This is Part 2 in a 3 Part Series on STEEM and the Blockchain World, a conversation with Steemit Content Director Andrew Levine. If you missed it, read Part 1 to catch up! Then check out Part 3.

In this second part, we’ll get a breakdown of Smart Media Tokens, Hivemind, Communities and other big updates coming for STEEM.

James: This might be a good opportunity to say SMTs, they are not out yet but that is on the near horizon, your major next step here. Obviously, there is going to be plenty of resources on how they work and how to set them up. Talk briefly about how they are, how they work, and how you envision people making use of them.

Andy: Our two major product releases are Hivemind and SMTs. They are separate projects being worked on by separate teams with maybe a little overlap. I don’t want people to think, “Oh, it’s SMTs.”

We have a lot of projects in the works. Appbase is another project of ours that is probably less sexy to other people, but it is basically our scaling solution. It is how we plan to modularize the blockchain. It’s already in production, the foundation of it. That is one project.

The other one is called Hivemind. Hivemind is what is going to enable features like communities on top of STEEM. But we don’t develop solutions that only have one use case, we develop solutions with the broadest set of possible use cases and so Hivemind has evolved into a soft consensus layer that sits on top of the STEEM blockchain.

It effectively adds all the functionalities of Smart Contracts to STEEM without the downsides. STEEM remains super-fast and scalable because it is application-specific with respect to storing content, but Hivemind will enable developers to use the code they store on STEEM, as well as the content, to power decentralized applications without the headaches that come from having your entire application stored on the consensus layer.

The developer will get to choose for themselves just how decentralized they want their application to be as opposed to being forced to make it fully decentralized from the word “go.” This is what will enable us to use STEEM–an immutable database–to store epheremal social information.

All of the information that is submitted to Hive gets stored on the STEEM blockchain. But when you, as the developer, are building your application, what you’re actually querying is Hive preserved in social functions.

For example, you want to build a cryptocurrency community. You get the namespace, you want to appoint moderators, you want to unappoint moderators. That’s the kind of stuff that will be on Hive. It doesn’t need to be on the blockchain, it doesn’t need to be synced up perfectly to the blockchain. That is what is going to go on Hive.

Is this simply an organization on the Steemit platform, kind of like how Medium has publications? That you can have contributing writers to publications, or is this an upgrade of the simple tag system that you can organize content on by Steemit right now, or is it more than that?

It’s a massive upgrade to that. Hivemind is open-source software that will reside in the STEEM GitHub along with the STEEM blockchain, but it’s separate. What that means is that, what we are going to be asking developers in this space to do is to say, “This is open-source code. Let’s all use this together.”

And so, what that would enable is, say there is a crypto currency community on Steemit.com and it’s exclusive. There’s thirty people in it. When you go over to DTube, since they will be pulling the same information from Hive[mind], you won’t have to create a new community in DTube. You won’t have to go through the process of admitting all these people.

Personally, I think what we are trying to build with STEEM is an open, decentralized social layer of the internet that everybody can tap into. By incentivizing it, and incentivizing it first, and incentivizing it well, that will give us the first mover or advantage to always outrun the competition.

So, you’re going to have an ever-increasing diversity of portals through which you can engage with the STEEM blockchain, and STEEM users and communities will create a cross-platform capability for you to congregate with the people you want to congregate with.

Communities cross. You don’t have to recreate. It’s across DTube, across Steemit, across all the different platforms that are powered by STEEM. You can say that my tribe lives on all of these, and these are simply tools that my tribe can use.

Yes, exactly. Everything is on STEEM. Steemit.com is one interface for STEEM, eSteem is another, DTube is another. DTube is just another interface for STEEM. So you have your CoinCentral community, and people are posting in it.

And if STEEM’s stakeholders are in there upvoting it, you’ve now got a cryptocurrency flowing into that community. And through a reward-splitting feature, you as the runners of that community will be able to take a percentage of that.

That’s a cool way where you will immediately be able to tokenize a community. This is something we’re light years ahead of everybody else on, so I really think that it’s going to be really hard to catch up with us on this stuff.

But SMTs take things to the next level, because the you will be able to launch an SMT into your community. You can actually tokenize your community with your own token. When you launch an SMT, what will happen is, you’ll be able to specify who is entitled to earn that token.

I don’t know how familiar you guys are, or anyone is, with STEEM’s true unique value proposition. Yes, it stores content, but that was actually relatively simple implementation when you think about it.

But our real unique value proposition is what we call our Proof of Brain distribution mechanism. Proof of Brain is a truly decentralized token distribution mechanism. The way Proof of Brain works is that it crowdsources the valuation of content. It leverages the upvotes and the downvotes of users to calculate the value of the content.

And the way it does that is that there is a certain amount of STEEM produced every day. It fills the rewards pool. A small percentage of it goes to the block producers. The rest of it goes into the rewards pool. It is distributed based on the upvotes and downvotes of the users and proportioned based on their stake. That is how it is ungameable.

If you just give out tokens based solely on upvotes and downvotes, which I’ve actually seen relatively new projects to the space, or not even new, proposed projects in the space, suggesting that you can just distribute tokens based on upvotes and downvotes, but if their influence isn’t proportionate to their stake it’s not going to scale, at least not at the base layer if you want maximize network effects and not implement things like KYC.

It’s the same with what we have right now, now there’s just money. There’s going to be the same rigging of the system and the people. You see it a little bit on STEEM where there are bots and you have people.

Well, there’s always gaming but —

Yeah, but empowering gaming versus making it hard, introducing friction to gaming, is an issue.

Yes. And incentivizing, distributing tokens based solely on upvotes and downvotes or views is a great way to pay people to come up with ways to fake views and to create accounts.

We had just started talking about a novel solution that we are implementing with SMTs that will actually enable you to distribute tokens based on one account, one vote, but it only works because it is built on the foundation of STEEM which is still a stake-based system.

This is one of those other things — and I think another part of the problem with STEEM is that they just did too much. There’s too much innovative stuff in one thing, so how much stuff are you really supposed to focus on? There is a social network on a blockchain. How much more could there be? But in a world, in a community that claims to value decentralization so much, nobody wants to talk about the fact that the only way to earn Bitcoin is to mine it.

The only way to earn Bitcoin directly from the protocol is to mine it. It’s forgivable, because Bitcoin’s innovation was so massive, it was so new. The goals were very, I think, intentionally constrained. You can’t take it down, you won’t be able to take it down. It will bootstrap its own value for various reasons.

I think there’s an irony and a blind spot, because I think a lot of people in this space imagined that you were replacing central banks, that Bitcoin enabled the replacement of central banks.

That’s still widely held as the ‘dream’ and goal.

Right, and that’s because the people who are Bitcoin’s central bankers have a vested interest in pretending that they are not central bankers, but that’s what miners are. Miners are the central bankers of Bitcoin.

Because tokens are created, and they are distributed to a small group of people who are then tasked allegedly with distributing those tokens. The best, friendliest interpretation of it is, because these people have a vested interest in the protocol, it’s in their best interest to give these tokens to the right people or sell them.

Now, there are so many people that have them. But if you simplified the organization the most, there are two ways to get Bitcoin: mine it or buy it from somebody who mines it, or buy it from somebody who bought it from somebody. So, they are the central bankers of the Bitcoin industry.

They have someone to policy control over it.

I think actually, the Bitcoin community can benefit from establishing some governance and some structures around what the miners should be doing with their tokens. Right now, there is no structure. Where is it going?

It’s on each individual mining pool effectively to distribute it however they want. They are not really incentivized. Bitcoin’s great. It is what it is. But they are not properly incentivized to encourage applications. I don’t think they are ideally incentivized to do that. They are not incentivized at all.

Until their main income source is transaction fees, they are still incentivized more to mine than to drive adoption. They don’t care if you adopt, because the less people the adopt, the lower the difficulty would be and the more Bitcoin they will mine in the meantime.

Yes. And at the very least that, what you can say is that on a protocol level, the only incentives built into the protocol are to mine it from what I understand of it. Again, totally fine. It’s the first one. It was pretty freaking revolutionary, right?

So, that is fine. But because of that, what is more important about that is that we’ve had this evolutionary process. Why did Ethereum use Proof of Work? It wasn’t because they thought it was scalable. It was because at that time, everyone was using Proof of Work. It was the only thing that was legitimate.

It’s the one that works. Now, I don’t see how you interpret Casper as anything other than an admission that that was an incorrect decision to some degree.

Well, yes. If you ask them they’d say, “We want both.”

Yes, and it’s fine, all of which is a roundabout way of saying for these reasons, we’ve accepted centralized distribution of tokens as the norm. There are people who do it. You can buy Bitcoin. Yes. That is a person on the other end of that sending Bitcoin because they choose to, because you have a conversation with them off chain.

No other protocol is even working on a system for manufacturing tokens and distributing them to all the necessary players in an ecosystem in such a way that it actually bootstraps its own value. We pioneered that with STEEM. We’ve used Steemit.com as a proof of concept to show how powerful this decentralized distribution mechanism can be.

And with SMTs, what we are offering to people is the ability to create your own version of STEEM but tweak the parameters, allocate founder’s tokens to yourselves, allocate trenches of tokens to the founders of the team, to important community members, to investors, whether they are private, or if you want to do a public offering you can do an ICO.

There will be smart contracts built into the smart media token’s protocol to make it super easy to specify how you want an ICO, how many tokens you want to be in it, when it happens. And with our next hard fork, we are going to enhance the ability for other developers to create accounts for people without making it insanely gameable. We actually have incentives to have one account. That is where you accumulate STEEM power.

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So keeping your digital identity unified is incentivized because the more power that you consolidate into your one identity, the more control and influence you have on the platform.

Yes. And so, that enables us to say with a higher degree of confidence that these are real people because this is their account, we can look into an account. There is also a lack of incentive that there is in other blockchains to create accounts.

Like with Ethereum, it is fairly common practice to create new addresses every time you want to make a new transaction. With STEEM, there is the opposite case. If I want to send somebody money, I do it from my main account. That is where I have my money.

The incentives and the disincentives encourage single accounts, even though it’s perfectly fine to have multiple accounts. We can say that I believe that we have the most users, and the decentralized distribution mechanisms, the integration into real applications that people use, leads to that.

In my opinion, this is one of those other real unique value propositions of STEEM and then of SMTs. What it really offers to developers and to entrepreneurs is the most efficient way to create a

decentralized autonomous corporation or organization in the world.

You’re an app developer. Your company is going to focus on building the application. Your application is going to ideally have thousands of users.

In order to maximize growth and productivity, what you want to do is integrate the token into your application. It is what corporations do, they call them shares. The reason why they do that is because it enables you to coordinate activities in an organization without the cognitive load of a finance department and an executive branch deciding who deserves what and who gets what. Which is inefficient, unfair, and inevitably leads to people feeling slighted and exclusion of certain people, biases, all of that stuff.

And so, what we offer is the most advanced technology for building a decentralized autonomous corporation right now. By integrating with STEEM, what happens when you integrate with STEEM is you piggyback off of our decentralized distribution mechanism. For example, Utopian rewards people who submit open-source code.

When they submit that open-source code, there are people who are in that interface that have STEEM power. They’re going through and they are upvoting and downvoting code that they like. And based on those upvotes, STEEM is rewarding them.

If you wanted to create an application, let’s say on Ethereum, that rewarded people for submitting open source code to it. How long do you think it would take you to develop that and develop the logic for incentivizing all of those people?

How long did it take to build steemit.com?

Three months, but steemit.com isn’t on Ethereum. You’ve seen how many projects announce things on Ethereum.

And then build forever.

Yeah. So, forever seems to be the current answer.

The average length of shipping your mainnet is forever.

Yeah. Building apps is a whole lot easier than writing blockchains, that’s for damn sure.

Right. Exactly. But not only that. Even the people who are looking to build blockchain applications, they’re really only looking for this very limited functionality that they just don’t realize is available to them on STEEM. They want a couple of things. They want a blockchain protocol that’s scalable.

A lot of projects that you see on the space — I mean, I don’t keep track because I have a fucking job and I’m super busy. I can’t keep track of everything that’s going on.

A lot of value props are simply scalability.

Yes, they are basically like, “We want to reward these people for something, and so, we need to launch a token that is super-fast and super low cost. And so, that is why we are building this new blockchain with this new, unique protocol.” I’m looking at it and I’m just being like, “Why wouldn’t you just outsource all that to us?”

Well, you’re a trusted third-party.

But our blockchain is decentralized and open-source. I mean, we get it. It’s nice to build your own blockchain, but we’re really good, you know. Our blockchain is processing more transactions than every other blockchain combined. And we are not even using 1% of our network capacity. You’re going to beat that?

Everyone thinks they’re cyberpunk and they’re building the new internet.

The fact of the matter is, we are growing as fast as we can. Integrating a token with Proof of Brain is the easiest way to turbocharge any application, because it’s instant gamification. You’re not going to start writing down our unique value propositions.

Yes. As unique as they sound, there’s quite a few of them.

Or maybe I am using the wrong term there, I think one of the best frameworks to come at STEEM from, is that it’s a turnkey gamification system or like a game point system, all it is. And I’m happy to just be like, “Yeah. Super simple, super stupid.”

You integrate with it, and you immediately get a game point system that’s designed to maximize engagement. That’s all we did. Do you want to know how we did it? It’s pretty simple. We classify people as content creators or curators. Forgetting block producers, right? Block producers are paid a salary to just maintain the blockchain and they’re elected in.

100% of the reward pool goes to the players of the game. What DTube, and DLive, and Blockdeals, and Musing, and DSound, and Utopian have done is tap into STEEM’s game point system. They’re already growing exponentially because of that, also because they get to share a preexisting user base. That’s another huge value proposition.

You inherit all of those users. No new accounts, no moving your content.

You create a halfway decent application on STEEM, you immediately start getting exponential growth just because all STEEM users are there, are ready. I mean, the design of the system is just so elegant.

The criticism of that might be, “Yeah, but it doesn’t matter if they are not serious stakeholders.” Yes, but who has the most incentive to check out great new applications on STEEM? Large stakeholders. That’s why when new apps come on STEEM, and they are like, “We need help getting attention.” Usually I am like, “There is no help for you.”

Because if your application was halfway decent, someone would have found it and shared it with the stakeholders.

The more people using it, the more money everyone is making.

I’m a large stakeholder in STEEM, and somebody builds an education platform that’s user-created courses. I don’t want to share it? I don’t want to go there? I don’t want to start uploading a bunch of shit? Giving great contributors tons of money? Of course I do.

At the very least, the incentive is there. There’s not much more you can do on a protocol level than create the proper incentives. That’s all we offer. I think a lot of other protocols are falling into the trap of trying to solve every problem on the blockchain level.

One point that I just want to make clear is that you will be able to tweak the Proof of Brain algorithm with SMTs. You will be able to have 1,000% inflation. You can have all of the token emissions, all of the tokens in the rewards pool. You can have them all go to posters, not commenters. You can have half go to posters, half go to commenters. You can have 90% go to curators, only 10% go to creators.

I don’t know why you would do that. There are other cool stuff that you will be able to do too. You can specify the rewards curve.

DPinterest? I was just saying why you might incentivize curators over posters if it’s a platform where people are sourcing content that’s not theirs. It’s a discovery platform for posting. “Hey, I found this online.” The curator is the…

That’s a really good example. I might use that. The crazy thing is that — forget anything being innovative about STEEM, even though I think it is. Go through every website that exists now that has a market cap that has a valuation of over a hundred million dollars.

Every single one. What if I integrated that with STEEM? Pinterest, right? Digg, Twitter. Every major application, even if it’s just a dumb integration where you just go, meh. But they are getting to be more innovative.

There’s an endless supply of products that could be plugged into this ecosystem and have this incentive structure laid overtop in order to reframe how these sites are incentivized.

Yes. We’re giving you so much more than that. We are giving you the ability to give yourself a bunch of tokens, yes, and then do nothing and the token will bootstrap its own value.

Just Keep STEEMing

In the final part of my conversation with Andy we touch on what made STEEM an early success, why he’s confident in the future of STEEM and the mechanism that will guarantee this future built into the platform.