If Steem value tied to dollar- why hoping for massive value change?

in #steem7 years ago

My understanding of Steem is that it's value is essentially tied to the US dollar. This is seen as an improvement over something like Bitcoin, because its wild value fluctuation may be interesting to investors but is bad for anyone depending on understanding its valuation to determine the value of goods and services in bitcoin currency.

But....I often see people point to the spike in steem value that occurred a while back (I presume this happened at a key point in Steemit's development). I see many others trying to predict what it will do on the exchanges in terms of increasing or decreasing in value.

So, that's where this loses me. I am very new to cryptocurrency but I can't seem to reconcile this. If Steem is tied to the US dollar. Then why do people think it will be a big investment opportunity?

I can see the value in steempower and steem dollars. There seems to be an interest component in at least the latter and I believe the former as well. I assume some market/exchange value fluctuation, good or bad, is seen as almost measuring the success of steem and steemit.

But if its tied to the USD, as I think it will be, why do some people think it's going to be the next bitcoin value explosion? Isn't that exactly what its not supposed to do? If its value fluctuates wildly, up or down, isn't that a sign of problems, rather than an indicator of success?

I appreciate any constructive explanation on this. I'm not trying to be a killjoy. I want Steem to succeed, I want Steemit to succeed. I just feel like there's a gap here that I can't seem to reconcile.

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There are three tokens in the Steem system: Steem (provides liquidity - highly inflationary), Steem Dollar (pays interest - similar to debt; loose peg to US dollar based on 7 day moving average) and Steem Power (similar to equity in the platform). Steem power grows through a process akin to stock splits to protect holders from the inherent inflation of Steem. It's in the White Paper. The information is out there if you look...

What is bitcoin tied to? I'm new aswell :)

Bitcoin isn't tied to anything other than supply and demand as far as I know, once all the coins are mined there will be no more, yet more and more people are using it everyday...

That's right. BTC and most other cryptocurrencies are free floating on the competing tides of supply and demand. The Dollar value of BTC is a reflection of the value which the world places on BTC vs the value the world places on the USD at any given moment. FWIW, the Dollar value of most of your more obscure cryptocurrencies is actually a derivative of both the exchange rate of that particular currency against BTC, and the exchange rate of BTC/USD, since many of them are not directly exchangeable for US Dollars. IOW, to purchase them, you would first have to purchase BTC, and then exchange BTC for the other cryptocoin.

Regarding the original question in this post, I admit I have not looked into the mechanism by which Steem is pegged to USD. Hopefully someone will be able to break that one down barney-style for all of us, because I would really like to know myself. I'll look around though and see what I can find out. If no one has answered it by then, I'll try to contribute something if I can.

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Thanks @sdred955 Steem is my first experience with a cryptocurrency.

It's all very interesting for sure.. Hopefully someone can expand more on the Steem "stock split" aspect as well. I heard Dan speak about it on an interview but that is all I know about it...

I haven't read the whitepaper yet but as I understand it, it will be the equivalent of stock splits as new Steem is mined over time.

So holders will have more Steem than they started with even if they did nothing but hold it.

Whitepaper is available from menu top right...

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