This blog is incorrect.
And it is highly insulting for such erroneous misinformation to be highly upvoted while ridiculing me.
I wrote the blog post which bacchist is quoting and criticizing with this post.
Let's begin with the Investopedia defintion:
What is 'Compounding'
Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.
Also known as "compound interest".
The Steem white paper says that for every 1 STEEM created for a block, 9 additional STEEM POWER are created and distributed proportionally to STEEM POWER holders. In other words, for every 10 new units of money supply created, 9 of them are STEEM POWER and earned as interest for STEEM POWER holders, regardless how you account for them as a ratio to VESTS.
The interest paid to STEEM POWER holders is taken from STEEM holders, as a percentage of the market capitalization.
The reason you guys are fooled is you are not accounting for the fact that the interest payments are taken from STEEM holders and given to STEEM POWER holders.
I am sorry for those who lack math skills and upvoted this incorrect blog post. Please note your names are listed on the list of upvoters.
There is a big difference between what is happening to your Steem Power balance and what would happen to your credit card balance if you missed a few payments. There will not be exponential growth of the money supply and the attendant hyper-inflation that would bring. It's not going to happen!
There is exponential growth of the Steem money supply. Even if you keep the VESTS constant and account for tokens divisibility as separate parameter, the external unit of exchange are STEEM and the supply of STEEM is growing exponentially with a compounding on newly minted STEEM on every block.
Did you happen to notice that a certain @dan is among that list? You know, the guy who invented this system in the first place? Are you claiming his math skills are lacking, and he doesn't understand what he created? A little humility might be in order here.
Just to be fair, Dan also upvotes plagiarist. So I'm not sure he is actually reading what he upvotes. It's more like he glances at it and calculates, "will normal people upvote this?" and then clicks accordingly. It's like on Twitter when they say, "Retweets are not endorsements". Upvotes are not endorsements, but more a game of whether or not you think other people will blindly upvote a post without thoroughly assessing it's content. ;)
https://steemit.com/steem/@jl777/truth-and-fairness-vs-popularity-what-to-do-when-a-post-that-says-another-post-is-wrong-and-gets-more-reward-than-the-original
As a community do we care more about accuracy or popularity?
from the "voting is popularity contest" by smooth: "Downvotes are widely discouraged except for reporting abuse, which means every non-abuse post with at least one upvote should have an upvote percentage of 100%"
@tuck-fheman would you consider what bacchist did to anonymint's post as non-abusive?
https://steemit.com/steem/@smooth/voting-is-a-popularity-contest
I don't agree with a lot of the upvoting and downvoting on Steemit. People are downvoting for others using what they consider to be a wrong tag on their post or because they posted in a different language and didn't tag it with that language.
Any sort of consensus has been lost in recent weeks due to the influx of new users happy to make up their own set of rules. I'm sure over time it will work itself out just like it did when the 2nd wave of new users hit the beaches of Steemit island.
After people have been here for a month or two they realize what the whales approve and don't approve of, and if they want to make money they will "pander to the whale" or perhaps persuade a few whales to change their minds.
When people's rewards begin to dwindle, they realize they need to change their ways. It's generally only those who have been given a free whale ride for a while that feel like they can do whatever they want without retribution. But once their post start earning $1.28 each, they'll come around usually. ;)
I'm not speaking for Dan, but I think he's said in the past that he upvotes anything that will bring about an open discussion. He many not agree with the post, but thinks it's a topic that should be discussed and in this case it appears he is correct, assuming that is his reasoning behind his upvote.
Yes, that's a good point, but this (I'd imagine) is a slightly different type of article. It only takes a quick scan to see what the content is about.
As far as I understand, VESTS don't change over time unless you curate or post. Steem Power is just a reflection of your VEST holdings given the current ratio of 1MV to Steem Power (234 right now) . To me, it seems like share dilution, not compounding interest. That said, I understand how easy it is to get this confused because I wrote two posts myself on the Steem Power "interest" before better understanding things.
If the money supply of the dollar remains constant, yet we use an accounting ledger which moves dollars from one person to another when an interest payment is made, is that not an interest payment because the total supply of dollars didn't change.
Just because you invent some orthogonal ratio token that remains constant doesn't mean value wasn't transferred. Duh!
Come on guys, I don't have time for middle school math tards.
@lukestokes:
If you call analysis trolling, then yes I am doing analysis at Bitcointalk.org. Some of it is postive for Steem and some of it is critical. Otherwise it wouldn't be analysis.
@bacchist wants me to be 100% loyal. He doesn't want the fact that Steem is an exponential compounding system to be exposed. Which may explain why @dan upvoted his (or may not if @dan didn't even read it).
Yes I am claiming @dantheman can come here and debate me if he feels he is correct. I already explained the math. Let's wait to read a cogent rebuttal.
See also my explanation that this is not simple interest.
Edit: tie-warutho you are wrong. Please stop downvoting my posts!