Steem, Steem Dollars, or Steem Power? What the hell should I buy?
Welcome to Steemit! As a new user, this question has plagued my mind.
If you're reading this, you're likely wondering the same question. Out of these three choices, which cryptocurrency should I HODL for long term growth and benefit?
I'll do my best here to try to quickly break down these three choices so you can make your own decision.
What is Steem?
Steem is the base currency of Steemit.
It is designed for speculation. This is the only 1 of the 3 currencies that can be traded on exchanges like Bittrex.
Steem is used to buy Steem Dollars and Steem Power.
The quantity of Steem doubles every year.
In most cases, due to the inflation of 100% per year of Steem, you'd want to hold on to steem no longer than 10 days (otherwise, the built in inflation is devaluing your Steem by 0.19% per day)
What are Steem Dollars?
Steem Dollars are not traded on any exchange. The only way to trade this is to change it for Steem, then you can trade Steem on any exchange like Bittrex.
Steem Dollars are pegged to the price of a US Dollar. $1 Steem Dollar is equal to $1 US Dollar.
Steem Dollars also pay interest. If this is 10% over a year and you have $100 Steem Dollars, then you'll have $110 Steem Dollars at the end of the year. Whatever the price of Steem is, you'll be ensured to have $110 USD worth of Steem when you decide to cash out your Steem Dollars.
This was invented for stability.
If you have $1 Steem Dollar and you want to cash out, and Steem is trading for 10 US Cents, you can exchange that $1 Steem Dollar for 10x Steem coins. You can then sell those 10x Steem coins on an open market exchange for 10 cents a piece for a total of $1.
What the hell is Steem Power?
This is a long term investment vehicle.
For every 1 unit of Steem Power, you'll receive 9 steem over the course of a year.
You cannot withdraw these funds whenever you want.
If you have 10,000 Steem Power, you can cash out for 10,000 Steem over 104 weeks equally divided.
The remaining amount of steem 90% goes to pay out Steem Power. It's a long term investment with high interest rate, but has restrictions on when you can cash out.
If you believe in the platform, you should get Steem Power.
You also have more influence on the Steem platform if you have more Steem Power. Your upvote will be more powerful.
Recap
Always buy Steem, as this is what you need to buy everything else. Steem inflates at 100% per year. So if there is 1 million Steem available in the world at the end of 2017, there will be 2 million Steem available in the world at the end of 2018. This is the only currency of Steemit that you can trade on exchanges like Bittrex. The price is volatile, so traders might like this to do do buy/sell trades for profit.
Steem Dollars are worth $1 USD no matter what. You'd want to convert Steem to Steem Dollars if you are looking to buy something on Steemit (perhaps in the future, people will post items they want to sell in exchange for Steem Dollars). You also earn around 10% interest per year by holding onto Steem Dollars. Steem Dollars can be exchanged any time you want for the USD equivalent in Steem tokens, which you can then trade on an exchange to get back into USD should you desire.
Steem Power is for the believers of the Steemit platform. If you're an author on Steemit, or you really like using this platform and think it will be the next Reddit, this is the stuff you want to get into. You'll need to buy Steem then change it for Steem Power. Steem Power will make your upvotes on Steemit more powerful, giving you influence on this platform. The catch is you can't exchange back to Steem whenever you want. You'll have to initiate a "Power Down" which will take 104 weeks. So if you hold 100 Steem Power, it will take 104 weeks to exchange all your Steem Power for Steem, which you can then exchange for USD. The benefit of holding Steem Power is that you're more powerful on Steemit and you earn somewhere around a 90% interest per year in the form of Steemit.
So there you go. Buy Steem if you want to do some trading, buy Steem Power if you believe in this platform. I wouldn't bother with Steem Dollars for now.
Don't believe anything I say though; You can checkout the Steem whitepaper here: https://steem.io/SteemWhitePaper.pdf
If you found this helpful, please upvote this post and help a minnow out :-) Thanks!
Edit: The Steem Power cashout timeframe has been lowered from the original 2 years suggested in the whitepaper to 3 months. So Steem Power converts to Steem in equal payments over 3 months if you choose to power down.
This answered some questions for me. Learning all the ins and outs here is taking a little longer than I expected and I'm generally a quick study.
Thanks for taking the time to explain some things. :)
I'm glad this post helped you get closer to a better understanding of the Steemit ecosystem. I'm also learning as I go. Thanks for the upvote!
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STOPIts not true today all your post is false. Its arround 9 to 12 % inflation, you need 13 weeks to power down, and you dont gain more than 3% interest.
Thanks for the updated info! I've updated the post to reflect the 13 weeks to power down from Steem Power. I can't find any references to the current inflation rate except what's stated in the whitepaper so leaving those alone for now.