I commonly hear that steem is not meant to be a currency that you hold and if I want to avoid inflation I need to power up my steem.
The problem is that the price of steem needs to be able to grow to handle the growth of this platform if steem the currency is constantly inflated by at least 100% every year then how can it possibly grow in value.
People already complain and say they are going to leave because they earn 50$ instead of 200$ per post but if steemit.com has 100 times more users they will earn a lot less if the price of steem doesn't grow by the same ratio or these new people will leave because they earn nothing.
I often hear steemians say that new users means more people are buying more steem to power up but this is not true, the people that buy steem are mostly investors not the users who were promised to make money blogging, the people with heavy pockets have always and will always be the ones paying for content/advertisement,etc..
The issue right now is that investors are all asking themselves the same questions how can I make money with this thing and how can the system handle 100x 1000x more trafic?
Imagine a scenario where steem was only inflated by 10%. First the price would have never gone from 4$ back to 0.3$ as speculators would have bought much sooner.
There would be no difference with the power down system, actually maybe a psychological difference as people's SP power balance will go down immediately so they may reconsider powering down.
In an interview Dan said that the growing steem power is a psychological thing, when people see their balance grow they feel good about it.
I would argue that what matters is actually the value of their account, and when it keeps decreasing people especially newbie don't have a clue whats happening and feel pretty sketch about it so you actually achieve the opposite effect.
If you have only 10% inflation the price of steem will likely grow and users will see the value of their account go up, at least it won't go down 500% in 3 weeks...
Another thing that users will be sketched about is the stock split, sure the value of their account would be the same but they might kinda freak out when the see that they lost 9/10 of their steem power, with only a small inflation you pretty much don't need to do a stock split.
A currency like steem with the only purpose of being a mean to buy steem power could survive but not if it is so much inflated , because this inflation removes completely the main use of pretty much every crypto which is speculation.
Some steemians say steem was designed to remove speculation in order to get price stability, I would argue that stability is created by a liquid market, the market of steem is actually highly illiquid as most steem are locked in the contract. That's not even the point though.
Currently people are scared of investing in steem because of the inflation and even if you power up your investment can literally vanish in a few weeks as seen recently ( personally I dont think we ever going to see 4$ again, not with this set up which beg the question how do you handle 1000x new bloggers? )
Today steem power is seen as an investment. I think it should be seen as a tool to earn more steem/ play the steem game and steem should be seen as an investment.
Scarcity or at least the illusion of it is very important for a currency, that's why bitcoin is so popular because it has a limited supply. If steem didn't have so much inflation people would feel good about buying it.
To me this is the logical thing because if steem goes up it means steemit.com can pay more bloggers and so it means that it is more valuable.
With the current set up we are in a conflicted situation where steemit keeps getting better everyday but its price keeps going down, users want mass adoption but this means they also want less rewards, steemit inc wants to grow the user base but the steem bockchain have less and less money to give to users.
If the inflation was 10% only with all the good news of curation guild, escrow market, steemQ, esteem, steemaccess, etc... the price would be going up right now and the depressing atmosphere would be an euphoric one.
Anyway this is my little rant but ultimately what I want to understand is why steem is inflated by around 300% right now and will gradually go down to stabilize at 100% when it could be about 10% and become a very attractive tools to investors and allow the price to grow ?
PS: I also want to admit that in my previous post I was wrong about something I thought that if you want to get out of steem you can't because the steem power grows faster than what you can get out every week. I failed to consider that each time you power down you will receive less steem power %"interest" so it keeps growing now but at some point it will reverse and start going down, so sorry about the people I argued with over this, I wish they would have explained to me why I was wrong but none did so had to figure it out myself.
YOUR MISSION, should you decide to accept it, is to get busy and provide content. Lookit Facebook , Reddit and the other Social Media sites. They have content. That's why people go there. It has nothing to do with being paid. Get busy writing content and attract people. FaceBook's market cap is 374 BILLION. How can they do that if they don't pay? ANYTHING we get on Steemit is better than what we would get on FaceBook or the others.
Why the complaint?
You missed my point. Here is the important part
In other words, the more users the less everyone is going to get paid. This was obviously expected and it would be impossible to pay more as more user register but if the price keeps growing it would be possible to mitigate this fact. However with a constant decline in price du to inflation and lack of interesting investment proposition , at some point steemit won't be able to attract new bloggers. You already see the effect of this when people complain that they used to earn more per post.
Investors ask themselves 2 things, how am I gonna make a return and is this viable long term? The answer to these questions is NOT SURE and NO.
Steemit would never be able to compete with reddit,facebook,etc..if there was no innovation. The whole point of steemit is to rewards users for the content they provide instead of paying steemit CEO.
Facebook has value because advertisers are willing to pay big money to advertise on the site.
Steemit and facebook are 2 completely different model.
Do the math on how you voting power goes up with financial investment. It just doesn't pay to do it, to gain less than pennies in voting power.
Steem power should not be seen as an investment because as an investment it's really bad due to the inflation of steem. Steem power should be only a tool to make more steem, the more steem power you have the more steem you can get.
Also if steem wasn't so inflated steem power would actually become a good investment eventhough its not its purpose.
Well said
Can you explain how steem works? I don't understand the concept. How is inflation controlled?
The amount of steem is doubled every year, 10% is whats being used for payouts, curation rewards, and for new users to sign up. The other 90% is paid back to steem power holders, so in reality the inflation is 10%, it just depends if you hold steem power or not. Thats the incentive to hold Steem Power instead of Steem and only use Steem when you want something with higher liquidity to sell out or buy in. Steem Dollars offer a higheer liquidity as well but they only pay 10% interest yearly.
Thanks for the explanation!
Anytime, glad to help.
The inflation is controlled by code. Steemit is based on a new tech called the blockchain which allows currency creation like steem and bitcoin.
Thanks for this post which actually opened up a new scenario for me which I had not thought of. I do not claim to have understood everything you have said in this post, but I do realize this is a new school of thought which should be put forth for the lay users, and investors, to consider.
I also consider this post to be a "good content" post, which everyone seemed to want for the last 3 months, and an example of the sort of quality debate everyone wanted. But it pains me extremely to see your post being ignored, considering that I came across it 12 hours after you posted and is not even half a dollar yet and 46 votes (Which is just a yardstick, and not greed! BTW).
The price of steem is dropping, and posts like these are being ignored as they represent another view which may not be "politically" correct . I find that "herd mentality" is kicking in pretty fast, and this we must resist by having every school of thought heard. Which this post is, albeit in troubling times for steem when the "this is my last" posts are increasing in frequency.