Debunking STEEM Hyperinflation Myth
When STEEM started, in May 2016, the term "hyperinflationary token" was somehow associated with it. It's also true that in the initial setup it did have certain characteristics that made that term appropriate, but starting HardFork 16, at the end of 2016, things changed a lot. Yet many people are left with this information, which is not entirely true.
As a matter of fact, STEEM has a decreasing inflation rate, that will stop, in 20 years at only 0.5%. But I'm getting ahead of myself.
Let's Speak Some Numbers
Each day, around 43,000 STEEM tokens are printed. Out of them, 75% goes to content creators and curators, 15% goes to witnesses (the equivalent of miners in other blockchains) and 10% goes to Steem Power interest.
The current inflation rate for STEEM is 9.5%. This percentage will decrease every year with 0.5%, stoping in about 20 years at 0.5%.
Let's compare this with Bitcoin. At the current reward per block, which is 12.5 Bitcoin, the total number of Bitcoins issued each day is around 1800. Pretty much all of them are going to miners. The inflation rate of Bitcoin in 2017 is about 4% (after 8 years of existence). In 2014, after 5 years, Bitcoin had an issuance rate of 10%. Read more about this here.
Ethereum is having around 17,000 tokens printed every day. Likewise, all of them are going to miners. The issuance rate of ETH in 2017 is 14,75%. A good explanation of these numbers may be found here.
Let's try to put this in perspective with the current prices (approximate values based on Coinmarketcap statistics):
| Token | Daily supply | USD total value |
|---|---|---|
| STEEM | 43,000 | 43,000 x 3.8 = 163,000 |
| BTC | 1,800 | 1,800 x 17100 = 30,780,000 |
| ETH | 17,000 | 17,000 x 810 = 13,770,000 |
As you can see, the issuance rate of STEEM is comparable with major tokens like BTC and ETH, but, when you look deeper and see how much of this issuance is going to actual users (and not miners) the picture changes dramatically. Add to this the transaction speed and zero fees and you're suddenly in wonder land. Kidding you not.
A Little Projection
Now, what should happen for STEEM to reach the market cap of ETH or BTC? Well, simple:
- for STEEM to reach the market cap of ETH, STEEM should trade at 13,770,000 / 43,000 = 320 USD / STEEM (or 100 times higher than now)
- for STEEM to reach the market cap of BTC, STEEM should trade at 30,780,000 / 43,000 = 715 USD / STEEM (or 200 times higher than now)
This is a very simplistic approach, which doesn't take into account the current circulating supply of STEEM (around 292 million), nor the love and hate relationship it has with SBD.
But should make you think.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
If you're new to Steemit, you may find these articles relevant (that's also part of my witness activity to support new members of the platform):
I wasn't aware that STEEM's inflation rate goes down 0.5% per year, but looking at it long term the amount of STEEM tokens by the numbers (not percentage) doesn't really decrease that much. Because although the rewards percentage decrease the total number of STEEM it is being multipled on gets bigger every year (by a factor of last year's inflation.)
Yes, the circulating supply will be significantly higher than Bitcoin's for instance. There's a long discussion here about "scarcity creates demand" versus "oxygen money", or models in which something has value because is in short supply versus something having value just because is available (like oxygen).
ETH has a bit of a deflationary factor thought, as gas cost burns ETH out of existence. If ETH becomes highly adopted (which I doubt) the assumed gas cost is estimated to burn more than the ETH produced, but aside from that I completely agree with your point.
There are many other factors to take into account, but I don't think it would have made sense to write a deep analysis, the goal was to point some fundamental differences and to challenge the "hyperinflationary" label of STEEM, which is incorrect. For instance, ETH will switch to PoS too, which will change the distribution model, bringing it closer to Steem's DPoS.
Thanks @dragosroua for sharing these amazing comparision of Steem with ETH and BTC...WIth this analysis we can clearly see that growth potential of Steem is very high.
Thanks for this explanation. Hyperinflation has been one of my biggest fears for crypto. Nice that Steem is going back to content creators though
Well I missed the "low ranges" of ETH and BTC, but first time in my life I feel that I am at a good place at a good time. It's good to be part of Steemit and not only financially...
I think the social aspect is what makes this platform so unique. The financial side is "just" that little extra (... you know: what is the difference between ordinary and extraordinary...)
The social aspect of this platform is fantastic I totally agree :-) and the possibility of making some money with it is fantastic. And so funny to watch for someoone who does not understand much of it yet.
You are right, but they will also wake up one day... however then the configuration will be a lot more different... :-)
nice information,thanks for good sharing
Hei, you did not upvoted your comment anymore, congrats! Now you will have to learn what Spam is and why you should not do it and you are good to go. You are already a better steemian if you reached this level!
You forgot to add that for BTC there will always be a fixed max number of coins which makes it finite. Steem doesn't have that.
Yes, there will always be a certain amount of tokens filling the reward pool. Making things even more interesting.
I was refering to max supply.
numbers have started to speak..thanks for sharing these facts with us sir :) very informative
Cool data and analysis numbers speak themselves :)
Congrats, Dragos, you always bring valuable information to the platform. I am a bit sad to see how Steem is so much undervalued compared to other grown-up cryptocurrencies, but indeed the inflationary system may scare from the beginning new investors. Right now I am glad to see that Steem value is going up so much, which means that it started being appreciated by the mass and I also hope that it will compete with Ethereum or Bitcoin by the market cap soon!
Let's hope so :)