on the most casual re-reading, as I tried to push myself to read deeper, as I am of course aiming to outdo Steemit in every possible way, I could not help but be struck by how certain concepts now held to be truisms about this platform, as believed by those who are in the upper echelons and inner circle, are completely contradicted by the White Paper.

So, for the edification of these fools, as well as the general education of the rest of us, here is every quote, soction titles for reference, that explains what this platform is supposed to be about.

(The WSB quote to the right refers to this phenomenon of groupthink and cognitive dissonance).

Enjoy!

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Abstract

Steem is the first cryptocurrency that attempts to accurately and transparently reward an unbounded number of individuals who make subjective contributions to its community.

Introduction

In 2014, Reddit hypothesized that its platform would be improved if everyone who contributed to reddit.com by posting stories, adding comments or voting were rewarded with a fair share in Reddit, Inc .

About that one... Without giving decision making power to average users without them needing to run witnesses contradicts this.

The second principle is that all forms of capital are equally valuable. This means that those who contribute their scarce time and attention toward producing and curating content for others are just as valuable as those who contribute their scarce cash. This is the sweat equity principle and is a concept that prior cryptocurrencies have often had trouble providing to more than a few dozen individuals.

And this distribution turns out to be controlled almost entirely by the in-group centred around Steemit, Inc.

The challenge faced by Steem is deriving an algorithm for scoring individual contributions that most community members consider to be a fair assessment of the subjective value of each contribution.

If by community members you mean the authors of this whitepaper and their most adoring sycophant-servants. Since this point is so blatantly ignored, and repeated I will try not to again quote one of this nature again unless it is exceptionally indicative.

Ways to Contribute

STEEM is constantly increasing in supply by 100% per year due to non-SMD incentives. Someone who holds STEEM without converting it to SP is diluted by approximately 0.19% per day. While the rate may appear high, for transactions that take less than 10 days, it is still cheaper than credit card processing fees. Furthermore, the daily token creation is insignificant next to the daily volatility.

Obviously this did not work out well, and a contracting scheme starting at 10% and moving downwards has replaced it.

Steem Power (SP)

In the cryptocurrency space, speculators jump from cryptocurrency to cryptocurrency based mostly on which one is expected to have short-term growth. Steem wants to build a community that is mostly owned and entirely controlled by those with a long-term perspective.

Except that the majority of users are just looking to grab whatever liquid rewards they can get, and cash it out before the rickety machine that is Steemd, or the ongoing attrition of new users that results from such sloppy development procedures and unfriendly attitudes from the most powerful in the platform.

Sustainable Debt to Ownership Ratios

If a token is viewed as ownership in the whole supply of tokens, then a token-convertible-dollar can be viewed as debt. If the debt to ownership ratio gets too high the entire currency can become unstable. Debt conversions can dramatically increase the token supply, which in turn is sold on the market suppressing the price. Subsequent conversions require the issuance of even more tokens. Left unchecked the system can collapse leaving worthless ownership backing a mountain of debt. The higher the debt to ownership ratio becomes the less willing new investors are to bring capital to the table.

Anyone can see that this happened for the first 8 months of the life of the platform. But it wasn't the only reason, it was just a lever that fed off the ongoing greed of large stakeholders continuing to cash out part of their mined (read, cheaply made) stake.

Subjective Contributions

Subjective Proof of Work presents an alternative approach to distributing a currency that improves upon fully objective Proof of Work systems such as mining. The applications of a currency implementing subjective proof of work are far wider than any objective proof of work system because they can be applied to build a community around any concept that has a sufficiently defined purpose. When individuals join a community they buy into a particular set of beliefs and can vote to reinforce the community values or purpose.

Apparently there is some community agreed purpose here. It's not just about making a profit, apparently!

Distributing Currency

In the case of Bitcoin-style mining, it can result in the production of specialized hardware and cause people to invest time developing more efficient algorithms. It may even help find prime numbers, but none of these things provide meaningful value to society or the currency holding community at large.

I might be mistaken, but rat-pushing-cocaine-dispenser-button-like self voting behaviour does not constitute 'meaningful value to society or the currency holding community at large. I might be entirely misreading this, according to many of the most fancy characters in this platform.

Voting on Distribution of Currency

The naive voting process creates a Prisoner's Dilemma whereby each individual voter has incentive to vote for themselves at the expense of the larger community goal. If every voter defects by voting for themselves then no currency will end up distributed and the currency as a whole will fail to gain network effect. On the other hand, if only one voter defects then that voter would win undeserved profits while having minimal effect on the overall value of the currency.

The guys obviously understood the game mechanics. Why is it they chose to apply an inequitable stake-biased method to make it so the biggest stakeholders had the most influence? This does not change the mechanics, it just gives this privilege to those who were in first.

Voting Collusion

While cooperation to distribute funds to the best work is the desired goal, collusion that undermines this objective should be minimized. There are two kinds of collusion, the most straightforward is when one user simply buys a larger stake than others, and the other involves coordinating a large number of smaller stakeholders to work together. Larger stakeholders can have the voting influence of 100 or even 1000 smaller stakeholders which means they have even greater incentive to defect by voting for themselves than they had under a linear distribution.

The voting on witnesses is exempt from this principle, of course. The solution to the previous issue of a prisoner's dilemma, is completely contrary to this leading sentence of this section.

The use of negative-voting to keep people from abusing the system leverages the crab mentality that many people have when it is perceived that one individual is profiting at the expense of everyone else. While crab mentality normally refers to short-sighted people keeping good people down, it is also what allows good people to keep bad people down.

Except they made it look like downvoting was about reporting abusive content, and not just a disagreement on the assignment of rewards...

Eliminating “abuse” is not possible and shouldn’t be the goal. Even those who are attempting to “abuse” the system are still doing work. Any compensation they get for their successful attempts at abuse or collusion is at least as valuable for the purpose of distributing the currency as the make-work system employed by traditional Bitcoin mining or the collusive mining done via mining pools. All that is necessary is to ensure that abuse isn’t so rampant that it undermines the incentive to do real work in support of the community and its currency.

The issue here is that this meaningless work contradicts everything from the first 6 or so quotes at the top that I have given, that the level of this abuse has turned out to be clearly far greater than claimed in this document, and that the measures that are described here also have turned out to be completely unfit for purpose, but there has been so little real discussion, nor sufficient attention given to those trying to raise the topic.

Payout Distribution

The economic effect of this is similar to a lottery where people over-estimate their probability of getting votes and thus do more work than the expected value of their reward and thereby maximize the total amount of work performed in service of the community. The fact that everyone “wins something” plays on the same psychology that casinos use to keep people gambling. In other words, small rewards help reinforce the idea that it is possible to earn bigger rewards.

Tacit recognition of the vital importance of game rules being correct in this system right here, as well as explaining that Steem is a game.

Mining Rewards require Steem Power

After the first month, Steem miners are paid in Steem Power (SP). SP is liquidated through the two-year process of “powering down.” This means that miners must wait for a long time, likely many months, before sufficient mining rewards have been powered down to allow them to recover the cost of electricity and computational resources. The powering down process discourages creation of mining pools because the pool operator would have to spread payouts over years.

I contend that the dramatic reduction of the power down, and not deecreasing the period between payouts has considerably increased the volatility and started a game of 'chase the time before the whales are powing down the most'. If the payouts were daily, this would not be occurring. I also believe that 13 weeks is not long enough, thus my prescription of 1% of the configured power down per day, or 100 days, slightly longer.

Performance and Scalability - Reddit Scale

To achieve this industry-leading performance, Steem has borrowed lessons learned from the LMAX Exchange , which is able to process 6 million transactions per second. Among 14 these lessons are the following key points:

1. Keep everything in memory.
2. Keep the core business logic in a single thread.
3. Keep cryptographic operations (hashes and signatures) out of the core business logic.
4. Divide validation into state-dependent and state-independent checks.
5. Use an object oriented data model.

They left out very important elements, and I have studied also the database systems used by Facebook for this. They are all sharded by geographical region. The minimum memory requirements for the Steem blockchain, for validation purposes only, is now over 24Gb, which can be reduced with SSD drives. The requirement for RPC nodes, is now approaching 64Gb, which is inordinately expensive on the open market in VPS, and there is no direct monetary incentive in the consensus logic that rewards these server operators, which is becoming an increasingly serious bottleneck, so much so that every other day many steem based apps that use the full configured full node, are down for replay, and require at least 3 failovers to maintain even this level of service.

Impact of Token Creation Rate

At first glance, 100% annual increase in the STEEM supply may appear to be hyper-inflationary and unsustainable. Those who follow the Quantity Theory of Money may even conclude that the value of STEEM must fall by approximately 5.6% per month. We know from countless real-world examples that the quantity of money does not have a direct and immediate impact on its value, though it certainly plays a role.

Surprisingly, the post $4.32 peak price chart looks exactly like about a 5.6%, compounding, loss of value over the first 8 months or so. So the Quantity theory of money is correct. In fact, it may have been even faster than this.

Impact of Token Creation Rate Greater than Ninety-Percent

As of May 1, 2016, over 98.49% of all STEEM has been converted to SP. This demonstrates that demand to hold long term dominates. In this environment both liquid STEEM and SP are diluted to fund rewards

So, in case you didn't know, the whitepaper was written after the network had been running almost 2 months. There obviously was not enough users, nor any route out of the network, otherwise these early users would have already been milking it. cough did I say milking it?

No Micropayments, Tips Optional

The only transactions that users can approve without thought are ones that cost them nothing

Note that, the real key here is that the distribution of new tokens by votes, hides the cost in the inflation of the currency. This is a key insight that still makes Steem stand apart from any other distributed social network platform.

Final Comments

It has to be said, that after such a re-reading, that I have regained some degree of respect for the inventors of Steem, and due regard should be given.

However, the game and economic theory behind almost everything has turned out to be wrong. About the only parts that have been fully functional are the ones that exploit Skinner Box type addictive behaviours, the inflation tax, and... ok, that's all I can think of.

There is not enough ways in which users participate in governance, there is not any compensation for running a database for queries, which is by the design, a very expensive enterprise, and there is so many Prisoner's Dilemmas in the voting systems, that it has turned everyone into virtual inmates.