Falling STEEM/SBD Price - Proposed Solution to the SBD Debt to Marketcap Ratio ProblemsteemCreated with Sketch.

in steem-price •  2 years ago

There are two concerning things happening with the price of Steemit currencies right now. The price of STEEM continues to fall. Many people are worried it will never find a bottom. The amount of SBD debt has also passed 5%, and the system is now paying out author rewards in STEEM instead of SBD. If the debt level reaches 10% of the marketcap, the system will no longer pay conversions at a rate of "approximately one dollar worth of STEEM" per SBD.

I want to show that while one of these (the falling price of STEEM) is probably causing the most alarm - it is actually not as big of a deal as people think. I believe the other problem though (increasing level of SBD debt) is a larger concern. I will show why, and offer a potential solution that the top 19 witnesses and community could implement together - which will hopefully address the problem.

The Falling Price of STEEM

To start with - the biggest item of concern on most people's minds is the falling price of STEEM.

Everyone has heard that STEEM has very high inflation, and users should convert to Steem Power to protect against it. Do people really understand what that means though? To put it in another way, the price of STEEM is meant to go down. Granted it is going down faster today than it should/will under 'normal' conditions, but that is mainly because of several factors which make today's situation kind of unique:

  • The network is in a distribution phase, which means it is purposely inflating STEEM at a faster rate than 'normal'.
  • Many of the early adopters are powering down and cashing out to capitalize on their initial investment, as well as fund projects that they believe will add value to the project in the long-term.
  • The July price spike caused the network to produce a lot more SBD than the platform was arguably 'worth' at the time. There is now a very large amount of debt that the network must pay back.
  • There is still not a very big demand for STEEM/SP yet, because the product is not ready for mainstream users, and there is not much to combat the inflation by generating more demand (like through advertisements) other than speculative investing, and users wanting to work their way up to dolphin/whale status.

The Rising Price of SP Vests (Wait, Rising??)

There is another way to look at the price, which is the value of vests. This is really what users should be most concerned with, because if you are holding SP, this is what you have.

To help explain how the vests work, here is historical vest price information:

  • On 7/6, 1M VESTS = 197.368 STEEM = $45.987
  • On 7/20, 1 MV = 1M VESTS = 229.192 STEEM = $804.005
  • On 10/29, 1 MV = 1M VESTS = 410.581 STEEM = $65.412

What does that mean? Well the short answer is that if a user had bought around $46 USD worth of STEEM on 7/6 and powered it up, and left it in their wallet (and done absolutely nothing else) - they would actually have around $65 worth of STEEM in their wallet today. (Being held as Steem Power.) Yes, their SP would actually be worth more today than it was when they powered up! (Despite today's lower price of STEEM.) That is how vesting works. As a side note, if the user had been actively curating the whole time - they would have generated even more SP/vests.

Most of the stress about the price is coming from users (myself included) who bought in between 7/20 and today, while the price was being inflated. (My biggest cash investment by the way, was at right around $800/vest.) Depending on whatever the price was when those users bought in, they likely have less in their account today than they did when they bought in. These users are wondering if we will ever see STEEM reach the "good old days", where the prices will be in line with what we saw during the July spike.

Will We Ever See the "Good Old Days" Again?

I will not go into that much here, because it has been covered in a lot of other posts, but my personal opinion is that STEEM / vests will eventually reach new all-time highs, once:

  • The site becomes fully ready for mainstream users.
    (Major community issues/strife resolved, new features added, etc.)
  • We do a big recruitment push to get tons of new users (and keep them).
  • We implement some form of "attention economy" based advertising program, which will create demand for the supply of STEEM, using Steemit's massive and engaged user-base as a selling point for people who want to pay for our attention.

(Note - this does not constitute investment advise. Please consult with a professional advisor and/or do appropriate research before making any investment decision.)

The SBD Debt Problem

The existing SBD debt is a big cloud of doom looming over the price of STEEM today. At some point that debt needs to be cashed in for STEEM, and if the price of STEEM keeps falling - more and more STEEM will need to be created in order for it to pay back that debt. Also, if the debt level passes 10% of the total marketcap, the system will no longer honor the "1 SBD = approximately 1 USD worth of STEEM" contract. It will start paying users less than what $1 SBD is worth, to prevent the system from collapsing.

This fear is one of the contributing factors to the downward pressure on the price right now, and it will only get worse as the SBD debt to marketcap ratio continues to get worse.

There is a lot of discussion/disagreement about whether or not having this 10% limit is good or bad. On the one hand it is a precaution against a "black-swan" event like @dantheman has described, which could cause the price of STEEM to spiral downward out of control (to zero); but on the other hand, it creates doubt for investors that holding onto SBD is a stable investment.

My opinion on this is that we do need this built into the system as a "last resort" safety mechanism, but it should be one of those things that never actually happens. In order to make SBD a stable investment, I think the most important thing we can do right now is ensure that is the case.

Proposed Solution to the SBD Debt Ratio Problem

For the Witnesses:

  1. The top 19 witnesses should pick a day on which they will begin implementing a "significant discount" in their price feeds. The date should be publicly announced, and the community should know about it in advance.
  2. There should be an agreed upon debt level (I propose 3%) at which point the "significant discount period" will end.
  3. During that time, witnesses should adjust their price feeds such that a SBD->STEEM conversion results in anywhere from $1.05 to $1.30 worth of STEEM being produced.
  4. Once it ends, the price discounts should be updated to return the price of conversions back to a $0.95 to $1.05 level.
  5. Witnesses should also use the SBD interest rate (as suggested by @smooth) to add increased demand for SBD if needed during this time.
  6. Witnesses will need to monitor their price feeds very closely. If the increase in liquid STEEM produces too much downward pressure on the price, to the point that the debt to marketcap ratio starts getting worse and not better - then a decision should be made to end the "significant discount period", and reduce the discount back to a $0.95 to $1.05 level. The interest rate can be kept at a high level (or even raised higher), to continue to prop up SBD demand as needed.

For the Community:

  1. I know a lot of the users in the community will not like this metaphor, but similar to a time when a country is at war, they encourage their citizens to support the country's economy for the "good of the country". We need that type of mood right now in the Steemit community. The situation we have today as a result of the July price spike, is a big hole that we need to dig ourselves out of, if the price of STEEM/SBD is going to recover.
  2. Let me be clear though, I am not asking users to invest more money into STEEM/Steem Power. You can if you want to, but that should be for purely market based reasons (if you think it is a good investment).
  3. What we need is users who are holding onto SBD which they essentially received as "free money" for participating in the site, to use the "significant discount period" to convert their SBD into STEEM and either Power Up or use it to buy more SBD on the exchange.
  4. Users are also encouraged to use the "Power Up 100%" option during this time for their posts as much as possible.
  5. Basically what we are trying to achieve is to reduce the SBD to marketcap ratio to a sustainable level, without dumping all of the converted STEEM directly onto the exchanges.

The Risks:

  • The biggest risk of this comes from the fact that there will be a significant increase in the amount of liquid STEEM being produced by the blockchain, as the virtual supply of STEEM (debt) is converted into actual STEEM.
  • Some users will not want to power up and would prefer to cash out their SBD for BTC/fiat (which should be allowed if that is what they want to do). In addition, many traders who are holding onto SBD for purely investment reasons will use the "significant discount period" to get a good conversion rate, and sell their STEEM that is produced on the exchanges.
  • If users rush to the exchanges and try to sell, it could put an even more significant downward pressure on the price of STEEM than there is today.
  • If the price of STEEM gets pushed down at a greater rate than the debt level is decreased, then this could actually make the debt to marketcap ratio even worse, rather than better.

The Potential Positive Effects:

  • Reducing the SBD debt level below 5% of the marketcap will return the system to its normal state of paying out author rewards in SP/SBD instead of SP/STEEM.
  • Backing away from the approaching 10% of marketcap debt level will bring a sigh of relief from investors, who are currently concerned that the entire system is going to collapse.
  • There is a good chance that potential investors will notice that we have addressed one of the major instability problems that they were worried about, giving them new confidence in the future of the project.

Closing Thoughts

I want to stress the fact that this is a proposal and that no changes are being made at this time. I am hoping that the rest of the community (including the other witnesses) can review this proposal and provide feedback. This is not a sure thing, and there are definitely real risks. It needs to be carefully considered and vetted before taking any action. If there is a general consensus that this is a good idea though, and would likely work - then I think the top 19 witnesses should move to adopt the plan within the next few weeks.

Thanks to everyone who provided input on this, including those who have been presenting opposing views. I want to highlight the help I have received from @lafona, @james-show, @liberosist, @bacchist, @dragosroua, @arhag, @good-karma, and @gtg in Steemit.chat, as well as through the various posts that they have created. Also to the many other members of the community who have been contributing to the conversation via their posts and comments about the topic.

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I'm really glad you pointed out how expensive vests are getting, and getting by the day.

That seems to really be missed in a lot of conversations I'm seeing.

nice post

Hi Tim, thanks for the article and for the mention. It's a bit late now for me, but I promise to look over the entire article with more attention tomorrow and hopefully come up with a more complete answer, but until then, at the first glance, I don't think this "interventionism" will work. The problem is real, but fixing it from the top to bottom may not be ok. IMHO, it will be way better if STEEM holders will have something to spend their steems on, than to adjust the numbers from the price feeds. But then again, I promise to look over your proposal in the morning, it may work very well and I may just be bit foggy now.

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Thanks for the reply. I appreciate you planning to provide scrutiny/review.

MHO, it will be way better if STEEM holders will have something to spend their steems on, than to adjust the numbers from the price feeds.

Yes, I agree that this would be better, but it would need to be something that actually 'uses' STEEM/SBD, rather than having it exchange hands.

While this solution would be preferred, my worry (and other's as well) is that the time to develop and roll out a solution of this nature could take another several months or even closer to a year.

The problem we are trying to solve is basically the price spike from July, and is not meant to be a long term solution for the price/value of STEEM/SBD.

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Yes, I'm thinking at the same thing, a way to actually "burn" STEEM. I have something in mind. We'll talk more in the morning.

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In the end, I wrote an entire article, because it would have taken too much space here. Thanks for incentivizing me to do this :)

https://steemit.com/steem/@dragosroua/steem-is-a-river-sbd-is-bottled-water-and-steem-power-is-a-dam

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Really good article! Thanks for putting that together, I enjoyed reading it :)

good points. Totally agree with your suggestion. Resteemed

Thanks for this thought out response to the current sbd steem situation. I have been offline for a bit but it is nice to have a post like this to catch up.

Although I read the broader situation a bit differently, I love how much thought you've given this.

Personally, I like that the price of steem is currently low and very volatile, as this has made it possible for me to power up far more than I otherwise would have been able to. Also, I would much rather see STEEM trading at $0.05-$0.15 and SBD consistently at $1 than STEEM at $0.25 and SBD bouncing around below $0.90.

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I know what you mean. I have been using the low STEEM prices to increase my vests as well :)

To be clear though, the proposal is more focused on the SBD debt ratio than the STEEM price. As far as the effects it will have on the price of STEEM, it could actually send that in either direction.

Excellent post! Clear and concise.
I think it will not only help non-financial-gurus to understand what steem's 3 tokens are, but how they interact. kudos!

Very good proposal but there is a psychological issue most people forget when it comes to Steemit.

Almost every single member that joined Steemit comes from the wild west of short investing. People that have been around in the blockchain for quite sometime now, know that you cash the fuck out anything you can as fast as you can, waiting for the next hype. Those who mine, shifting their mining power left and right, know this very very well.

Right now mining zcash and even ethereum is much more profitable rather than trying to mine steem. Any investor that dares to put some money in will see it drained out immediately. The initial investors, the whales, have made ROI already and now is all about a "dog eat dog" situation in regards who gets the last breadcrumbs.

I don't see any solution other than getting all the whales and witnesses to work together. Right now though most of them act like the Titanic is sinking and all they care is saving their own ass.

We shall see.

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Regarding the dog eat dog for the last breadcrumbs, I tend to disagree. We are in a phase where they are building out the site, and the community is working on projects that will add value in the long term.
I think this article does a good job explaining it:
https://steemit.com/steembubble/@dan-atstarlite/why-the-steem-bubble-was-an-investment-round-and-not-a-product-launch

The problem we have right now is more of a short term surplus supply/debt one, which I believe can be solved through proper monetary/fiscal policy by the community/witnesses.

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I couldn't agree more, you certainly have your head wrapped around the way crypto works.
Also mining zcash currently.

This seems to have some merit. Many of the proposals have, IMO, been a bit myopic. I'm not sure if this one will work, but, again IMO, it seems worth a shot. While I don't really understand how the witnesses discount, the basic idea makes sense.
The big question is, "What harm can it do?" When it comes to intervention, the first rule is "Do no harm."

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Well, in the negative scenario it would flood the market with a huge amount of newly created STEEM and put significant downward pressure on the price, causing it to drop lower than it would if left alone.

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Hrmmm, that doesn't sound too great, does it? lol

I think the price of steem will still go down to 10000 probably

Hello @timcliff, I'm new to your posts and so far find them to be very informative and thoughtful. my understanding of the financial workings of Steem and Steemit are so very limited but I'm learning a bit at a time. I'd like to ask a super basic question - in the light of what you've written here, it is helpful to power up at this time? It seems like a good idea to me but I'm just clueless enough to misunderstand the big picture. Please advise, thanks!!

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It is generally not advisable to hold liquid STEEM for very long, because the price will usually be on a downward path due to inflation.

If you are interested in "investing" in STEEM for the long term, in hopes that the project will become a success, then powering up will give you "vests", which are protected from a large portion of the inflation by adding more STEEM to your vest over time.

Also if you power up, your votes will have a little more influence. Not much, but if you keep adding to it over time, it can start to add up.

It should be noted though, that any STEEM you power up is subject to the two year power down period if/when you eventually decide to cash it out.

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thanks so much @timcliff, very thorough and helpful response, I understand now.

Great post. We are basically in the midst of an economic and sociological experiment. The only way to know what will happen is to try it with appropriate contingencies as you have suggested. It is also best to try it out whilst the community is small.

One important factor that I haven't any one mentioned is that why we could not deposit steem to users' wallet directly. All the steems that is given out of the system never has chance to return the system again. Steem buyer on exchanges will not get any benefit from holding Steem for long term. If they want to join in Steemit, they have to sell steem then buy it again to deposit to their account. This disadvantage which is only benefit for steemit founders accompany the hight rate steem inflation would be cores reason to let steem falling nonstop. However the situation will change when there's an outburst on information quality and qualtity created by steemit users which is worth over the steem market capitalization.

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There is actually a way to transfer STEEM from an exchange into your wallet. Which exchange do you use? I can find a guide for you.

I've already written about this. Holding Steem in or out of the system has no actual effect on the price of Steem.

The reason is simple - as long as the single most influential user and producer of Steem is Steemit, then Steem will always be traded like a company share. Add to that the constant printing of new shares (devaluation of the rest) and no information about the actual value of the Steemit network, and you have a serious problem on your hands.

To better understand this problem, ask yourself the following:

If a company of unknown value has 100,000,000 shares (and their number keeps increasing), but only one share is sold on the market, while the rest are held by company investors, are you going to pay a premium to obtain 1 share out of a million, or would you rather pay a millionth part of what you, as a trader, consider the company to be worth now and in the future?

As far as holding on to SBD - it was a huge mistake to introduce a pegged currency, in the first place. The developers couldn't have known how their project and attached currency will fare. This was a psychological gimmick for investors, but a huge risk for the system. And as we are now aware, the developers' expectations were wrong, especially considering the overprinting of Steem. In fact, hard coding economic growth is always wrong. The last time someone tried planning its economy, it changed the lives of hundreds of millions of people (USSR and the Eastern Block; China in 70's).

If a country pegs its currency to another, to make its economy stable, it never:

  • Changes the peg.
  • Trades with its pegged currency.

Why? Because changing the peg speaks of continuing instability and trading with a pegged currency leaves the country's economy in the hands of the foreign exchange market, which always reacts negatively to instability.

There is only one solution to Steemit's problem:

  • Stop printing Steem.
  • Start offering something unique in exchange for other currencies.

The first one won't happen. The second one will soon be changed with the introduction of advertising banners on Steemit.

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It's an interesting perspective.

An excellent post. If the steem model stays static so does it's charting.
Like a plane with too much luggage on board.

I was very surprised to see the SBD at $.80 this morning at 8:00 am est .
What do you make of this ?

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I'm not an expert in this area, so this is purely a "guess" but I would suspect there is a lack of trust that users are going to be able to get $1.00 worth of STEEM back for anything money they put in.

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there is not much to combat the inflation by generating more demand (like through advertisements) other than speculative investing

If there was actual speculative investing right now the price would be a few $ maybe possibly higher. Speculation is what prevent cryptos from dying, even the useless ones.

On 7/6, 1M VESTS = 197.368 STEEM = $45.987
On 7/20, 1 MV = 1M VESTS = 229.192 STEEM = $804.005
On 10/29, 1 MV = 1M VESTS = 410.581 STEEM = $65.412

Not sure how you get those $ amount , what calculation have you done? to get like $65.412 from 1MV and 410.581 STEEM, I don't get it.

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I don't know the exact math behind the calculation, but it is a steemd.com calculated number viewable here:
https://steemd.com/distribution

The basic idea is that even though the price of STEEM is going down due to the inflation, more STEEM is being added to each vest to combat the inflation. If you look back at historic data, on 7/6, 1 MV would have been about 197 STEEM. If you multiply 197 times the price of STEEM on 7/6, that vest was worth about $46. When a user has SP, they do not lose their vests over time (unless they power down). So if a user had 1 MV on 7/6, they would have received about 213 STEEM for holding the vest. On 10/29, they would have had 410 STEEM, which at that day's price would have been worth about $65.

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more STEEM is being added to each vest to combat the inflation

This doesn't make sense man, you don't combat the inflation by creating even more.

When a user has SP, they do not lose their vests over time (unless they power down).

That's false. When you are powered up you lose about 10% of your vests every year.

VESTs are not worth a certain price they cost a certain price, you make it sound like certain VESTs are more valuable than other as if you could sell them on the market or something.

Let me explain to you

On 7/6, 1M VESTS = 197.368 STEEM = $45.987

This means that to get 1M VESTS on 7/6 you would need to buy 197.368 STEEM which were worth $45 at the time

On 7/20, 1 MV = 1M VESTS = 229.192 STEEM = $804.005

This means that to get 1M VESTS on 7/20 you would need 229.192 STEEM which were worth $804 at the time.

As time goes by you will always need more steem to get the same amount of VESTs. Basically if the supply of steem doubles you would need twice more steem to get the same amount of vests. And the price is just what these steem are worth at the time, that's it, basically the price of VESTs depends on the price of steem and current total supply. The price of VESTs don't really change it's the price of steem and the supply at the time that will give you the cost of VESTs.

What does that mean? Well the short answer is that if a user had bought around $46 USD worth of STEEM on 7/6 and powered it up, and left it in their wallet (and done absolutely nothing else) - they would actually have around $65 worth of STEEM in their wallet today. (Being held as Steem Power.) Yes, their SP would actually be worth more today than it was when they powered up! (Despite today's lower price of STEEM.) That is how vesting works

Their SP would not be worth more, they would pay a higher price because between this period the supply has doubled, so they had to buy twice more steem power to get the same amount of VESTs.
65$ is not the value of their VESTs its just the cost that the paid at the time.

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I'm going to do a bit of research and get back to you. One of us is wrong :)

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@snowflake - I did some digging into it, and your understanding is actually not correct. That might be why you see the inflation as such a worse thing than I do. This may finally answer the question you had as to how an investment in SP is possible to grow in value despite the inflation.

If a user buys 1 MV worth of STEEM and powers it up to have 1 MV, they will always have 1 MV unless they do something to change that such as power down (which will lower their vests), or curate (which will increase their vests). A vest is essentially a share of Steem Power, and the actual number of shares that you own is not diluted by the inflation.

What does change is the amount of STEEM that one vest represents. One MV of vests purchased for 197 worth of STEEM on 7/6 would have turned in to 410 STEEM by 10/29.

you don't combat the inflation by creating even more

The whole network of steem has inflation. Some of the inflation goes towards author rewards, miners, etc. But a large portion of it is paid back to the shareholders, to cushion the effects the overall inflation is having on the price of STEEM.

In the example if the same user had just bought 197 worth of STEEM on 7/6 and held onto it as a liquid currency, they would have lost quite a bit between then and now. But because they converted it to SP - the amount of STEEM they owned went up along with the price of STEEM going down.

I am not 100% sure on this last part, but I believe that in a theoretically mature network the difference between the amount of STEEM being added to a vest and the rate that the price of STEEM should fall as a result of inflation should be reflected as a 10% loss to the value of 1 vest over the period of 1 year.

As a speculative investor though, one is gambling that the price of STEEM actually goes down at a slower rate than the inflationary effects, or that it even possibly goes up. As long as the number of STEEM added to a vest outpaces the rate of the downward falling price of STEEM though, then the value of a share/vest is actually going up.

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This may finally answer the question you had as to how an investment in SP is possible to grow in value despite the inflation.

I don't really said that that your SP investment can not grow, people are mostly compensated for the inflation when powered up so their balance might not necessarily lose value. What I said is that if you have inflation the price is going to push lower and lower which means the rewards on the platform will go down which means your SP investment is probably not a good investment since there is no room for the platform to grow( less and less rewards)

A vest is essentially a share of Steem Power, and the actual number of shares that you own is not diluted by the inflation.

There is about 10% inflation used to pay for rewards and witnesses which you are not compensated for so your VESTs will be diluted by 10% every year.

STEEM being added to a vest

steem are not added to anything, it's the supply that is increasing and the price of steem at the time that makes the price of VESTs go up or down.

Imagine you own 1 % of a cake. Now someone brings another cake. That means that you own 0.5% of both cake. Now if you want to own 1% of both cakes you will have to buy another 1% of the second cake. ( this means you will have to buy 2 times more steem to own the same percentage because the supply goes up)

As a speculative investor though, one is gambling that the price of STEEM actually goes down at a slower rate than the inflationary effects, or that it even possibly goes up

This is very unlikely because when the price goes down the rewards on the platform goes down and so people are not going to buy more steem if they see that rewards are shrinking

As long as the number of STEEM added to a vest

Adding steem to a vest make no sense man, just think about this. Imagine the current supply of steem represents a company. Say this number is 100 steem and is equivalent to 1000vests. You own 1 steem which is 10 vests .Now the company decide to issue another 100 share, so this means that now the company is 200 steem.
This means that 1000 vests is now 200 steem so if you own 1 steem you only own 5 vests instead of 10, you have effectively been debased by 100%.

I am 100% positive that my first statement was correct.

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As I have said in my other conversations with you, I really don't have any interest in getting in a 'debate' with you. I have done a lot of research on this, and I am happy to try and explain things to you so that you can better understand the platform, but I am not really interested in "proving that I am right" to you. I can tell that you actually have some misunderstandings in the way you think this works, which I have tried to explain to you, but you seem convinced that you understand it better than I do. You are welcome to continue believing whatever you want. Sorry, but to avoid this turning into an argument I am going to end it here.

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I will add one thing though, which you are welcome to continue to 'discuss' with me if you disagree, but the rewards pool is based off the market-cap which is the price times the amount of STEEM (not just the price). The price can still go down while the rewards continue to go up, if the price declines at a slower pace than the rate of increasing amount of STEEM.

Ok I know what you mean , number of steem rewarded are also increasing. The problem is that when you print even more steem to compensated for the price it is very likely to decline even faster, which is what happens the last few months.

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So you are the one who always want to end the discussion and I am wrong ookkaayy
Also worth mentionning that everytime you have to do some research prior to answering. And you twice said I really don't have any interest in getting in a 'debate' with you yet you are still here debating...but I am the one with misunderstandings... Ill let everyone be the judge

Btw you can't sell VESTs on the market lol

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I have always been interested in answering your questions and trying to help you better understand the current system, as well as challenging my own understanding and looking for things that I might have overlooked or have wrong.

I would think that the fact I want to double check my facts and understanding before I respond would be considered a good thing :) I care that I am not providing you with misinformation, and when you say something that directly contradicts what I am saying, ar leads me to doubt that my understanding is correct - I want to try and understand what I am talking about as much as possible before I give you a response.

When you start saying that what I am telling you is wrong after I have done my research and am confident that I am right, then it starts to cross the line between trying to both help each other understand and better figure out how things work, into more of an argument.

Anyway, I'm not mad or anything like that. I'm just saying that I don't want to keep going back and forth to try and win an argument. I'm sure we will continue to chat again. Take care.

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I will add one thing though, which you are welcome to continue to 'discuss' with me if you disagree, but the rewards pool is based off the market-cap which is the price times the amount of STEEM (not just the price). The price can still go down while the rewards continue to go up, if the price declines at a slower pace than the rate of increasing amount of STEEM.

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Hey. I know this discussion is a little old, but I wanted to correct a mistake that I made when we were discussing.

You had said:

This is very unlikely because when the price goes down the rewards on the platform goes down and so people are not going to buy more steem if they see that rewards are shrinking

Then I replied:

but the rewards pool is based off the market-cap which is the price times the amount of STEEM (not just the price).

I was wrong. (Sorry.) I now found out that the rewards pool is just a static amount of STEEM, that does not depend on the price.

Back when payments were made in SBD, the SBD that you got paid in did factor in the price (since it needed to take the current reward pool and figure out how much SBD it was 'worth'), but with the current algorithm where it just pays in STEEM, you are 100% correct.

I did say when we first started that it was never really about which way was 'better' than the other. I saw value in reducing the inflation as you were proposing, and even agreed that yours might be better than what we had.. My main argument was that the cost of changing was very high too, so just a side-by-side comparison of which was 'better' could not be used as an argument - because it also needed to factor in that additional cost.

I will say that I'm kind of surprised, but it looks like the "higher ups" agreed that making a change like this was worth the risk. So congratulations - it looks like you won :)

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No problem man! Yeah I am glad they have made the proposal, to me it really made no sense to purposely create high inflation for no reason.

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