Ned's Making $700k+ Every Week: Is the Steem Power Interest Rate Too High?

in economics •  3 years ago  (edited)

humpback-whale-436120_1280129fd.jpg

My biggest concern regarding STEEM right now is whether or not they got the economic math correct. Take a look at the current interest rate on Steem Power and how that impacts the balance of the whale accounts:

➜  php-steem-tools git:(master) ✗ php steem_rate.php ned
Sleeping 1 minute...
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Interest Rate Per Hour: 0.0344%
Steem Power Per Hour: 1011.1007175967
Interest Rate Per Week: 5.7792%
Steem Power Per Week: 169864.92055625

At the current price of $4.28 that's... $727,021.

WUT?

Did I mess up the math? Is my script wrong as far as how it calculates things? Is it really $700k+ in new value a week for a new startup?

I love the idea of this platform bootstrapping a currency and of the founders being massively, massively compensated for their creation. I think this platform could potentially make the world's first cryptocurrency trillionaires in fiat terms, and I'm all about that! What I'm not sure about is if the current exponential increase in Steem Power via interest is sustainable. I get that the interest rate will settle down to 12% annually over the next nine months, but what about the time between then and now?

If you'll notice, Ned (and other whales) are powering down:

neds_wallet59217.png

That could be to transfer as much STEEM as possible to other accounts because of the potential problem I'm bringing up here. It could also be to pay for real world expenses to continue to grow the team and infrastructure. If the intention is to sell in order to obtain real world $, can the market sustain a large sum of STEEM for sale every week? Given @ned's current balance (and I'm only highlighting one whale account here, there are more), his payout of STEEM should be around 28,000 STEEM:

2,937,140 / 104 = 28,241.730 STEEM

At $4.33, that's $122,286.69. At last check, the 24h trade volume of STEEM is $ 2,657,920. If Ned sells all his weekly STEEM, that would be 4.6% of the market activity for that day and less than 1% for the week:

If dumped in one day:

122,286 / 2,657,920 = 0.04.600841635565 = 4.6%

If sold throughout the week:

122,286 / (2,657,920 * 7) = 0.00657263090795 = 0.65%

Maybe that's fine? What if a few other whales do the same?

I guess we'll find out in the next couple days. If there's one thing humans are bad at, it's understanding the exponential growth of compounding interest. We don't encounter it nature, so we've got no hard-wired brainpower for handling it.

I'm a huge fan of Steem, and I really want this system to succeed on so many levels.

That said, I just had a friend message me today on Facebook about buying $1,000 worth of bitcoin (for the first time ever!) so he could convert into Steem Power. I have friends who bought at the top of bitcoin's price rise to $1,200 and still haven't broken even two years later. This gives me pause. Could we be in a similar situation? So many altcoin scams have lost money as @jaycodon points out in his post. Given the flood of liquid STEEM that's coming, will the market price hold? If not, will people consider this a pump and dump?

Is it different this time?

I realize by putting this out there, I may not be making friends with the whales. They may not want people to think about these things in hard terms. On a platform where reputation and influence is everything, I may be shooting myself in the foot. I also may not understand the economics here, and might be putting my ignorance on display for all to see. Either way, it's risky to put this out there, but I wanted to get my thoughts down for you all to critique. Having just finished a 24 hour experiment hiding all the $ signs on the site (more on that later), I'm a bit sensitive to the financials right now.

What do you think?


Edit: as @bacchist mentioned in the comments (throw him a vote!), the amount of VESTS an account holder has isn't actually increasing unless they interact directly with the site and are rewarded by the mining process for their post creation or curation. That means the VEST amount isn't going up, just the conversion rate between Steem Power and VESTS, which as of this edit is 1 MV = 1M VESTS = 229.382 STEEM. Thanks @bacchist!

Edit #2: Thank you to everyone for a such a great conversation! I've really learned a lot and enjoyed it. One thing I intend to do is no longer think in terms of "interest" but instead in terms of vested ownership dilution. The new Steem Power being created is dilution, even if the price isn't (yet) adjusting to represent that reality. Things are going to get interesting! Also, I wanted to make it very clear, I am in no way jealous of the whales here. I'm super excited for them!

Edit #3: Ned cancelled his power down this morning! What does that mean for Steemit and the market? I have no idea! Photo in the comments below.

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  ·  3 years ago (edited)

So much truth in this:

If there's one thing humans are bad at, it's understanding the exponential growth of compounding interest. We don't encounter it nature, so we've got no hard-wired brainpower for handling it.

A lot of the success of Steemit will be on whether the whales act smart for the long term. That means curating outside of a couple narrow categories, spreading out their votes to new people religiously, being thoughtful on how they shape the growth of the overall ecosystem without destabilizing it or being short term greedy. They need to be long term greedy.

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They need to be long term greedy.

YES. Absolutely.

The numbers I'm seeing above, $700k a week... that doesn't sound long term greedy and that has me worried about long term success. I'm not laying blame here, just trying to make sense of the numbers. It's possible they got the math/economics wrong.

As with most things... time will tell.

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That means curating outside of a couple narrow categories, spreading out their votes to new people religiously

Amen! Preach it brother! :)

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Agreed, but since they hold Steem Power, aren't they already long-term greedy to a degree? If they are invested in the platform, and have to power down over the course of two years, I doubt they would want to see any harm come to their investment as they power down. But yes, they do have a lot of responsibility in their hands with the future of Steemit.

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Yeah, I tried to analyze that a bit in the post to get a feel for what the next couple of days will be like. I ran the numbers just with Ned's account, but he's not the only one who has been powering down. Hold on to your butt, as they say.

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Actually, what would stop them from powering down their Steem Power so the Steem Power can be more distributed, and taking instead the Steem Dollars to live off the interest? We should not assume Steem Power will only and always belong to Dan and Ned. They could easily power down and take Steem Dollar interest for profit if it's profit they want.

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  ·  3 years ago (edited)

It's not interest, it's dilution prevention. The price of a single steem is expected to go down accordingly.

There's a lot new steem being created, powering up keeps your stake growing proportionally. At 90% total powered up (or VESTed, to make the connection to @bacchist's comment), there's no dilution for those who powered up. We're at 97% right now, so there's a lot already.

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@pharesim You stole the words right out my mouth but used more intelligent terms:) Great Rebuttal! The steem will drop.

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Thanks so much! I keep using the word "interest" because I'm thinking in terms of X over time becomes X + Y at some rate (which also changes over time), but I see it's a more intricate dance than that.

I think I understand now that the dilution should drive the prices down a bit and bring things back to equilibrium. Thank you!

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It's interest in the sense that quantity of STEEM you have increases over time in proportion to the amount you're holding. That does occur with both STEEM and SP... But it is not compound interest, which is what we normally think of, where at some point the interest accumulated is added to the principal.

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Yeah, that's a great way to phrase it. Previously, I wasn't thinking in terms of VESTS which don't change, even though your Steem Power balance is going up.

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Right. At 90% powered up, the growth of the money supply does not outpace the inflation of the vested STEEM. But with such a high % powered up, the money supply is increasing at a faster rate than even the inflation (aka interest rate) can compensate for.

I'm still trying to wrap my head around all the economics involved. I think in this case, I'm tempted to go against my typical disposition against concentrations of wealth and power. A couple reasons why It bothers me a bit less in the case of Steem Power and interest, than it does in something like voting power, where I've been vocal in my criticisms of the imbalances.

First, Steem Power doesn't really exist. It's just an abstraction. The amount of VESTs that are represented by the Steem Power figure stays constant aside from increases due to participation and interaction with the community. The difference is subtle, but it basically means that the growth doesn't resemble compound interest so much as inflation. In Malthusian terms, it's "arithmetical" growth, not "geometrical" growth.

Second, we are still well above 90% vested, which means that powered up Steem is still experiencing quite significant dilution. This is something that I need to think through a lot more, but it does mean that SP is not earning the full value of its interest, due to the money supply increasing at a faster rate.

Of course, this might worry some because it does imply that Steem is overpriced at the moment. In the future there will be far more liquid Steem, which means that supply and demand will drive the price down. This might not be something any of us particularly want, but it's not due to the interest rate being too high. It has more to do with so little of the money supply being available on the market. It's manufactured scarcity.

I'm interested in seeing what kind of effects SBD will have on this. The whitepaper says that SBD will act as leverage for STEEM, increasing both the gains and losses of value that STEEM holders see from market fluctuations. I think it might actually provide some stability during sell offs. If the price of STEEM falls below a certain amount, there would be less STEEM in existence than would need to be produced if holders of SBD tried to redeem them. It could result in catastrophic failure, where both tokens lose all value... but short of the economics breaking down completely, I think it might provide price support. I've called it a "semi-automatic stabilizer." I could be way off base there, though.

Another reason why the interest rate doesn't bother me quite that much is that high value accounts which are not actively contributing the the community through posting and interacting will lose ground to smaller accounts which are more active. Over time, such accounts will lose their relative status... I wish it occurred faster, but then again of course I do. ;)

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Great analysis, @bacchist. Thank you!

This is a key point I should have highlighted more:

The amount of VESTs that are represented by the Steem Power figure stays constant aside from increases due to participation and interaction with the community.

In order to sell, Steem Power has to be converted to STEEM which decreases the number of VESTS. I see what you mean there in terms of it not really being exponential when it comes to a change in VESTS, and that's an important aspect of the economics I'm probably not taking into account. I feel like not enough people are talking about VESTS few a new person like me to understand them and because it's not really mentioned in the white paper as VESTS. I also noticed https://steemd.com/distribution changed the 1 SP to be 1 MV.

The next day or two will be interesting as the whales (and others) finish their power down.

The interest rate of Steem Power will never drop to 12%. There is a 100% inflation in the token per year, and 90% goes to SteemPower holder. So there is a bare minimum 90% interest rate a year to SteemPower holder if i'm not mistaken... I explain this in my video: https://steemit.com/inflation/@alexfortin/the-inflation-of-steem-explain-why-is-it-good-for-you

The whales are making a lot of money right now but that is totally fair. They created something useful, invested their money and time ahead of knowing if any of this would be successful. I really don't see a problem with Dan making 700k$/week. It is not a zero sum game where if someone else win, you lose. Actually I wish that Dan makes 10 millions per week so that would means my Steem are worth even more.

The more people use the platform, the more this price of 4$+ will be sustainable and keep climbing. But we just came out of a 10x bubble and beside bitcoin, I never saw a coin doing more than that.

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Thanks for the reply, Alex!

By 12%, I mean this number mentioned in the white paper:

Steem by contrast will achieve an instantaneous annual rate of approximately 12% after just 1 year (not including the effects of SMD operations).

Which I talked about here. Are we talking about the same numbers? This stuff gets pretty confusing because there are so many moving pieces involved.

As for the whales making money, I have no fear at all there. I also hope they make $10M a week! But back in reality land, I don't think a new start up can increase the size of the pie that quickly in real terms.

I think we might see a correction in the price if the user base don't grow fast enogh.

This is exactly why I don't think the current interest reward of $700k+ a week supported by the current price makes sense for a social network which has (comparatively) few users right now.

That said, I'm very hopeful for the future, just cautious about my friends jumping into this financially. It could be that this is really cheap STEEM right now and it will rise to challenge Bitcoin as the most useful cryptocurrency around. It also could go back to $0.20 land and be left alone by the pumper/dumper alt-coin fans.

Thanks again for your insight.

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As per the whitpaper:

At first glance, 100% annual increase in the STEEM supply may appear to be hyper-inflationary and unsustainable.

Because 90% of all STEEM created is distributed back to holders of SP, the result is similar to having a 2:1 “split” every year rather true inflation. The total rate of expenditures used to reward contributors is about 10% of the market capitalization per year, a rate well below what Bitcoin sustained for the first 7 years after it launched.

As of May 1, 2016, over 98.49% of all STEEM has been converted to SP. This demonstrates that demand to hold long term dominates. In this environment both liquid STEEM and SP are diluted to fund rewards.

We need to differentiate Steem and SteemPower.
Steem on the exchange will increase by 11.51% (12%) a year. That is what he refers as instantaneous rate. But your interest rate on your Steem Power will be close to 90%/year.

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It's kind of misleading to use these terms uncritically without understanding all the implications of a rapidly increasing money supply. We should be careful about giving the impression that a 90% return on investment is somehow built into the economics of Steem.

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Shhhh.... Shush now... TO THE MOON!!!

Heheheh. :)

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Am I missing something?

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It can be confusing but it's not badly worded in the white paper as to being misleading. I understood there isn't a 90% return of investment and I think most understood it as well but I agree we should be careful not to give the opposite impression.

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Very interesting. Makes me wish I took economics classes in college =(

  ·  3 years ago (edited)

Yes, I believe the daily interest rate is too high. It's high enough that it incentivizes inactivity over other activities that provide value to the site, like content curation. See the article I wrote on this rewards for content curators need to be increased, and why it matters for more thoughts on this.

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Wow, great write up, @tarindel! It's a tragedy that post only got $0.27! I just gave it a vote in hopes we can get it noticed. Thanks for sharing. Previously, I didn't think the curation reward needs to change, but now I'm thinking maybe it should. That said, it rubs both ways. As curation rewards go up, they also go up for the whales which, in a way, makes the problem worse as far as their balances increasing due to interest.

So many complicated angles here. :)

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I might agree with you that curation should be better compensated, but I want to point out that inactivity is not incentivized in any way. Especially as things are now, where most STEEM is powered up and there is a lot of dilution of currency, inactivity causes your stake to drop in value.

Interesting... seems after almost 7 days, Ned cancelled his power down this morning. The plot thickens! What will happen next! What will the market do? No one knows! Welcome to the crazy world of Steem!

ned_power_down_cancel8b5fa.png

I don't understand anything yet about buying selling and all those things you talk about because for me most important that I feel inspired to just write and suck all in what is happened here . I have massive respect for such work you do ! 🙌

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Thank you!

I hope I made it clear that I'm not really sure what I'm doing either. But either way, I've made some interesting relational connections so far and, as you said, I've also been inspired to write. High-five indeed. :)

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Luke , all I understand for now ...Those whales are in power and I am also worried about longterm success as you mentioned .

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Indeed. The whales rule the waters.

I hope I didn't piss them off with this post. :)

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so whooot :) They will find you ...just wait lol

@ned and @dan they are the creators along with other whales. They get paid more then what the steemit accounts shows. It's their company. So don't be jelly be thankful.

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Hello @paco. If my post came across as sounding jealous, than I failed at what I was trying to understand and communicate. I'm very grateful to both of them and the rest of their great team. As I said in my post, I hope we can help both Ned and Dan become trillionaires, along with others who deserve it.

My concern isn't with whales getting a bigger slice of the pie than everyone else. My concern has more to do with what the current price of STEEM is compared to that pie and how it's going to be distributed right now. Altcoin markets often have quite a bit of pump and dump activity, and I've seen it destroy cryptocoins and the communities behind them. If we don't pay attention to how much STEEM is about to hit the market, we might be in for a big shock which some in this community aren't prepared for.

As you can see from the comments here, I've been thinking about things incorrectly in terms of "interest" instead of thinking in terms of the dilution of shares. I'm hopeful the market will cool down a bit while liquidity increases so whales (and everyone else) can easily transfer in and out of STEEM and SBD with stability.

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Oh okay, now i understand and yes you are correct. Thank you for taking the time to respond to my reply.

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No worries. Glad I did a better job communicating things on the second try. As you can see from the comments here, there are quite a few things I'm still figuring out and learning.

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Steemit is their company. Steem is decentralized and belongs to all of us. We have to realize that while they are whales today that it's also possible they might power down and new people might power up. It means currently they are the people with the most to gain and the most to lose.

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Yep. I also hope the market price of STEEM properly factors in the complexities of STEEM creation. To me, it seems a bit hot at the moment.

Are we supposed to be jealous of Ned? It doesn't matter what Ned or anyone else makes. What matters is what each individual makes and I would say Steem Power Interest is the best thing about Steem Power. All who hold Steem Power get the same interest rate.

If this were Facebook then Ned would be like Mark Zuckerberg. If Ned becomes a billionaire like Mark Zuckerberg because of Steem then it's not that big of a deal because many of us will be millionaires. That is just how these things go in startup world.

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Are we supposed to be jealous of Ned?

Absolutely not. I'm sorry if my post came across with that tone as that's not my intention at all. The various clarifications and comments here show how I'm learning a lot about the proper way to think about this and "interest" probably makes less sense than share dilution.

As for things in the startup world, they don't become worth a billion dollars in a matter of months with this number of users (at least, it hasn't happened yet that I know of). What I was trying to point out is how the market my be a little heated right now and there's a lot of liquid STEEM on the way in the next day or two. Maybe there's a lot of future value already priced in (that's my hunch, along with a lot of pump/dump altcoin traders who could care less about Steem and are just working their charts). Either way, we should be aware of these numbers and watch things closely to see how this economic experiment plays out.

@lukestokes @eeks
“The most powerful force in the universe is compound interest”
– Albert Einstein

My only concern for this is the value creation is out of balance, it's almost like Steemit is the central bank that prints steempower that's able to get vested into STEEM/SBD out of nowhere.

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One thing which should be clarified here is that it's not really interest but ownership share dilution. It feels like interest, but in reality the ownership share is being diluted because the vested steem is above 90%. And though it does feel sort of central-banker-ish, the question I keep asking myself is how a pizza which was purchased for 10,000 bitcoin is now worth over $6.5M. Explaining that explains what might be going on here. There's also the future value which is priced in to consider. People know what cryptocurrencies can do and this one has utility via the social media angle. That's pretty incredible.

I've also been concerned about the value creation balance, but, in theory, the market is supposed to counter balance that. Maybe $1+ STEEM is overpriced right now. If, however, at some point in the future, STEEM outpaces bitcoin, than getting in at $3-$4 seems really cheap. As they say, time will tell.

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  ·  3 years ago (edited)

Not only that, but the 10K bitcoin, at the time, was actually a far greater perentage of the total amount of btc in circulation.

Bitcoin is worth so much now because of a huge increase in demand. Based on your name and use of english, I assume you are an american, so this increase in demand might not be as obvious to you. When you want to keep your money safe, you put it in the bank.

There are many, many people in countires like russia, and especially china, for whom the only comparable move is to buy bitcoin with that money. Money in the bank in these countries is subject to being stolen at pretty much any time by any number of government functionaries.

I'm a part owner in a law firm whos main focus is helping overseas clients do business in the US. Part of what we do is manage their merchant and bank accounts and send them their revenue in BTC. Up until the end of last year, i was the one actually going out and buying the BTC to do this (to the tune of like $10-40K a day). Its actually hard to find that much BTC everyday at spot, so i floated the notion of simply wiring them the money. The almost universal response was "no, nothing but bitcoin will do. I'd rather pay extra and get BTC" Its that kind of bidding that drover the price of BTC.

If you want to look at it from an exchange point of view. If youre a businessman in one of these countries, and youre buying, you don't put in a bid under the ask and hope it get filled. You pay the ask. And a lot of people doing that drives up the price.

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Yes! It's like Andreas Antonopoulos talks about all the time, the other 6 billion people who are unbanked. It's very encouraging to hear about this from someone who is actually seeing it happen. Thanks for sharing!

I see where your concern is and I have the same concerns. Don't get me wrong I love the interest, but if the hype dries up and we go through a boring phase the price might tank because of lack of demand. But on the same page it also keeps people active so they can get curation and posting rewards to keep up.

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the price might tank because of lack of demand

Yep. We've seen this over and over again with various crypto currencies. My thinking here is even if the price does tank and great posts are only getting, say $0.05 in value... that's still a hell of a lot more than Facebook or Twitter ever paid out.

My concern, I guess, is for my excited friends who want to get in early. $3-$4 range for STEEM could be incredibly early because, in many ways, STEEM could threaten Bitcoin. On the other hand, the exponential growth of the whales I'm seeing here makes me think the pressure to keep the price down will be high as they sell off.

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Yeah i agree with you, by the way is there any possibility you could put your interest script on a site or do a REAL basic tutorial for us who are code special? I would upvote the hell out of that.

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Oh, you might also want to check out this tool: https://dragonfrugal.com/coin-prices/index.php (not done by me)

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Thanks, @calaber24p. I've been wanting to explore and build all kinds of interesting tools for Steem, but I also have a company to help run (FoxyCart), and I haven't been pulling my weight lately. I'm stuck in the middle of the road, not sleeping much and as Mr. Miyagi says, that's where you get squashed, "Just like grape."

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Dont worry about it , I was only asking if you had free time :) Thank you for the other tool though! Im sure it will be accurate enough for me to figure it out.

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@calaber24p free time? What the heck is that?

Heheheh.

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Lack of demand doesn't tend to happen with social media. It's very addictive. If you understand behaviorism you will understand why.

  ·  3 years ago (edited)

700k a week!? Whew. I think i've made 1 penny per post. And theyre not exactly trash or cat vids.....
How do i get a whale's attention? Blind luck?

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Consistently write great stuff and you might get added to someone's curation bot which will vote up your content. Beyond that, I think the whales are voting up posts which will help grow the popularity of the platform.

Great analysis Luke. More levelheaded analysis like this needs to be upvoted.

It's a crazy amount of money to earn each week but it's occurring as result of the post July 4 speculative bubble. If Steemit can continue to attract new quality creators, perhaps it can grow into the current value that is being placed on STEEM. But my guess is we see some bloodshed at some point before things get better.

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Thank you!

But my guess is we see some bloodshed at some point before things get better.

Yep. That's my thinking also, which gives me pause as far as my friends wanting to invest right now. But hey, few probably thought a 10,000 bitcoin pizza would be worth $6.65 million dollars today either. In the world of crypto where we demonstrate value can be created out of thin air... anything is possible. :)

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the cool thing about this platform though is that they don't need to risk money to participate, they can invest their time (anyone can write a blog post). that's unlike any other digital currency, where to participate you need money (either to buy the coin or buy mining rigs)

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Yep. I mentioned on my friend Sean's post how Steemit is the best crypto currency funnel ever created. That's pretty cool stuff right there.

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ah ha, yes! thank you for sharing that - needed that refresher to recollect the story, as it's a great comparison for discussions regarding cryptocurrency... http://www.forbes.com/sites/ericmack/2013/12/23/the-bitcoin-pizza-purchase-thats-worth-7-million-today/#7e8e8d1a6449

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BTW, loved your Snowden googly eyes pic. So good. :)

If you know of any whales who want to lend some upvotes my way, I certainly wouldn't turn them down. I'm not too hopeful on this post though as I don't think this is the type of content which will bring in more investment right now. It's all good. The world's not really a meritocracy anyway.

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i don't know any whales. you've got a lot more power around here than me :)

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Looks like you'll get a nice payout in about 5 hours. :)

We all though of this, but in reality most of the profit they are making is used in building the platform up, I think we all need this to be a long term project and not just a few months sensation

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I certainly hope so.

That is a lot of steem power..

this is kind of the sausage effect, IMO. Its disturbing because you can see it right there, but no one bats an eyelash with mined currencies, where it happens behind the scenes. FOr example, $15 million in bitcoin per week.

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I hadn't heard the term "the sausage effect" before (and urban dictionary was no help at all). I did find this though:

This all amounts to what Joseph McNamara, former police chief of Kansas City and San Jose, likes to call the “sausage effect” of the war on drugs: you squeeze at one end and the other end expands.

Is that what you mean as far as the monetary system being squeezed in different ways? I've been having a lot of conversations about value lately as people try to wrap their heads around why a cryptocurrency can create money out of nothing. I often respond talking about the bitcoin pizza and how something that used to take 10,000 to by a pizza is now valued over $665 each. If they can explain that, they can begin to understand the nature of value and money.

I hadn't considered how many bitcoin are mined each day... as this thing grows and brings entirely new people into the cryptocurrency space, it wouldn't surprise me if the market for cryptocurrencies (and thus, the supply which can be created each day) also expands. Good thinking.

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"Laws are like sausages, it is better not to see them being made." --otto von bismark

Basically, its troubling because you can go to his wallet and see the steem accumulating, whereas no one thinks about it in bitcoin, because there is no easy way to see it happen. In terms of percentage increase in marketcap due to the creation of new coin, when bitcoin cost $4, it was going up like 5x as fast as steem is now.

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Ah yes, I knew there was a reference I was missing. Thank you.

On one level, it's troubling to some, on another, it's fascinating and liberating to know everything is transparent and out in the open. We know who is powering down and by how much. That's quite interesting to me.

From the comments I think you've got it worked out now. But to be sure I'll elaborate some here. It's only Steem dollars that earn interest, and that interest is currently "only" 10%. Holders of Steem Power, like Ned, are awarded 90% of all new Steem mined, but that's not interest at all since it's coming from newly minted Steem. That newly mined Steem dilutes the valued of existing Steem. Though this dilution is admitedly hard to see in a rapidly rising market, it's definitely real. If new Steem were not being created at such a repid rate, then the value of existing Steem would be even higher than it is (same demand but less supply). So, Ned and all other STeem holders are actually suffering from experiencing inflation of about 10% per year even after getting credited with 90% of all new Steem. So long as the value of Steem grows by more than 10% per year, they will never really experience the impact of this inflation in fiat dollars though.

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Thanks Sean!

Though this dilution is admittedly hard to see in a rapidly rising market, it's definitely real.

I think that's a key point because as the price goes up and the amount of Steem Power goes up, things seem like they are on a crazy train leading to $700k+ a week in new value. Thinking in those terms, it definitely didn't make sense to me. I'm wrapping my head around it now though.

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Actually this is right. Steem Power doesn't earn interest because there is some dilution but a lot less. Unlike with Bitshares where the growth rate was somewhat slow I think here with Steem we can have dilution because of the growth rate.

added post to my favorites list just for the comments - thanks!

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Steemit: The one place on the Internet where you absolutely should read the comments! I love it here.

The interest % he gets, we get. So in all honesty I don't think its to high.

Anyway Ned wouldn't do anything malicious(well we hope) to destroy steemit. Unfortunately, this is the way cryptos work. Whales control the power. If they dump we suffer. Just hold thumbs and hope that the whales see this as a long term investment.

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this is the way cryptos work

And most of them have tanked in value, later to be called scam coins. I'm hoping for something different here. I agree, if they dump, we all suffer. I guess I'm hoping in their rational self interest here to keep things a float. That said, even if they are acting rationally... what if they got the math wrong? Sure we all have the same interest rate, but the balance becomes drastically different over time.

Hoping you read this so you can help me decide,

Hi, I'm quite late to this party. I was researching steem power interest rates, and I wasn't sure if this is a good time for me to invest. How are the interest rates doing, and how do you feel now 11 months after this post?

I tried to understand your posts regarding steem power and the math you did. I don't quite fully get it.

Hope all is well!

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A lot of things have changed since I posted this. It's not actually interest, but share dilution protection. That rate of inflation (share dilution) has slowed down a lot and I think it's below 10% now. I am as bullish on STEEM as I've ever been. Check my wallet to see how well I've done here. I think Steemit has a bright future.