Are we right to put so much hope into SMT's when we see the development of the Steem-Engine Tokens?
There are some quite successfull tokens on Steem-Engine but they are few. We can't help to notice that for most of the Scot-Tokens, the tokens that will come closest to SMT's, the value of the tokens, expressed in USD or in Steem, has been going gradually down over time.
What are Scot-Tokens doing wrong?
Most scot tokens are lacking quality sinks. Meaning that there are no real ways to use these tokens. It is true that some tokens lost their sinks because of #newsteem and the fact that it is not possible to sell votes on steem anymore. Many tokens simply have no real application and therefore the only use they have is to be sold for steem. This puts a constant sales pressure on the coins and with an organically growing supply due to the inflationary system, the prices can only go in one direction. It is not surprising now that most of the Scot-Tokens lost a huge percentage of their initial value.
Can a token with an inflationary model work at small scale?
The problem with Scot Tokens and probably also with SMT's is that they are built on an inflationary model. A certain level of inflation feeds a reward pool that is then distributed to the contributors and the stakeholders. This is nice and in a way an interesting reward model. But can it work at a small scale?
The demand for Steem, Scot-Tokens and SMT's needs to grow at the same rate than the inflation. Otherwise the demand can't follow the supply and it will lead to a loss in prices. Steem is very big and has a quite healthy ecosystem with many use cases for the coin. So there might be a growing demand in steem and the transformation into steem power will slow down inflationary tendencies.
When new tokens are created with such a system, there might be an initial hype with overpriced tokens but if there is no real use case for the tokens, the demand will quickly go down and with it the prices.
Will SMT's bring concrete use cases and according sinks?
To be able to allow stable prices, SMT's will have to overcome the weaknesses of the Scot-Tokens. First of all, they will need to make sure that the demand for the coin will be constant and increasing over time. The danger is that we will assist to a new wave of Ico's that will result in people either being riped off or in tokens that nobody wants.
To fullfill the blockchain's hope SMT's will need to be better
- SMT's will need to provide ways to spend the tokens for things that people really want. If they fail to provide that, the coins will simply be sold.
- The creators of SMT's should plan the supply of the token well and be able to adapt it on a market. The proceeds of the initial sale should be partially used for that and to create demand for the token.
Investors should be careful
If SMT's will be run like Scot Tokens, it is clear that they will face a similar fate. So for investors of any kind it will be important to be careful while investing in SMT's. How much inflation will there be? Who will be the stake holders? Are there real and interesting use cases for the Token? How can the Token be exchanged?
As long as SMT's will be based on a similar inflationary model, it is safe to expect prices to go down over time. SMT's will need to be much better than that. Fortunately the whole blockchain made it's experiences and it might be a way to start with an improved version.