Steemit Inc., a social media platform built on a decentralized database that rewards contributors with cryptocurrency payments, has fired 70% of its workforce while the cryptocurrency crisis has affected its bottom line.
Founded in 2016, Steemit is often described as a blogging platform built on its blockchain, but is a little closer to Reddit with a payment function. Users create content or share links while other users, in supporting the content they prefer, suggest users STEEM cryptocurrency.
Like other startups that use cryptocurrencies at the center of business models, STEEM has seen the value of its cryptocurrency drop from the start of the year – in this case, an astonishing 96 percent compared to its historical high.
"Given the weakness of the cryptocurrency market, the fiat returns on our automated STEEM sales down and the rising costs of managing the complete Steem nodes, we have been forced to lay off nearly 70% of the team," Ned Scott, founder and CEO. 39, Steemit's CEO said in a statement last Tuesday. "The rest of the team is focusing primarily on reducing the costs of the infrastructure that manages steemit.com and our public APIs, ensuring that the community can stay informed about developments."
Scott added that "in order to continue improving Steem, we must first control costs to remain economically viable". While a reasonable argument, if a rather rare goal for a startup founder, Steemit's problems are probably more representative of the broader market than the company alone.
An October report found that blockchain companies were switching to traditional venture capital as initial coin offerings quickly declined in popularity. And that was before the wipeout in the cryptocurrency markets started in mid-November.
"The problems of the project will certainly call into question the current feasibility of managing projects with real operating costs as well as cryptographies with highly volatile cryptocurrencies", The Block has rightly remarked.
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