Blockchain Social Media Staking

In one of his recent posts, Scott Cunningham wrote an excellent article detailing 7 Ways Blockchain Social Media Platforms Are Better than legacy platforms. In his post, he briefly touched on the fact that some blockchain social media sites allow users to recover their stake (Steemit) while others do not (Uptrennd). In this article, I want to expand upon that topic and discuss why I believe that Uptrennd's non-recoverable staking model is a great way to encourage community involvement and support the long-term growth of the platform. Before starting the article, I want to make it clear that I use a variety of social media platforms and this is not a criticism of any platform. Rather, it is intended as an analysis of how different rewards systems create different incentives for users.

Background Information

First, it is important to define what "staking" means. Staking simply means that we are taking what we have earned on the site and re-investing it back into the site to gain more influence. Let me use the example of Uptrennd. When our posts and comments get upvoted, we receive points. Once we reach the minimum number of points, we have a choice to make. We can either convert our points and withdraw them, or we can "level-up" by trading our points for a higher level.

Different social media sites allow staking in different ways. On Uptrennd, once we spend our points to level up, we lose those points permanently. We can not get them back. I call this non-recoverable staking because once a user stakes their points, they have made a permanent investment. Other sites, such as Steemit have what I call recoverable staking. For example, you can convert your rewards to Steem Power which gives you more influence and makes your votes worth more. Later on, you can "power down" this Steem Power and gradually turn it back into a more liquid token for withdraws. On Steemit, staking is not a permanent decision, and it is possible to recover the tokens that you stake and later withdraw them.

I have always been fascinated by how small, day-to-day decisions add up in the long run, and I have been thinking about how recoverable vs non-recoverable staking affects the future of a platform. In my opinion, non-recoverable staking (Uptrennd model) could help to build a stronger user base and promote the long term growth of the platform. On Uptrennd, each level that a user gains increases their upvote multiplier by .1 points. For example, when I leveled up from level 1 to level 2, each time someone upvoted my post, I received 1.1 points instead of the 1 point that I did at level 1. This means that the higher my level is, the more rewards that I receive from getting upvotes. However, I have to permanently invest points to receive this reward, so I have to do some careful calculations to determine whether it is better to level up or cash out my points. If you are curious, you can find the multiplier for each level in Uptrennd's "How it Works" section.

​A Personal Example

I am currently at level 9, which means that for each upvote I receive, I will get 1.8 multiplier. If I reach level 10, I will get 1.9 multiplier, but I will also have to stake 596 points to get this extra multiplier. So what is the better choice for me? In Economics and Business, we use a "break-even analysis" to determine the amount of money will have to make to justify an investment. The break-even analysis applies here as well. In my example, the cost of leveling up is 596 points, and the benefit is an additional .1 points per upvote that I receive, so we have to do some simple mathematics to determine how many upvotes I must receive to earn back my 596 points. If I simply divide 596 by 1.9 I see that it will take 314 upvotes to earn back 596 points as a level 10. However, this is misleading because if I did not level up, I would still be earning 1.8 points per upvote. To determine the true break-even point, I must divide 596 points by the difference between my level 9 multiplier and my level 10 multiplier. So, we have 596 / (1.9-1.8) = 5,960. Because the difference between level 9 multiplier and level 10 multiplier is .1, it will take 5,960 upvotes before I receive enough additional upvotes from the new level to make up for staking the 596 points.

The reason that I completed these calculations is to show that leveling up in Uptrennd is a significant decision and that the user is making a considerable investment in Uptrennd when they choose to level up. When we invest our points to leveling up, we are showing that we have confidence in three things.

We are committing ourselves to write good articles and comments that will continue to receive upvotes. We are voting with confidence that Uptrennd administrators and moderators will be able to keep the platform running smoothly so we have a place to post this content. We are showing our confidence that Uptrennd will continue to have an active community that wants to read our articles and interact with our content.

If any of these three assumptions prove wrong, the user will be unable to recover their staked investment, and would have been better off by simply withdrawing their earnings.

​Comparing Staking Methods

Now, I want to contrast this non-recoverable staking with the recoverable staking model used by Steemit. Steemit can get confusing because they have three different forms of crypto on the site, but the basic idea is that you can “power up” your rewards to gain Steem Power which makes your votes on the site worth more. If you want to get this investment back, you can power down Steem Power and gradually receive a little bit of your investment back each week. In 13 weeks, you can completely recover the tokens that you staked into the platform (Dangi, 2019).

The interesting thing about recovering your Steemit stake is that it is completely automatic. Even if you stop posting and creating content, you will get your full investment back at the end of 13 weeks. By contrast, Uptrennd requires us to actively work on creating good articles so that we can earn enough upvotes to make our investment worthwhile. Because we have to actively work toward recovering our investment, I believe that the non-recoverable staking model (Uptrennd) provides a greater incentive to remain active on the platform that the recoverable staking model. I also believe that non-recoverable staking (Uptrennd) is a much more serious decision because it can not be undone. As I said in the introduction, I am a huge fan of a variety of blockchain social media platforms. The most important thing is that they are giving users choices and freedom. That being said, I think that Uptrennd's non-recoverable staking system is a good example of a process being designed to produce a certain outcome. By making the stake non-recoverable, the platform encourages continued engagement and activity.

What are your thoughts?

Reference

Dangi, R. (2019, February 2). Still confused by Steem, Steem Power and Steem Dollars- Read this. Retrieved September 27, 2019, from https://medium.com/hapramp/still-confused-by-steem-steem-power-and-steem-dollars-read-this-220ace402bcb.

Image Credit: James Sutton @ Unsplash