So it's kind of a, you could call it a cryptocurrency.

And the Steam dollar was this sort of complex mechanism that was created to essentially give people a place to go instead of being in Steam and still have a currency. It was essentially it's steam with a smart contract wrapped around it to peg it to the dollar. So people didn't mind holding that, but ultimately it is a complexity in the system. it's a very cool complexity. There were a lot of things learned from that. A socialized, tagged instrument on the blockchain is pretty not cool if we're really big into it. And potentially has uses in other cases outside of a content network.

But ultimately, with Steam sort of being closer to a currency, or at least a token that doesn't have hyperinflation that could be used as a currency, there's less of a need for the Steam dollar. So we're kind of looking at it down, asking, does the community want to consider, continue to be paid out in steam dollars or do they want the system even more simple. Ultimately, these things can be addressed through software upgrades. If there's a potential for simplifying, it can be done. And it's possible that that's what the community wants. So you mentioned earlier, and this is sort of one of the major premises behind Steam,

that it's a decentralized platform that the content is decentralized and that there's sort of this idea. behind it that everyone is, you know, everyone gets to participate in this platform sort of at an equal, as equals. And one of the criticisms that has been addressed is the concentration of stake within a very small number of actors. And since these stakeholders, ultimately, are the sort of voters that will decide whether content does make it to the front page or not in the end. That concentration does present itself as some sort of a vulnerability within this premise of everyone is equal and everyone has a chance to rise to the top. Can you address that in a way that, well, I guess my question is, like, who are these people?

Are they members of the steam at community that have risen to the top through sort of organic means? Or are these mostly concentrated within so the core members that were there at the beginning that were mining the coins or perhaps even steamet employees? Sure. So we talked about the steam it holding that's used to, or it's sort of reserved in your mark for improving the ecosystem. and that is not voting. It doesn't vote. It doesn't influence the content. There are some other accounts, for instance,

there's an account that I control, one that Dan controls. There's accounts held by people who mine the coin early on that have a lot of these tokens. There are people who have come into the system and either earn or, I suppose, purchased more tokens to get a bigger and bigger stake that can point out those examples. But ultimately, I think that most people realize that having a smaller group of people voting and influencing the content hurts the network because it becomes apparent that the sort of algorithm for figuring out what rises to the top and gets rewarded is to, it's not a wisdom of the crowd.

It's not a function of the crowd at that point. And so that's why we talk about solutions like curation guilds. And actually, there have been some really innovative off-chain solutions where basically people have said, okay, you know, guys, let's – so there's a new key structure system here. There's three types of keys. There's the owner key, the active key, and the posting key. The owner key essentially allows you to reset your passwords across all keys. The active key allows you to transfer funds, and the posting key allows you to post or vote content. It's a transaction like anything else, but it's a specific type of transaction.

And so you kind of want to segregate it from your active key, just ultimately provides better security. So what can actually happen that's really cool is you can share your posting key with other people. And that's what's happened. All of these whales have essentially shared their posting keys with people across the platform. People who are in the community chat rooms are now basically taking those posting keys. And then other people are bringing in content and saying, hey, these are really good articles or these are really good articles about XYZ. You could say they're about dog walking or they're about, you know, making great soup or making, you know, a trip to Everest or something like that. And then that group of people is deciding based on, you know, their bylaws, so to speak, what they think should be voted on that will help the community the most.

So you have people outsourcing and basically giving away their voting authority for the benefit of the community. So ultimately, the voters have become many, many people instead of just being the top holders of state. And what is the incentive for those people to whom the keys have been delegated to? Do they have some sort of an incentive to get those keys other than simply a monetary incentive? Well, one, they could want the influence, and they could want to vote specific posts to benefit the network. They could also want to be paid. I know that some of these curation guilds are paying some of these people to do the curation. It's essentially a job.

And so people who are concerned, if you took some early minor who's concerned about the content that's made into the network, it's possibly in their best interest to make sure that there's good curation. And that when people get to the site, it doesn't just look like steam content for something like that, but it has attractive subcommittees. So when they outsource the posting key, they may also be outsourced the. the economic rewards that come from voting. Let's take a short break to talk about Jacks. Jacks is a multi-coin wallet created by the people at the Central.

Now in the past, if he had a whole bunch of cryptocurrencies, it was a pain to handle them. You either had to leave them on an exchange, which was insecure, or you had to have all these different wallets, which was a hassle. Fortunately, now with Jack's, those medieval days of darkness, misery, and suffering are over. Jack supports multiple cryptocurrencies and new ones are being added. But it's not just storing cryptocurrencies you can do with Jacks, but you can also exchange them directly from within side the wallet thanks to their shape-shift integration.

And since there's only one seed, Jax makes it super easy to back up and sync to the other devices. Jax works with Windows, MacOS, Linux, Android, iOS, and has browser extensions for Firefox and Chrome. So go to Jax.io, that's That's J-A-A-W-X.I-O to download the wallet and get started today. We'd like to thank Jax for those supportive Epicenter. I mean, it seems to me like this is a good way to distribute the way that this content is being voted for,

but it doesn't eliminate the issue of concentration of power, because ultimately you have these very important stakeholders that get to decide who are their groups of people that they're going to trust. to curate good content. And so ultimately, it remains the decision on whether, you know, content is good content or not, well, it remains their decision. So, you know, if you have to, like, say, 100 people that are, you know, 1% of the stakeholders, and they get to choose who their sort of content curators are, they also have the ability to withdraw other keys.

Can you address that problem? So let's boil it down. Are you suggesting that the problem is still suboptimal curation? I'm addressing the problem of centralization of power. So people have power proportion to the stake weight, but their stake weight has been basically determined, right, by a very short time where the whole thing was mined into existence, right? where people did not know about it.

It was, well, according to at least many accounts, done in a way that made it very difficult, if not impossible, for most outsiders to actually participate in this mining. So, you know, if the stakes are all coming from there, you know, that makes it whatever else you do afterwards puts it on a dubious footing. A dubious pudding. So it's kind of like if you look at some other news network and they have an editor and they decide what gets posted, it's kind of like that, but better, because it is distributed. It is in the hands of many people.

Can it be better? Yes, it's a sliding scale. But in terms of, you know, people coming in early, there's not an unfairness here. There's still an equal percentage opportunity to earn based on your stake weight. There's a horizontal playing field in terms of percentage opportunity. So I'm still, I still feel like maybe we're still abstracting to the core problem. Right. I think that the problem goes, I mean, to me, it sounds like if one looks at the statement,

you know, then one can see, first of all, a sound idea, right? It's the idea of monetizing content this way of having decentralized kind of social network. or news creation site. And I think those are all sound ideas. And you guys have obviously done some really good work there. And I think especially where a teammate has done great work is in the user experience, which is pretty nice, right? It feels quite a lot like Reddit.

And, you know, of course, Reddit has succeeded there. And it's been a challenge, I think, for a lot of, a lot of these projects to have good user experience, because often bringing in blockchain, bringing in cryptocurrency makes it much harder to have good user experience. So there is, well, you guys did a good job. It's not totally clear to me to an extent

there is a sort of centralization risk through the steamy.com website, you know, if that's kind of like a sort of web wallet. So maybe that's a question to ask as well. But it seems to me where this is more questionable, is actually around that launch and how that happened. And there it's just reading about it, it's very disturbing, to be honest. And to me, it does certainly sound like from reading a variety of accounts on that,

that it was sort of structured in a way to ensure that, you know, you guys would hold a very large portion of the stake. And of course, if afterwards... Brian, it's very clear. The company owns about 45% of the state. The employees here probably have 10% distributed amongst 14 or so people. And after that, it's all in the community. And now you take that 50 or the 45% owned by the company.

It's not being used in the system whatsoever. So it's probably not as bad as people are making it out to be. and it's completely dedicated towards getting better and decentralizing over time. Any object that comes into existence is centralized at its birth moment, and over time, decentralizes. And we are at the very beginning of steam, and over time it will decentralize. So if there are issues with it today, you know, decentralization is a subjective and sliding scale. Hopefully it gets to the point where steam, it doesn't matter.

or Dan and I don't matter. And, you know, that's, could be years away. I don't know. But there's still a lot of growth to be had, a lot of development to be done. And it's fully in our objective to make sure that that happens. Okay, cool. So another thing that, of course, Steve made, why it got a lot of attention was because the price went from, or, you know, went from being totally unknown.

It's a huge market cap of almost 400 million. dollars, at least sort of seemed to be around there on coin market cap, which I don't know, was that maybe number two even at, well, number three, I guess, behind Ethereum, behind ether. And since then it's collapsed quite dramatically, so it's now at about 10% of its peak. What's your view on that? Do you have an explanation for those enormous fluctuations? Yeah, you know, it's the nature of.

of, you know, people finding out about a currency. It happened after the system kind of fully turned on and people actually being rewarded and using that, you know, those tokens to go and pay their rent or buy a washing machine for their mother and do real-world things. And they're like, wow, all I had to do was blog to, you know, get a piece of this cryptocurrency. And confidence, I think, just went through the roof. And that led to whatever happened in the markets, whatever the speculators. you know, did is what happened. And the interesting thing with cryptocurrencies is we've seen this

happened before. We've even seen it happen in Bitcoin. From the end of 2013 to, you know, six months later, you can pretty much overlap these charts dot for dot. And, you know, ultimately, that's not what matters to us. We're not focused on price. We don't care about what's going on in the market. What we care about is growth. We know that if we can build a mainstream application with 10 million and unique visitors per day that we probably already won. And that is what we're driving for. We're improving the user experience. We're making it easier for people to sign up.

We're solving all sorts of problems with crypto security and password management for blockchain and cryptocurrency-based systems. There's a lot of work to be done there. And there's a lot of gamification to do on Steam it. There's a lot of encouragement of third-party apps and making sure that there are viable business models for other applications. So, you know, the community is asking for changes like revenue splits so that someone creates a post and they can say, okay, well, I collaborated on this post with XYC people or this post was hosted on Huffington Post. So the reward should be shared with the author and be shared with the platform and be shared with the referer.

And that sort of thing. So there's all sorts of things yet to be done and that's what we're focused on. And if we do these things, if we grow, if we develop, everything will take care of. and whatever happens in the market is just what happens in the market. So before we wrap up, I'd like to bring it back to the community that has gathered around Steam and the Steam website. So give us your impressions on what has, so, I mean, because as Brian mentioned earlier, we've seen these types of projects before and none of which that have had as much traction as Steam. So what do you think from your perspective is unique about Steam and has made it so that we have thousands of people today using this platform and it's one of the largest cryptocurrencies and it's certainly not the same size as Reddit or some other social network. But comparatively, to other projects we've seen, it's quite successful.

What are your thoughts on that? Well, it's like I said before, there's a special reward. designation here that has not existed on any of these other platforms that you guys have interviewed or seen it's completely new it's the idea of a subjective proof of work where people can contribute to a community by developing projects or writing blog posts and then sharing that with the community and getting rewarded directly it's a really it's a it's a it's a it's a it's and it takes a village kind of model and people are contributing in all sorts of ways you know whether that's buying building tools or providing

valuable information. And then the blockchain itself is designed to reward those contributions through a subjective consensus that there was value there. So it's essentially subjective proof of work that is the new element here that's giving people a reason to get involved. And that is a big driver's group for the program. So just to end on that, so you now have such a community that there have been events being organized as Steam Fest. Can you tell us a bit about Steam Fest and what it is? Who comes there? What happens?

Actually, I have a scarf from the event. Actually, it was in Amsterdam. And the host made these Steam Fest. It was great. There were more than 200 people there. Speakers from the blockchain industry, prolific authors. Neil Strauss was there, author of the game, and Rolling Stone contributor in your type.

contributor. It was a really special event and everyone I met there felt like family. We've all been in our digital silos for the last six months and you see people's usernames and handles and that sort of thing and then you meet them in person and it's it's really it's really special for that sort of thing to happen. I think a lot of good collaborations are going to come out of that and hopefully more events. It's really productive to get together and talk with people about you know what the platform needs. they're completely ears open asking people, what's your input into what we should be doing with the website, with the blockchain, what do you want to see this thing turn into?

And from that standpoint, it's great. So, yeah, so hopefully there'll be a Steam Fest too by some point next year, and we can get even more people there. Okay, cool. Well, Ned, thanks so much for coming on. And we certainly look forward to seeing how both the Steam is. dance team develop and what comes out of this. I mean, there's no question that there's something there, right, in this space and that

this is going to have a very big impact. I think the whole media creation coupled with incentive mechanism and cryptocurrency. And you guys have certainly done important work, I think, in driving this cost forward. So I think it would be great to see where this all leads in the end. Thank you guys. I really appreciate you having us on. We're definitely looking forward to coming on again soon. Cool.

All right. Well, and with that, we're at the end of our show. So EpiCenter is part of the Let's Talk Bitcoin Network. You can find this show and other shows on Let's TalkBitcoin.com. And if you like the show, then please leave us an iTunes review. That helps new people find the show. So thanks so much. We look forward to being back next week.