Try to compare Steem's economic model with Bitcoin's. They are quite similar. The only difference is that Steem spends inflationary funds on rewarding content creation and curation, whereas Bitcoin spends similar amount of funds on burning electricity. Actually BTC spends much more but when compared to market caps - it's similar.
If Bitcoin's economic model can survive and expand, so can Steem's.
If there was no Bitcoin I would have similar doubts as you are having. But the existence of BTC and its 8-year old track of resilience denies common sense and classic economic principles.
Bitcoin has a limited supply, known in advance. And it was the first cryptocoin on a blockchain, providing features that no other payment system did at the time (decentralization, transparency and anonimity). I believe these are the properties that made Bitcoin popular and give it value.
I can't figure out what similar values steem could provide. Sure, it gives you the power to curate content and distribute rewards, but I don't think anyone would invest money simply to gain these abilities. In my opinion, whoever buys Steem Power is hoping to get at least as much money back some time in the future as they put in.
What am I missing?
Whoever buys Bitcoin hopes for the same - that the system expands and they will get as much money back some time in the future as they put in.
Bitcoin is indeed a special case - it had a first mover advantage by providing very unique features as a payment system. But Steem is also a special case: it provides unique features as a censorship-resistant medium and an unprecedented content reward scheme - nobody has done it before.
IMO the only vulnerable aspect is this:
I've been thinking about it as well. Is this a crucial feature without which Bitcoin would have never taken off?
I think not, and this is why: the year 2140 (when BTC inflation stops) seems to be remote enough to exceed any reasonable investment horizon. And how will Bitcoin resolve mining incentives when inflation drops further? Bitcoin has no choice but expand and increase its price to compensate for decreasing mining rewards (the alternative is to increase transaction fees but this will kill the product). If Bitcoin fails to expand, it will collapse because the imminent halving process will effectively remove financial incentives for mining.
In short, Bitcoin faces a similar challenge to Steem and the limited supply does not help. Both Bitcoin and Steem need to continue expanding or find an alternative source of revenue. However Bitcoin's limited supply can have a psychological value - people's perception matters even if it's illogical.
Damn, economy is complex. I've been thinking for a while and i'm not any closer to an anwser than at the beginning.
I'm not sure how much inflation matters. On one hand, intuitively, I'd say if something is generated out of thin air, it should eventually become worthless. On the other hand, fiat is practically generated out of thin air and yet kinda-sorta works.
But fiat is also unique in the sense that it doesn't really depend on exchange rates; your salary is fiat, the grocery store takes fiat, at this point people believe in it so strongly it's just this ubiquitous IOU representation. But when you have a less popular, in everyday life practically useless token, exchange rates matter. And they are sensitive to volume.
It would be interesting to see how much BTC is mined vs how much steem tokens are generated per unit of time compared to the total available volume though.
And to address your point about BTC: I don't think mining has to be profitable. As long as it is, of course you will see huge farms consuming a lot of electricity for profit. Eventually, I could see users and merchants running single nodes in their own interest to keep the network running, breaking even from transaction fees or probably even at a loss. That would be the ultimate decentralization.
Btw thanks, thanks to you I'm even more confused now :/
@innuendo and @orly are having a nice back and forth here. I think this sort of discussion is valuable, but it won't get rewarded as it should.
Thanks for having a civil discourse and bringing your unique perspectives to the community. Even though you aren't getting a bunch of money, just know that it still is appreciated.
Thanks to you both.
You are watching the "tip of the iceberg", unaware that Dan stated "the real money isn’t in blogging, content generation, or voting. The real money is found in bootstrapping a digital currency. "
https://steemit.com/steem/@dan/steemit-s-evil-plan-for-cryptocurrency-world-domination
The blogging platform thing is a Trojan Horse. You can build anything on the Steemit blockchain once you have the users (markets, hosting, etc). The REAL goal is to take out creaky Bitcoin.