When people talk about Blockchain plus content, Steemit comes naturally to mind. Launched in June 2016, Steemit uses blockchain technology to record content, evaluates content based on users’ ratings, and rewards content accordingly using open-source algorithms with their own token Steemit.
Compared to traditional internet content platforms, Steemit takes out the middleman and rewards authors directly. It prevents cheating behaviors like click-farming and makes profit through dividend/commission. These traits make Steemit outstanding and to this day it has close to a million users.
As of Apr 8 2018, Steemit’s token Steem is ranked 29th on coinmarketcap.com, with a market cap of 488,797,447 USD. This proves the combination of UGC and Blockchain-based rewarding system is certainly viable.
However, Steemit’s rewarding system has its potential issues, such as their centralization of tokens and loopholes in rewarding mechanism. How to build a viable and fair ecosystem and tackle the issues of good content selection as well as the capitalization of content, is the biggest challenge of any UGC platform. There are a few pioneering projects in this realm and most of them are focused on 2 aspects: those lead by Steemit which publish content and those lead by Media chain which focuses on content traceability.
Although the main directions are the same, the operations of each platform different. So how does a platform come up with a reasonable rewarding algorithm to select good quality content and help the authors capitalize on their work?
I began my search recently and discovered a project which might provide solution to the existing issues of Steemit and become “Steemit 2.0”. As I am fluent in Chinese, I joined several Blockchain discussion groups in Chinese social media platforms and stumped upon this project called U Network. I browsed through its website and went on to research on it in Chinese media coverage and got my hands on the available information on it.
U Network (token UUU currently priced and 0.008 RMB, 0.00000345 ETH on HADAX) aims to resolve the 2 major issues of Steemit, namely the centralization of tokens and loopholes in its rewarding mechanism.
Let me elaborate on these 2 issues:
1.“whales”: the early participants of Steemit controls majority of the Steem tokens, which indicates a highly centralized power-structure. This group of people can control the growth and heavily influence the development of the entire community.
2. The rewarding algorithms: there is no cost in giving an Upvote to any content. This would lead to click-farming using bots and other cheating mechanics for arbitrage and also tolerates contents with poor qualities. In the long run these are really detrimental to the community’s development.
U Network tackles these problems through 2 main focus points: 1. Discover good quality contents through algorithms. 2. Capitalization of content through token UUU.
Steemit uses DPOS, which is similar to voting in elections. The benefit of this is high efficiency, performance and high centralization of power. U Network uses PBFT, which is an algorithm based on Byzantine fault tolerance, which is good for progress in the long run.
The actual algorithm can be put in simple words: content’s value is determined by the number of “Upvotes”. It also takes token to give “Upvote” or “Downvote”. The initial investments would be then rewarded by subsequent raters through an algorithm. In short, the earlier you discover quality content and invest on it through giving it a thumb-up, the more rewards you stand to gain potentially. This is like any investment through angel funds the earlier you invest the more rewarding you gain would be, provided your judgement is correct.
For example, if you are the 5th person giving an article a “Upvote”, you will give part of your tokens to the author and the first 4 people ahead of you who gave the “thumb-up”. This algorithm would encourage users to be more rational in ratings and discourage click-farming behaviors due to the initial investment. At the same time, the articles need to be more well-thought and outstanding to deserve more high ratings.
The exact algorithm is still under simulation and testing to achieve the fairest, most reasonable results. When I contacted the official channel on Telegram, I was told first alpha Dapp Chinese version testing would be released in middle of April 2018, a few months ahead of the original schedule.
The second part of the rewarding mechanism concerns the authors: authors’ rewards are based on the quality of their contents. Part of this reward comes from the mechanism above, but U network will also set aside a pool of our tokens (approximately 20%) to reward good contents directly. Additionally, it will select the top 20% content daily and reward the authors with these extra tokens. These incentives would motivate content authors to create better pieces and value quality over quantity.
Now let’s look at U Network’s tokens — — UUU. These tokens would be used for voting and rating contents; they would also be accepted for any paying contents, including subscription, groups, private messaging etc. There might also be direct broadcasting which would be accessed through token payment too.
U Network considered the impact of outside capitals before releasing tokens into the market. Steemit designed its token Steem Dollars to be pegged to 1 USD. However, it failed to work as its current value is over 1 USD. The reason behind it is very simple: when the value is below 1 USD, there’s incentive for people to buy it and eventually move the value up. Circling back to product itself, if the token value fluctuates too much then the author’s profits would too. That is the reason U Network’s initial algorithm remains simple such that the UUU value would not be affected by market value too much.
Essentially, U Network provides a solution to turn content valuation into an economic problem. As we know content’s value can be very subjective. Consequently, if no cost is involved in voting, users would randomly or blindly cast votes. When voting takes initial investment, it would transit slowly into an economic as opposed to financial model. The interesting part of the algorithm is that the first 35% voters would definitely make profits. As a result, if you estimate the value of a certain piece to be at 100 dollars and approximately 300 users would vote in favor of it, then as long as you vote among the first 100, you would make a profit. This economic principal promotes rational judgement and market prediction.
In terms of author’s power, U Network would also rank voters based on their authority in their respective professions or industries. For example, if someone has a good track record as content generator in a certain topic, he would be ranked higher than average in that particular topic. However, in terms of token distribution U Network wouldn’t rank different users.
In the beginning of 2017, not many people outside China had heard about NEO and NEOwas valued below 15 cents. Then its value went up almost 1000 times. Judging from U Network’s potential and its current market value, I would say it’s heavily undervalued. If it‘s Alpha and Beta testing go well in the Chinese Market, its price would easily hit 10 cents to a dollar USD in the near future. If I were to pick the NEO of 2018, UUU is definitely my top choice.