The title sounds counter-intuitive, I know, yet it does show how important bringing out Smart Media Tokens (SMTs) really is.
Presently, the focus is on the HIVE reward pool. Honestly, it is really the only thing of any value right now so it makes sense. However, over time, we need to start to transition to something beyond it.
Before making a case in that direction, I must state a few things pertaining to the HIVE currency.
To start, it is vital that HIVE always maintain a reward pool for content. The staking of the token plays into governance operations such as Witness voting, thus it needs to be as accessible as possible. Rewarding content helps to spread the distribution of the token out. Ultimately, we need to see millions of accounts holding HP.
We also know that HP is beneficial when voting for proposals in the DAO. Here again, we want all to be involved and a decentralized distribution will help to combat abuse.
Some have stated that HIVE should just be for the applications and businesses. I disagree with this. The idea is to decentralize the distribution to as many people as possible. The voting aspect of Hive, as more people are involved, will dilute the reward pool. By this I mean it will reward more users on a weekly basis, albeit with less per post.
The introduction of SMTs will allow applications and communities to tokenize their ecosystem. This puts the onus upon them to operate as they see fit. Eventually, the goal needs to have more focus upon the SMT than HIVE. Right now, HIVE is the main token while any other token is the gravy. SMTs offer the possibility of switching things up.
Does that mean HIVE becomes worthless? Quite the contrary.
HIVE is the token representing the base layer. It is required (in HP form) to interact on the blockchain. This is a valuable utility as the ecosystem grows in numbers. Millions of people playing games, posting, interacting, and doing whatever else the applications offer will all require Resource Credits. This can only be achieved by having Hive Power.
It also provides a powerful defense mechanism against what took place with Sun. As the overall token distribution flattens out across more users, the ability to take control lessens. We saw the result of what happens when there is an overwhelmingly large honey pot to access. Imagine for a second if the distribution was 1 million individuals with 350 HP apiece. Even if someone came in a got 35,000, which is 100 times the average, it still would be impossible to take control.
Thus, we can see that HIVE has an vital utility to the blockchain. The "long tail" shows how the accounts at the far end of the spectrum can hold enormous influence.
That said, Hive is going to evolve into a diverse ecosystem. It basically can serve as a data structure and immutable ledger for many different types of applications. People obviously have different interests which should be rewarded. Naturally, we are not all going to agree with what that is.
We recently saw an announcement with the introduction of @dbuzz. This is a microblogging (Twitter like) application. Over the years, we watched a couple of attempts at something similar fail. Why was that the case?
In my view, it starts with the fact that it pits the quality content group against those who are looking for growth. Obviously, Twitter is very popular as well as being easy to use. If fossils like United States politicians can use it, anyone can. And with the monthly user base, it is evident that many are.
Of course, being rewarded for microblogging content could be very appealing. It is an easy way to get a large number of people interested. The challenge is that it is subject to tremendous abuse. We witnessed this on a couple of different occasions. Voting blocks and spamming were common as people tried to milk the reward pool. People would spam the network throughout the day simply to try and garner a few votes. We know with the automated comment spammers of the past, how profitable this can be.
The hard fork altering in the EIP changed this somewhat but we can easily see how it can happen again.
So what is the solution?
Here is where SMTs enter the picture. If we were all active with our different applications, focusing upon those tokens we were interested in, then what those people on DBuzz did would not be of great concern to most of us. Applications could monitor what showed up on their feeds, culling out those who were trying to abuse the system. At the same time, each of us as individuals can choose who we follow or not.
To exemplify all this in action, let us use Twitter as an example.
Suppose that application suddenly decided to post to Hive and created it owns TWEET SMT. Instantly, 330 million monthly users would be on the blockchain. There would be billions of posts done a day all using Hive as a distributed ledger.
Under this scenario, how much would each post earn? Obviously, most would get nothing more than dust. The upvotes from the majority of the people, would have next to nothing in the way of Hive Power. Thus, even if one received a ton of votes, the payout in HIVE would be very little.
This would not make HIVE a primary focus for these individuals. Instead, their focus would be on earning TWEET tokens. There would be an assortment of Whales and Orcas on that platform who would be rewarding people with big upvotes. Again, unless they happen to have a great deal of HP, it would not affect that end of things too greatly.
Even though the HIVE payouts would amount to little on the individual level, collectively, it would take up a large portion of the reward pool. As it stands now, in this situation, it would likely eat up most of the pool simply by the sheer numbers. It would overwhelm the other applications.
Of course, this changes if Telegram, fresh off their loss to the SEC, decided to make a SMT for its platform of 400 million users. Instantly, on a collective scale, the Twitter people are not taking the majority of the reward pool as the Telegram people are getting their share also.
We can see how this keeps repeating itself as more users join. Obviously, I do not foresee either Twitter or Telegram becoming a part of Hive. I simply use this to illustrate things on a rapid scale.
What is interesting is that while the focus will not be on HIVE, the value of the currency would explode. With that much activity utilizing the network, the need is enormous. This would push the value up relative to fiat.
We also would see a system where, over time, millions of accounts would end up holding Hive Power, thus pushing the distribution way out. As larger accounts took profits during the price run up, we would end up seeing a greater flattening of the curve.
Right now, Hive is an ecosystem that is struggling to get users let alone the individual applications. Hence, we are in a situation where the tokens that are on here have little to no value. Some might hold promise, but thus far, have not really broken through.
Hopefully, as more people join the network through the different applications, that becomes more of their focus. Whether it is a game that offers hundreds of thousands of people in game assets, or a twitter like feature, having the ability to spread the Hive token out is crucial. It also will be a natural thing as some of the applications enjoy more success.
The reason why SMTs (or HMTs) are so important is because of the fact that having a token at the base layer offers a number of benefits. Because of the coding, they are instantly available if exchanges want to pick them up. They also are under the same governance mechanism as HIVE since they will be tied to the blockchain.
For this reason, I hope that these are high on the priority list. I know the developers are hard at work on many things and they were mentioned as being on the list.
It will be of great benefit to the community and potentially offers a radical shift in our focus. I believe, in the end, it will also resolve a great deal of conflict among the community.
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