STEEM, It’s all about POWER!! (Part 2)

When I started using Steemit around 2 months ago, there was one thing I struggled with from the outstep. How does Steem have any monetary value. Now I realise there are 2 very good reasons why Steem does have value, and why that value should appreciate (increase) moving forward…

How does Steem have a monetary value?

Power:
This all began to make sense to me (after using the platform and accruing Steem Power for a few weeks) when my up votes started allocating $0.01+ of Steem Power/Dollars to all content I upvoted. Steem's value is in the POWER it gives the holders to reward content and writers they like, and incentivise them to continue to provide this content.

Unit of Labour:
Steem also represents a unit of labour in the same way as the US Dollar, and any other national currency. Steem is paid out as rewards in exchange for Content Creation and Content Curation. At it's simplest form, users essentially donate labour to Steemit in exchange for payment in Steem. The economics of the Steem(it) system are set up very similar to the real world. You put time in, you get rewards out. Let's not forget, the gold standard doesn't exist anymore, £ $ pretty much only represent a trusting the central bank, and represent a transferable unit of labour...

The only difference is, this is a much more democratic version. It doesn’t matter who you are, where you are born, what you look like… The level of compensation you receive is all about the quality (there is also a function of quantity of coarse) of your contribution, decided by a community of judges.

Why will Steem’s value appreciate over time?

As more and more users enter the Steemit experience, demand for ‘Power’ will increase. There will also be an increasing labour base chasing an amount of Steem that is (to all intensive purposes, considering 97% of Steem is Powered Up) inflating by only 10% per year. I also think that (short term) we will see average rewards per user fall (and this has happened over the past week with an increasing user base) until this finds a stable level. We have seen the unit of labour cost fluctuate wildly over the past month or so;

3 Weeks ago: $30m Mark Cap, $3m worth of Rewards per year, 4700 users, Average Payout per user per year = $638

2 Weeks ago: $120m Mark Cap, $12m worth of Rewards per Year, 7300 users, Average Payout per user per year = $1,643

1 Week ago: $400m Mark Cap, $40m worth of Rewards per year, 10,000 users, Average Payout per user per year = $4,000

Today: $300m Market Cap, $30m worth of Rewards per year, 25,000 users, Average Payout per user per year = $1,200

In the near to medium term, this will be the stabilising factor for Steem. I think we could see Average Reward Payouts per user be the function by which Steem as a ‘stable currency’ could be valued.. Eventually, if Steem succeeds as the founders hope, we will see a decoupling from all these measures, and it will be valued in it's on rights as a currency regardless of the Steemit platform, however we can leave that to another day..

Some further thoughts on Steem, Steemit and the Power it gives users (if you missed Part 1):

The ‘Power’ Steem gives it users is considerably democratic. The more Steem you have, the more power you have on the platform. You can accrue Steem in various way;

1. You can buy Steem, this isn't democratic, however the fact that the inflation rate is so high, purchasers of Steem get penalised one way or another if they don't contribute to the Platform. Even Steem Power carries a inflation rate of 10%p.a. (Steam itself carries a 100% inflation rate p.a), but also locks that user in for 104 weeks whilst they cannot realise the investment.
2. You can be a content creator. The better you are, the more your liked, the more rewards you get. High incentives to create great content and give users what they want.
3. Engage with the content creators, you can earn $Steem if your contribution is deemed useful from the community, thus incentivising further engagement.
4. Pick great content before everyone else, you get rewarded with $Steem

Generally social media and content delivery as it should be. Where there is big reward, content creators will come, if your contribution is deemed unnecessary, you will receive no $Steem and be encourage to adapt to what the community wants.

The other interesting thing is that, the more Steem you have, the more reputation (power) you have, and thus you can help content creators get more views with your up vote than they might do with someone with less Steem. This means that, the more Steem you have, the more Power you have to make or break content creators income. This incentivises community members to hoard Steem. Power is valuable, and could become ever more so valuable as the Steemit community grows.

Large amounts of Steem can influence community members to read a certain content creator, or read a certain subject more than others. It's no surprise that the most popular tags are 'steemit’ and 'introduce yourself'. This is where the value is for content creators, and this is where the large Steem holders are spending most of their time. This will of coarse change as the platform develops and builds a loyal and productive user base. It’s great that early users are being rewarded for their efforts at this juncture. Steemit would be nothing without them…

Could we see a future where corporate entities purchase large amounts of Steem in order to reward customers, or for subliminal brand advertising? Luckily the inflation rate means there is an ongoing cost to such activity that will only benefit Steemit. That is where the value for Steem is, the ability to influence a content network into a direction you prefer, the more Steem you have, the more influence, the more POWER.