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Back before I had a more complete understanding of the Steemit blockchain, I assumed that the social-media network powered by the “STEEM” cryptocurrency was a revolutionary concept. I still believe that it is. However, my opinion conflated with another critical assumption – that STEEM would undergo a massive valuation spike. Obviously, that hasn’t happened and it may be a long time coming.

Earlier this year, I openly opined that STEEM could very well hit $4 by 2017 end. Now, that target seems like a pipe dream. At its peak, the Steemit cryptocurrency briefly exceeded $4 before quickly collapsing. Afterwards, the next highest peak occurred this past summer in June, when STEEM hit $2.52. Hindsight being 20/20, that was the ideal selling point.

Following its “deuce,” Steemit fans were disappointed with the blockchain asset being consistently stymied by the $1.50 resistance level. At time of writing, STEEM is trading a few cents above a buck.

The obvious question is, what happened? One of the biggest arguments favoring Steemit and the STEEM cryptocurrency was increased user engagement. As a social-media network, Steemit is miniscule compared to Facebook or Twitter. Nevertheless, thousands of people were joining each week.

Furthermore, the blockchain concept was integrating itself into the general public’s consciousness. Cryptocurrencies were no longer a fringe investment idea; today, it’s impossible to read a major financial news publication without it mentioning Bitcoin and leading virtual currencies. As the old adage goes, a rising tide lifts all boats.

But while other virtual currencies are rising, STEEM can’t get past its sideways consolidation. To explain its underperformance relative to other cryptocurrencies, the easiest answer is that other blockchain assets don’t necessarily impact the digital coin in question. Steemit has its own unique fundamentals (namely, the social media “schtick”), that separates it from other cryptos.

That explains some of the valuation deficit. However, the more critical explanation is that Steemit attracts integration without added value. In other words, more Steemit users dilutes the STEEM currency. The irony, of course, is that the blockchain network’s popularity is the primary reason why STEEM can’t gain any traction.

It’s not an entirely hopeless situation for Steemit. However, the network will need viable solutions to spark a market rally for STEEM. The problem is that people join Steemit for free. To attain STEEM, they can create content, which other users vote on, and ultimately, provide rewards.

But the reward pool’s value comes from the Steemit “whales” – individuals who have converted hard virtual currencies into STEEM. Without the whales, people would be rewarding others with worthless digital tokens.

As more people join Steemit, the actual reward pool becomes increasingly diluted. In my opinion, the only solution is to limit membership to people who agree to convert some unit of hard virtual currencies into STEEM. Otherwise, Steemit ends up sending invitations to a potluck dinner to those who want to eat, but don’t bring a plate to share.

As such, Steemit is a useful tool to enhance your business or your social media presence. However, as an investment, it’s a sinking ship – unless a viable solution such as my proposed limited memberships are implemented.

Using my analogy again, Steemit is a potluck dinner whose organizers want more food. Instead, it’s attracting more eaters. The current solution is to give all participants smaller portions. But per-capita calorie intake (or earnings per share) shrinks. That’s why STEEM is trading at a dollar while leading cryptocurrencies are soaring.

While Steemit’s originators and proponents desire increased volume and engagement, they need to instead focus on the value proposition. A unit increase doesn’t mean anything unless it’s tied to a value increase.

Otherwise, Steemit is no different than a decentralized version of Ben Bernanke.

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