The 2nd Layer and losing rewards

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I have been saying for quite some time that eventually the HIVE inflation pool will be removed from the current distribution model, where authors get curated for distribution. Instead, it will be primarily used for staked distribution and witnesses. However, this relies on having a secondary mechanism for distribution, something the @blocktrades has mentioned and given some insight on from his perspective recently - you can read it here.

However, Hive is a socially-driven blockchain and 2nd Layer applications will rely on a userbase to function - like customers. In order for this to really be viable, the second-layer applications will have to offer something of value that is outside what other "non-blockchain" applications can, which is blockchain tokenization. This is the economy that we are building here and currently it is all sitting on the same mechanisms, meaning the global inflation pool.

As @therealwolf has been talking about the last week, in order to empower the second layer, the *first layer (the blockchain) has to narrow its focus. I see this as the investment layer and always have as this is where investors stake - but it is also where there is the chance for distribution as people can earn from this layer. However, in regards to earnings, only about 1/3rd of the total HIVE in existence has come through the inflation pool, with about half of that 1/3rd (1/6th) being distributed to authors, with the rest being on interest, curation, witnesses etc.

However, considering one doesn't have to have capital to earn HIVE stake, this actually isn't sucha bad deal, considering that most of the content that has attracted HIVE value over he last 4 years would like get nothing anywhere else on or off the internet. The "great post" is actually by far, an exception in the pool of content and this was even more the case in the early days. For four years, the users of the blockchain have been enjoying over valued content. Don't get me wrong here, some of the content could likely earn elsewhere and probably is cross-posted or like the art, sold IRL for earning - but not many are able to sell a blurry picture of their lunch or a meme for anything.

With the introduction of Hive-Engine tokens, we have seen that there has been the potential to add value to a token that doesn't draw from the global pool - for example the LEO token for @leofinance. However, even though this is great, it doesn't satisfy me as a stakeholder, even if it might as an author. The reason is that Hive-Engine is a third-party application that is privately owned and operated and doesn't lay within the blockchain consensus model - meaning that it doesn't live by stakeholder rules.

There is nothing wrong with this at all, however, I as a stakeholder would be highly unwilling to push the future of the blockcahin out to another private company and without SMTs, this is what would have to happen. If the future of the blockchain is dependent on 2nd-layer applications, that second layer has to fall under consensus rules and be "protected and secured" by the decentralization of the blockcahin through the stakeholder model - otherwise, what kind of investor would buy?

If we look at the Hive blockchain as a business, it would be ludicrous to outsource the core competence of the business to a third-party as that undermines the very purpose of the blockchain itself. The core competence of HIVE is the security, speed, stability and the consensus model that allows for stakeholders to guide development in a decentralized manner. I agree that after 4 years and all that has happened, the blockchain needs to innovate and grow, but I think that in this case, removing the global reward pool from author access is putting the horse before the cart - meaning that the infrastructure to support the 2nd layer has to be implemented prior. Not only this, it has to be battle tested and have a few iterations to work out the kinks. This takes time and a lot of thought.

My point of writing this quick post is just to make sure that those who are having the discussions and those who are reading the discussions understand that this isn't a decision that gets made quickly or easily, it is a discussion that has come up many times before and an idea that in some way or form, has to likely be implemented eventually.

A lot of current authors are likely going to be "upset" by the drive for the first layer of the blockchain to become the investment layer as they (like me) believe that is where the value is - but, I believe it has value because of the consensus, not because I can earn it and sell it weekly.

I say "current authors" because with an effective SMT layer that supports second-layer applications, those who onboard through these gateways will come in never having had access to the global pool at all. They will have a better understanding of the division of "labor" where there are investors and users. They themselves will be able to both invest into their chosen applications or at the first layer of the blockchain, with the latter being through a direct purchase and staking - this could happen through fiat or second-layer tokens for example - but a purchase would need to be made.

For all the people who are here now however, this would be considered a large change in the usage of the blockchain and create all kinds of fears and problems, as it will fundamentally change their experience and behaviors. Scary, right? But, the same people also want the development of the chain to happen so that there can be millions of users supported here and based on the global reward pool, that is unlikely to be possible.

Hive is more like the internet than Facebook or Twitter - it is an infrastructure that can house experiences (similar to websites are for the internet) built upon it like those and tie them all together through a highly diverse and borderless economy. The value of Hive is potentially immense, but it can't forever continue to act as if it is a website alone (as it is now as a blogging site), it has to expand and become the tokenized internet that can support everything else.

Anyway - these are some quick thoughts as mentioned and hope that they will add to the discussion, improve clarity or ease some fears (perhaps create more) around this topic. What I do hope people take away from this is that the value of HIVE for an individual is not being able to earn and sell it on an exchange, it is being able to stake it for a future where it supports everything that is to come. At the moment you can earn it, but eventually the gateways to that tap will close.

Taraz
[ Gen1: Hive ]

Posted Using LeoFinance



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53 comments
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Muchas gracias por esta valiosa información, es necesario conocerlo con detalles, gracias feliz día.

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Good photo quality, HD images, thanks for sharing my bro. Good job and I hope always be healthy.

allow me to reblog your post.

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Here! Please allow me to copy/paste a nonsensical comment on a nicely valued post. I'm sure no one else has ever thought of THAT.

I'm really close to a DV.

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You get flagged for BS comments. Continue and I will flag you more heavily.

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(Edited)

I'm really pleased you raised this and referred back to the @blocktrades post as I have been thinking about this a lot recently. Over in The Ink Well community we have an opportunity to create a go-to destination for readers (consumers) of short stories and poetry and an ongoing long-tail alternative source of income for writers, the majority of whom in the current economies earn very little, if anything, as full-time writers.

From the consumer aspect, I think about my experience as a youtube user: over the past year, I've become someone who visits youtube everyday, I consume vast amounts of information, expertise and entertainment, I am never very unlikely to produce youtube content and I think I have only ever, in the decade or so I've been using it, left about five comments, although I regularly subcribe and upvote posts. I'm the perfect profile of the audience we need for The Ink Well - especially once PeakD introduces facilities like being able to tip as a guest.*

The public investment funds in the UK which are available to support building this kind of audience for creative work have just opened up again after being diverted to COVID-19 relief. I have been working on an investment proposal for about £90,000 (although this may change, most likely upwards, as we develop the proposal). Fundamental to the success of this is a 2nd layer token: it would be very difficult to make the case to an external publicly accountable investor for a Hive-Engine token for all the reasons you say. I like Hive-Engine and the additional facilities it brings to Hive - that's great, but it is a private enterprise, and we don't own the keys :)

*Edit: the big difference here, as I think you've written elsewhere, is that I would be paid to consume.

Thank you for bringing this up.

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(Edited)

I am never very unlikely to produce youtube content and I think I have only ever, in the decade or so I've been using it, left about five comments,

Sounds a lot like me. I use YT for troubleshooting, not entertainment for the most part.

I'm the perfect profile of the audience we need for The Ink Well - especially once PeakD introduces facilities like being able to tip as a guest.*

Yes, this is what I am hoping for- But tipping isn't enough - inflation pools are brilliant - but not necessarily a global one (though for now it is too early to shift imo)

I like Hive-Engine and the additional facilities it brings to Hive - that's great, but it is a private enterprise, and we don't own the keys :)

I like them too and they have been great fun - but, if we have learned one thing only from Steem - it is don't trust a private company in a public environment ;D

!ENGAGE 25

Sorry it has taken me so long to start really replying - I have some IRL life things going on today with my daughter.

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I saw that she was ill - hope she is soon better.

I agree, there needs to be more than tipping.

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Thank you for your engagement on this post, you have recieved ENGAGE tokens.

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Progress is not always comfortable. Sometimes unpopular decisions have to be made. I also believe that Hive needs to grow and reach its potential. I am sure that the right kind of authors will stay even in more difficult times. Change is necessary and without changes nothing can prosper. Doing one thing in the same way over and over again will not give different results.I wish Hive would grow just because the community of people behind it is so amazing. Authors, curators, stakeholders.

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I think that for many new comers, this would make their experience of Hive more enjoyable, as they will be able to focus on the areas they love, without getting mixed up in the politics of the governance.

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Change is scary. Big change is terrifying. We're talking big change here.

I think that you are right, this change (or this sort of change) needs to happen to let this place grow and prosper at somewhere near it's potential. It would certainly make it easier for newcomers to navigate and participate.

For me, before I can support the added layer on the chain decay voting needs to be dealt with. We need consensus, but we need ACTIVE consensus. Non present voting is a drag on the whole system and tends to stifle debate. If the people that actually have 'skin in the game' are the ones forming the consensus then good on it.

Damn. Reading over that it might sound like I'm bitching about stake weighted voting. I'm not, it's how it HAS to be. It is, after all, a business.

Can you imagine the noise when this is proposed? OMG it'll make the "You are taking money out of my pocket" from the curation change look like silence. Many (probably most) of the loudest and most persistent are small stakeholders that have never invested a cent, but they can be LOUD. And don't want to be confused with facts.

Thanks for a thoughtful and considered post on the subject. This and others like it can move the needle of debate AND consensus.

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We're talking big change here.

Yeah - very big.

The consensus model should be revampbed in a few ways - one of them being the number of possible votes. 7 is a good amount. I also think that the depth of witness rewards should be spread further down the list more - for example, the top 20 take 70% - the next 30 take 20% - the last 50 take 10%.

OMG it'll make the "You are taking money out of my pocket" from the curation change look like silence.

:D

of the loudest and most persistent are small stakeholders that have never invested a cent, but they can be LOUD. And don't want to be confused with facts.

They probably overlap with all of those "egg faces" on Twitter who support crazy.

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I agree very much with 'vote limitations'. That would just about cure the 'big stakeholders don't leave anything for the little guys' debate. A simple and effective change that would unquestionably lead to a different slate of consensus witnesses. I'd be good with spreading the witness share out too. With vote reduction I suspect there would be routine changes in the slate.

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I think that there is resistance to the idea because it takes some power away from large stakeholders to push through change. In some ways it is good to have te stability, but that is also a risk.

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I actually think that a little instability might be good for us at this point in space and time. I know it's a horrible risk, but out of instability comes change.

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Yes - I don't mind the instability as well as pushing some percentage of "new blood" into areas of influence.

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looks like this is the road we are going, no one said it officially but from the people that are talking about it, looks like that. problem is, everybody should know about that, because people are talking about hive outside of hive, and it could be that they had no idea what they were talking about in next 6-12 months.
If hive goes to stakeholders, witensses and dao in few years we will get more centralized first layer. when you look who are the biggest stakeholders, witnesses and who is getting the dao...

hive was possible because of the social part of it. is it possible to continue like this? i have no idea, i am just a noob that comes here every day to read stories and post some photos.

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Most people talking about Hive are Hive people, and those who0 are not and are talking about Hive, probably don't have anything positive to say :)

If hive goes to stakeholders, witensses and dao in few years we will get more centralized first layer. when you look who are the biggest stakeholders, witnesses and who is getting the dao...

Yes, this is the challenge - are the people here now decent stakeholders? Who knows, but there has been 4 years of developing the stakeholder group, so another 4 years might not change it much, especially if it is relying on earnings only.

hive was possible because of the social part of it. is it possible to continue like this?

Yes, it might make it far more social. People on Facebook don't spend too much time thinking about the governance of Facebook.

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idk, i am probably stupid, but i don't like this renunciation of creators and users.

if steem had no social aspect we would all still be on steem cheering on twitter for justin to pump it.

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I think that in time, the social aspect would be empowered through the separation - but it will mean that those who want to invest will have to work a bit harder. I think Hive has the lowest entry into crypto and investing in the world, yet many people still don't seem to learn what it is all about.

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I've been following therealwolf's posts and now read yours. I don't think I get the whole picture, not nearly au fait with blockchain tech and I'm sure there are a lot of us on the same boat on hive.
Can you please explain some of the stuff in layman's terms?

Especially, do you mean, the current system on hive (which is author-curator reward distribution system) will move to second layer? or will it simply cease to exist and hive as the first layer will be a place to invest in hive tokens?

I understand hive's function as invest only platform. But what will be the function of the supposed second layer? What will it mean for the current users?

Will users be able to write still? And is that on the hive or the second layer? Will that layer be immutable as hive is? Because this might be one of the driving reasons that attract mainstream social-media users.

Will it be like reddit as it is an alternative for facebook and twitter?

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(Edited)

This was layman's terms :D

Technically, it is far more complex as it has to look into the full structure of consesus and economics - as well as the game theory behind all interactions.

Especially, do you mean, the current system on hive (which is author-curator reward distribution system) will move to second layer? or will it simply cease to exist and hive as the first layer will be a place to invest in hive tokens?

That the first layer will be investment/witness only. The second layer would be for earning tokens.

But what will be the function of the supposed second layer? What will it mean for the current users?

For earning, posting, distributing the many inflation pools of SMTs. Gaming, services, business.

Of course tauthors can write, but it would be financially powered in the second layer - with the earnings not coming from the Hive pool.

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Ah! In that case, the second layer tokens will be like Ngage, Leo—right?

Big thanks for explaining, the topic seem quite confusing to me. But some of the ideas started to make sense after reading Blocktrades' post.

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yeah, the second layer tokens are like HE tokens now -

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They themselves will be able to both invest into their chosen applications or at the first layer of the blockchain, with the latter being through a direct purchase and staking - this could happen through fiat or second-layer tokens for example - but a purchase would need to be made.

Don't you think this is going to make mass onboarding even harder than it already is? Cryptocurrency is not in any position...let me rephrase. Cryptocurrency is not even anywhere near being in a position where the mass population will invest in and stake it, to earn as authors. This change at this point in time will result in hive getting narrowed down to only people who understand and believe in cryptocurrency. I understand this change is inevitable, and necessary, but the timing of this change will be everything.

Posted Using LeoFinance

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Timing is important, which is why I mentioned now is not the time for this, as the infrastructure to support it isn't in place, with the infrastructure being the community condition also.

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Yes. One other concern I have regarding the 2nd layers on HIVE is, how most of the tribe tokens have performed so far. Only LEO has provided some sort of stability and only DEC has given users a decent real use case.

And despite this, we have just recently seen how one single holder can manipulate the market for over a month now. I know this ties in again with the lack of infrastructure, especially in terms of community infrastructure, but I wanted to know your thoughts on this. Is this something that should be on the back of our minds when we discuss how far second layers can go?

Posted Using LeoFinance

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Only LEO has provided some sort of stability and only DEC has given users a decent real use case.

Perhaps because most are predominantly still relying on the inflation pool for earnings. Perhaps it is kind of like a parent "chopping up the credit card" of a child and saying fend for yourself?

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Perhaps.

This is quite exciting and scary at the same time to me. Maybe the child has so much potential and this "nudge" to fend for oneself just makes him go Boom and surprise everyone. Maybe the child isn’t capable and it all falls apart.

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It’s really unclear to me how curation would work in such a system. Would curation earnings still be based on HP or just on holdings of whatever second layer token was used for the new reward pool? Would the inflation adjustment (“interest”) then be the only way to earn Hive or would delegation still play a part?

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I don't think there would be curation and instead, it would be a staking interest payment. I think it would be a case to decrease the inflation rate dramatically also.

I don't imagine this is happening anytime soon.

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(Edited)

The only way you can do this is if you have an established second layer.
Leo Finance is a good example of moving in the right direction but its current state is hardly the goal.

Without having the second layer tokens listed on multiple exchanges and them having decent volume before you do this change, HIVE will be a bust.

Changing the distribution model is the very final step.

I always considered therealwolf more of a spineless fool then anything else but hes right about the niche thing.
This change needs to happen, but it needs to happen in the right way. How its done is incredibly important.

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Leo Finance is a good example of moving in the right direction but its current state is hardly the goal.

Definitely needs to go beyond this - but perhaps the global pool is also part of the problem. Firstly, people are still building applications in the hope of earning Hive, not in the hope of onboarding externals and generating value from outside sources. Secondly, the shared pool also means that large stakeholders can directly affect the success of applications.

Without having the second layer tokens listed on multiple exchanges and them having decent volume before you do this change, HIVE will be a bust.

A decent inhouse exchange might start the process.

Changing the distribution model is the very final step.

I agree.

This change needs to happen, but it needs to happen in the right way. How its done is incredibly important.

Yep, which is why it has to be discussed openly, at least to include some of the stakeholders who have a different perspective than just "to the moon" for token values.

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Agree on all points. Roll out SMTs. Do it right. When SMTs start to flourish, end the rewards pool.

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Yep - it is not going to be a fast process - so don't rush it and fuck it up.

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Earning Hive by blogging will be as old fashioned as mining bitcoin on a CPU.

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The reason is that Hive-Engine is a third-party application that is privately owned and operated and doesn't lay within the blockchain consensus model - meaning that it doesn't live by stakeholder rules.

Good point. I was thinking SMTs weren't necessary because of HE, but this is true. I wonder what happens to all the tokens on HE if/once SMTs go live.

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The first time I heard about removing rewards from the first layer and putting them on the 2nd layer, I got really excited and increased my hive stake by about 3X from selling other cryptos (also the price was right). Although the 10,000 or so tokens is not a lot from an investor's viewpoint, compared to my crypto portfolio at that time it was significant.
I believe this is also what got Tron interested in Steem (it's a shame it wasn't a company with a more competent leader).

Fast forward, it caused some issues and people easily hijacked the discussion by trying to say removing the reward pool is stealing. I powered down and will again watch from the sidelines.

It's a discussion we need to have. The people who plug their ears and scream NONONO will not be a part of the discussion and will probably not like the results.

If people want to continue to earn rewards from posting memes or blurry pictures of lunch, they better join the discussion. If this is viable, I'm sure a 2nd layer solution will exist for them as well.

I don't see rewards for good blogs, art, high-quality writing, or sincere photos being affected much by a second layer. What I do see being affected is people trying to 'maximize' rewards which while benefitting them the most, minimizes value for the chain.

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It is interesting to think of it as stealing, considering everyone on the platform understands that this is a stake-based platform and, the pool is a future amount of HIVE that doesn't even exist yet and is owned by no one until it is in an actual wallet.

If people want to continue to earn rewards from posting memes or blurry pictures of lunch, they better join the discussion. If this is viable, I'm sure a 2nd layer solution will exist for them as well.

I think this is what scares people the most - if what they are doing is valuable it is valuable and will continue to be so. If it isn't.....

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nice post and I read @blocktrades nice proposal

Bytheway can I add communities in tags?

sadness-inside-out-today-main-tease-191018_010305cfdd8f7dab2c6547daadfcfce6.fit-760w.jpg

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you can add the code as the first tag -some will allow earning their tokens with other tags.

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what are these tag that let you earn token please tell me few :

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palnet neoxian are general ones I know - but you still have to have people who stake those tokens voting for you :)

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A content driven reward pool is not an obstacle to build a second layer. In fact I would argue that having a distribution mechanism for none investors is necessary for a DPOS chain to avoid a degradation of the governance that can be attested on other networks such as EOS or Lisk...to name a few.

This whole discussion about removing the reward pool strikes me as an attempt to rationalize an agenda that seeks to have SP holders capture a bigger chunk of the inflation.

In fact, removing the curation game would create a situation where all investors would get the same yield on their stake which is not conducent to maximization of earnings. Currently a good curator can beat the inflation by being good at it. That would disappear with the proposal from Therealwolf.

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And that is what Hive has to become to be successful. Protocol layer facilitating other dapps operating on top of it, not a faucet for free coins.

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I think the faucet is important to an extent, but the evolution has to happen to create some future stability.

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