How to Compound Steem Power and See It Grow Without Doing a Thing!
Would you like to know how you can double your Steem Power in three years without lifting a finger because this might be useful if you are tired of writing posts that get very little rewards?
In this post, I am going to show you how compounding interests works for Steem Power and show you figures that I hope will encourage you to study the possibility more.
This is not financial advice, just a fun method to see your Steem Power double in three years.
How to Compound Steem Power and See It Grow Without Doing a Thing!
You have certainly heard about compounding interests and how it works in the world of finance. Basically, you invest $20 per month at a 8% rate in a bank at the age of 20 years old, and at the age of 65, you are a millionaire, if you are still alive.
Compounding is the process of reinvesting the interests you earn so you can earn interests on the principal plus the interests. This usually starts slowly and with time, a lot of time, this can grow very fast and make you rich. If you are late starting this, then you will earn much less, unless the interest rate is much higher.
We can apply the same thing to Steem Power and I wanted to do some calculations to see how much Steem Power could be grown by itself without doing a thing and on what duration.
The first thing is that Steem Power holders are receiving 15% of annual Steem tokens inflation automatically and this is the first thing that will grow your Steem Power as I explained in this post: Know Who your Upvoters Are!
I am not taking this into account for what I am going to show you today, which is how to grow your Steem Power delegating to bid bots and compounding interests or payouts.
I am also not taking into account other Steem Power that you may buy or earn as rewards when writing posts.
Let's say that you have 10,000 SP to delegate for this purpose and that you delegate to a bot with 25% APR, which is a good average with possible ups and downs.
As I have shown in my recent case study, most of the bots return more than 25% APR, but I don't want to take any bot as example in this post.
You may want to read my case study: Case Study: Which Top Upvoting Bots to Delegate to for the Highest Daily Payout?
I made a spreadsheet with some calculations as you see below.
On row 2 we have the "Principal (SP)," which is 10,000 SP.
On row 3 we have the "Annual Interest Rate" or "Annual Percentage Rate," which is 25%.
On row 4 we have the "Compounding Periods Per Year," and in the B column we have 1 time per year, in the D column we have 12 times per year (1 time per month), in the F column we have 52 times per year (1 time per week), in the H column we have 365 times per year (1 time per day).
On row 5 we have the number of years, which is 1.
Finally, on row 7 we have the "Amount earned (SP)."
You may want to see the formula so you can do that yourself in a spreadsheet.
This is the formula for the first block:
This is the formula for the second block:
I trust you doing the formulas with all the other blocks.
Let's look at the results for one year and the effect of compounding interests:
If we compound only once a year, which means we wait the end of the first year and re-invest our interests for the second year, we would have earned an additional 2,500 SP, and have a total of now 12,500 SP.
If we waited the end of each month to re-invest, at the end of the first year we would have a total of 12,807 SP and now I believe that you can see the advantage of compounding more frequently.
When I say compounding, this means keeping your daily rewards in Steem and SBD that you earn from the bot, wait the end of the month, change the SBD in SP, and then delegate the additional SP to the bot for the second month. This means, if you earned 200 SP in the first month in daily payouts, when the second month starts you make a new delegation of 10,200 SP, and so on every month.
When you compound every week, the total amount is then 12,833 SP, which is still a bit more.
When you compound every day, the total amount is then 12,839 SP, which is I think to negligible to bother doing it every day.
I believe doing it every week is the best option.
Now let's see how it is after 3 years.
We started with 10,000 SP and just compounding once a year, we have now 19,531 SP. This is a very low maintenance method, if you don't use Steem and just want to log in once a year to delegate what was earned.
If we do it once a month, in 3 years we have 21,007 SP and you can see that it's a significant increase compared to once a year.
If we do it once a week, then we have 21,132 SP, which is a bit more.
Doing it every day, is not really worth it.
When we look at this data, if we delegate 10,000 SP to a bot now and delegate the additional payouts earned for 3 years, then we can double our SP, just like that, doing nothing, writing no posts.
You may want to see a breakdown of this with compounding every week.
First we have to set the multiplier: 25% divided by 52 is 0.48% per week.
These are the numbers.
We can see that after 26 weeks we already have 11,325 SP working for us.
We are now on the second year with 12,950 SP.
One year and 30 weeks and we have 14,809 SP.
Two years and six weeks and we have 16,933 SP.
Two years and 38 weeks and we have nearly doubled with 19,738 SP.
Three years are completed and we now have 21,106 SP.
We know the value of STEEM today, but we don't know how much it will be in 3 years. If it stays the same, we will have doubled our money. If it is half what it is now, we still would have the same. That's two options that you may consider.
If we want to be positive and think that the value of STEEM will be at least double, then we would have quadrupled our money.
I think you get the point.
If we really want to be optimistic and think that the Steem blockchain will be alive long enough, then we can look at the following tables. This also assumes that we still have voting bots that we can delegate to and earn payouts from.
This is for 5 years.
Let's say we are still compounding weekly and the total we have now is 34,799 SP.
This is then ten years later, and hopefully STEEM has survived every crash.
We compounded weekly all this time and the total value is now 121,097 SP.
I will let you imagine what the value of STEEM would be in ten years, but if it was only a dollar, I would be pretty happy.
I hope that this is useful for you to see that compounding SP can be very rewarding with you not having to lift a finger, except for a renewed increased delegation once a week.
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