Does the 13 week powerdown period prevent investing in STEEM?

In a recent post @thecryptodrive is proposing to reduce the power down period from 13 weeks to 4. He justifies the proposal in the following way:

The premise behind this change is to reduce the barrier to entry for investment into Steem and PoB SMT's, currently it is daunting for investors to lock-up their capital for 13 weeks.

At first glance the proposed change in the code seems reasonable. But is the premise for it a proven fact or is it just a reflection of the desires of one group of stakeholders?

I think that the problem is framed incorrectly. The real question should be how do we increase the value of the steem network? If reducing the power down period helps to accomplish this then we should go ahead and make the change.

And here lies the crux of the issue...there is no data to backup the assertion. Has a study been done that proves it or a professional poll conducted among a group of investors that mentions the lock-up period as the main barrier to entry?

The answer is no.

Source

First, let's start by looking at lock-up periods in general. From Investopedia:

There are two main uses for lock-up periods, those for hedge funds and those for start-ups/IPO’s.

Hedge fund lock-ups are typically 30-90 days, giving the hedge fund manager time to exit investments without driving prices against their overall portfolio.

For start-ups, or companies looking to go public through an IPO, lock-periods help show that company leadership remains intact and that the business model remains on solid footing.

The Hedge Fund market was valued at 3.53 trillion as of November of 2018 according to 2019-Preqin-Global-Hedge-Fund-Report.

It is worth noting that Withdrawals may also only happen at certain intervals such as quarterly or bi-annually..

So having lock-up periods plus limited withdrawal intervals does not prevent the Hedge Fund market to dwarf the whole crypto space. We can conclude that in general those two characteristics are not obstacles for investors. What investors look for is how much ROI can they obtain from commiting their money into a particular enterprise. The ROI comes from the underlying value of how the funds are allocated on the specific investments.

This brings us back to the question that I consider to be fundamental how do we increase the value of the steem network?. It is my belief that it doesn't matter if we reduce the power down period (or if we remove it at all) if the value of the network does not increase. For this we need adoption through various use cases. I can not presume to know which use cases can help us in this quest.

Also, we probably need to question if having a powerdown schdule is a good fit for STEEM. Maybe it is maybe not.

There are other issues to consider, alot of them were discussed in the post from @thecryptodrive and I encourage you to read them. The main concern that I have is that reducing the powerdown to four weeks (or even worse to only one) is that it can incentivize exchanges to flex their muscles (so to speak) and takeover the main witness positions and dictate the governance of the chain.

To conclude, this proposal if implemented will change the economics of the network and it should not be taken lightly. We need data and not take decisions based on our desires alone. Before commiting to this we need to justify it so probably it would be best if we use the SPS and fund an independent study (preferably by a non-steem entity to eliminate bias).


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  • @magic8ball

    To the question in your title, my Magic 8-Ball says:

    Without a doubt

    Hi! I'm a bot, and this answer was posted automatically. Check this post out for more information.

  • @culgin

    I think incentives drive behavior and it really depends on which type of crowd you want to attract. Having a long power down period will likely attract longer-term users/investors. On the other hand, reducing the power down period will invite more short-term speculators.

    The ideal scenario will be to have a few lock-up options with different duration. Of course the longer you lock-up the higher the ROI. Loom Network is one such crypto project which is doing this.

  • @edicted

    The question annoys me more than anything else. We are asking ourselves if we should greatly change our economics without even testing them out for a single market cycle.

    Every time the price of Steem naturally loses value due to massive volatility we're going to try to greatly change the fundamental qualities of the blockchain? It shows a great lack of restraint and patience.

  • @verifyme

    @onthewayout You have received a 100% upvote from @steemguardian because this post did not use any bidbots and you have not used bidbots in the last 30 days!

    Upvoting this comment will help keep this service running.

  • @rishi556

    I feel like it needs to be dropped down by a lot. EOS set industry standard to 3 days, and we are wayyyy higher than that.

  • @spinvest

    Hello, SPinvest is a steemit investment club that is 100% backed by STEEM POWER.

    It offers anyone the chance to earn STEEM POWER rewards without the silly 13 week power down.

  • @slider2990

    The current content creators, witnesses, etc. are already selling steem faster than investors are buying. Therefore 13 weeks is currently not a long enough lock up period.

    Just my 0.02 steem!

  • @remlaps

    I agree that there should be empirical evidence before implementing a change like this. Also, it's configurable in steem-engine tokens and (soon) in SMTs, which means different solutions can be tried and compared. Finally, setting @likwid as a beneficiary makes it effectively, 0 days anyway (minus a small fee). I can't imagine why this would be a priority for anyone.

  • @joshman

    Many conflate 'investors' with 'traders'. Anything longer than an instantaneous power down will not attract anyone actively trading crypto. Also, what percentage of day or swing traders would actually power up and use their STEEM power to participate, if they know they will likely sell it in the short term? What about delegations and their cooldowns? Odds are this proposed 'steem investor' wanting a quicker powerdown might want to actually delegate and get a return. Do the powerdowns for delegations also get shortened for the same reason? What would be the consequences of that?

  • @joe.public

    I dont believe it is a barrier to investors. Especially not the kind of investors we want. What I do believe is a barrier to investors is attempts to drive people out off Steemit. People like @greenman. he is still here but not with his original investment. I am not wealthy but I have very wealthy friends who were prepared to make large investments, but I pulled the plug on that when I saw people being run off for sport or because people were distributing too much Steem. That is what we would be doing now if were not for the fact that I identified an nsa styled Chain of Command controlling Steemit.

    Not 100% certain but i think @thecryptodrive is really the new and improved @berniesanders /@nextgencrypto Its something that bernie was asking for some time ago. Just have a look who flags this comment. berines right hand man and accomplice

  • @therealwolf

    Good points!

    I think it's important to differentiate investing in Steem aka buying and powering-up/staking of Steem.

    The latter is needed if a person wants to be able to earn passive vesting-inflation, as well as being able to participate in the voting-game, which includes earning of curation rewards. Last but not least, staking is also necessary to participate in the witness-selection/blockchain governance. All of this requires the participant to accept a 13 weeks powerdown timeframe.

    Now, the 13 weeks powerdown period is only preventing people from investing, who would only buy Steem if they could stake it with a lower powerdown time. However, I'm betting that the majority of people who have a problem with 13 weeks, will have a problem with 8 weeks, 4 weeks or even 2 weeks.

    It's also important to note, that a certain powerdown timeframe requirement is good and necessary. Voting for witnesses for example, should be for those who have skin in the game and not just for exchanges that are using their customers funds to vote (which is happening on EOS). But also from a security perspective, having your "investment" being locked away for 13 weeks (while only 1/13 is available each week) is a great security bonus. Now, I obviously get that this is not for everyone, most people don't have a huge chunk of Steem in their wallet. Which brings me to the point I was making all-along within this subject:

    Dynamic Staking Pools & Powerdown Periods

    Look, if you want to stake Steem aka power it up and be able to power it down within 3 days, you should be able to do that, but with restrictions. For example you would only earn a fraction of the passive inflation. You wouldn't be able to vote for witnesses or the SPS. And you wouldn't be able to vote for content.

    All of these different Steem espects could have their own minimum required staking period. For example: the passive inflation would grow depending on the locked up period of the user. (1 week = 0.1%, 3 years: 5% ~rough example) or voting for witnesses could require a powerdown period of 8 weeks. Voting for content could require a powerdown period of 2 weeks and the earned rewards could require a powerdown of 1 month, to reduce sell-pressure.

    I obviously get the point about making Steem not too complicated, but this is the job of interfaces like Steemit.com, Steempeak, Esteem, etc.

    If the question is: what is preventing investors for investing in Steem? and what can we improve to change that for the positive?, then the answer isn't just: let's reduce the powerdown period to 4 weeks. Sorry, but the answer to that is far more complex and will most likely require some kind of dynamic system which isn't enforcing one time/rule for everyone.

  • @underground

    the OBVIOUS ANSWER:

    BUY SPI (@SPINVEST!)

    Steem Power Investments has many upsides, and no power down period ;) Just sell them on the exchange (steem-engine.com)

  • @marki99

    To answer the title, yes.

  • @steevc

    Were you around when power down took 2 years? People invested in Steem then. We need investors who take a long view, not those who will drop in and then then clear off as soon as they feel they made enough profit. I think the period is reasonable.

  • @edouard

    It’s always important to care more for people who speak quietly because the loud well... we already know their opinion.

  • @koloboks

    8 weeks will be ok.

  • @briggsy

    alternate solution: Allow Steem Power to be outright transferred, with a 7-day cool-down that starts upon transfer. This would create a secondary market where buyers who plan to power-up could get a discount from someone fleeing the platform, and someone could transfer steem power to their friends instead of delegating it to them. This might have a deflationary effect during times of FUD. The upside for many is that they would not have to power down for 13 weeks to move Steem power between accounts, which happens a lot given that a lot of users can generate their own account tokens. Allowing steem power to be transferred would eliminate a lot of power downs for the reasons stated above, and then we could have more realistic power-down data available for information purposes.

    Just a thought coming from a different lens.

  • @technicalside

    My honest opinion.

    Yes it would be nice to have those funds available quicker if you have alot more invested.

    But would that not affect the price? As the market would be flooded with steem every time the price gets a spike.