Nice post, Taraz. I have a question for you... You and many other Steemians talk about waiting for a price past the historic ATH of Steem before selling, which is certainly admirable and I hope you are correct in stating that we will get there someday. I wonder though, with a network like Steem that brings crypto into the hands of so many users without requiring crazy tech knowledge or mining or any of that, how does the price grow with our massive sell pressure? Not to mention the big players/traders who are ready to sell when we get back to $1, even 75c. Our currency is so accessible with so many waiting on the edge of their seat to liquidate, I wonder how even a big buy-in from a big player would boost the price past $8, at least for very long.
Um. There are a couple of things that I see as a potential benefit. There is about 20% of the supply on exchanges now but there is 65% powered up and 15% liquid in wallets. (Steemit Inc is going to make things potentially interesting)
So anyway, 20% on exchanges. Price pumps... there is a 13 week powerdown so it is almost impossible for someone to liquidate unless they keep 100% liquid.
Then there is the other side of the game. My vote is something like 65c cents (if 100% voting power). if Steem got to 10 dollars as an example, my vote would be around 30 dollars 10x a day. If I sell, I lose that ability to vote. Depending on the way the market goes, there will be people selling early and will miss their buy back. I don't plan on that being me as there is a long way to go in the future here and 300 dollars vote value a day works out to ~110k a year. so at 10 dollar Steem I could liquidate for 370,000 or perhaps have a recurring earning of up to (being an ass) 30% a year.
The more people who sell low, te higher the distribution, the less volatile it becomes as not as many are going to be dumping hundreds of thousands at a time and, there will be many, many more users so percentage wise, it will have less impact.
Then there is the potential with Resource credits that are only created from powered up Steem but could become a pool that could be earned upon in the future. Sell and lose access to RC sales as RCs disappear as soon as the steem is powered don. The more people who powerdown, the higher the price of RCs as they become scarce.
There are many options to come, it is early days in a burgeoning industry.
Thanks much for writing this, this all makes good sense. I’m not worried, and definitely not an economist. Your explanations + examples are much appreciated!
NB: Steem isn't destroyed when it's spent.
Somebody new gets it.
Keynesians talk about the velocity of the money supply; the more people getting it, spending it, using it, asking vendors if they accept it; the bigger the ecosystem grows and the stronger the network effect.
Inhale, exhale.
You need both.
Thanks for the reply m8! What you say is true. Also, STEEM is always minted and distributed to users in this way. So if both these things are true, does scarcity only come from users locking it up in SP? Is this what holds the price at a given value? As I said above, I am not an economist and don’t pretend to know anything about the way money works :)
That's right. Ultimately scarcity comes from the inflation rate, which reduces annually.
Locking it up in SP only delays spending it, so it makes liquid Steem more scarce, but not Steem overall.
Its easy to assume this whole thing is some sort of ponzi scheme, which would be true if the business model was for new people to buy in with fiat so old players could cash out.
That's not actually the case. Its not the new dollars coming in that we're speculating on, it's the eyeballs.
Imagine the power to control what people see on Facebook. People would pay good money for that.
SP doesn't just let you distribute the new Steem, it also lets you prioritise your preferred posts and comments; encouraging more of them and making sure they're seen.
Imagine Imagine Dragons are planning an Australian concert tour. They post on chain and ask which cities to include. Suddenly half the country wants to buy a beer for the guy who can drive their comment to the top of the comment section. The Brisbane tourism commission are offering a holiday for the biggest upvote to get their comment to the top.
Its the power to influence the conversation. In the attention economy its the power to shape opinion and its hard to overstate how lucrative that will be as we add more users.