I am about to power up, but after reading into steem a bit more I have my doubts about how inflation could drop the price of steem
From reading the replies it seems that most people have no idea how steem works nor steem power.
From what I read holding steem is a bad idea as steem itself is inflationary 100% a year if you are not holding steem power.
By holding steem power you are better protected against inflation as for every 10 coins that are added to the market you will get 9 back. So I understand?
Which basically means that people holding steem power could have 11% inflation.
You have ofcourse more steempower and more influence in terms of how much your upvote is worth and you could by actively participating overcome that 11% inflation by making money through your content and participating in the network.
So this is a genuine question, what stops the steem power of becoming worth less if whales are dumping even more coins on the market which they earned from increased steem that they received from holding steam power more and more steem floods in. From what I understand 80% is held by the topwhales and due to holding it in steempower they will just increase their amounts. Due to the incredible imbalance of distribution of wealth they can effectively continously power down their earned steem forever and as long as steem has even the smallest value still make tons of money,
So holding steam power you are fully at the mercy of how many people (whales) are actually powering down versus what investments are coming in.
On top of that you have to be active every day to at least counteract the 11% inflation rate.
Please point out where my stories doesn't make sense and why it should be viewed otherwise so I can feel better about putting money into steempower 😄
What an excellent response. Funny that you are considering the same questions that I am, regarding the same topic, maybe that is why I relate so much to what you had to say about the topic.
Let me try to add my thoughts to yours..
Inflation - Due to the inflation, we will have to create demand for Steem. If one thinks crypto is going to "catch on", having an increased supply might be a good thing. I also think that if demand was weak and we suffered a large loss in price there would be an opportunity to adjust our inflation rate and handle that with a hardfork. (This would like only happen if things were quite bad)
Nothing stops Steem Power from losing value when the whales power down if they sell. It is purely speculation mixed with supply and demand. You are correct that the distribution is an issue and has been since the day I got here. A thought I have is that SteemIt the site could before an attraction which could bring visibility to the currency of Steem, and hence attract investors vs. traders. Where people gather an economy forms. So, if we continue to see widespread usage and new users, I feel it is only a matter of time that others will be willing to purchase the steem any whales would like to get rid of. traffic stats - http://www.hypestat.com/info/steemit.com
True about the active every day part, but as I am sure you have gathered we have a wide array of voting bots to keep our accounts active even if we are not.
My background is corporate america in the healthcare technology sector. So, my crypto knowledge is still under development.
I appreciated your comment very much, and look forward to seeing you around SteemIt.
You are welcome, I am still very much learning as well so if any content I put up is wrong let me know.
I did decide to buy steempower as I believe steemit will continue to grow exponentially and it's uniqueness and potential will attract advertisers and investors from around the world once steemit goes to the masses..
Also the top investors/ creators generally are proud of their baby so they most likely want steemit to succeed as well, but that is just pure speculation. Them powering down also has a positive side, as power is more spread amongst the participators.
The following link explains what steem dollars do, the rewards by posting and upvoting are eventually payed back in steem dollars. Where does this money come from?
Well the higher the marketcap the more steemit can loan and distribute as steem dollars amongst steem power holders. (same as what a bank does with mortgages putting equity, they use real estate as colletoral to loan money) These steem dollars can then be transferred back into steem or powered up to steem power.
The above info I took out of the great posts below!
https://steemit.com/steem/@steemrollin/steem-where-does-the-money-come-from
https://steemit.com/steem/@bitcoiner/steemdown-com-which-whales-are-powering-down
We should really try to make a simplified version of the explanation so that everyone can understand this. It took me days to actually find out how the system works and even now there are still some mysteries to solve for me. For instance I read that one of the more important ratio's to look at before buying steem and powering up is the Mvest to usd ratio. Or MVest to steem ratio.This figure can be found on: http://steemd.com topright.
hope this helps as well. If anyone else finds info to share I would love to hear it.