STEEM vs. BTC Analysis - Get Ready for the STEEM Tenthing (not Halving)!

in steem •  3 years ago

When the great new changes to the Steem/Steemit economy are put in place (supposed to be for November 16th), there is going to be a drastic change to the supply of Steem. The creation rate will drop to 9.5% inflation. According to calculations that I did, the daily STEEM creation amount will go from the original 400 per minute, or 576,000 per day, to 38 STEEM per minute, or 54,720 STEEM per day.

This means over 10 times less STEEM created each day.

And that's conservative, because the actual average creation amount over the last 8 months, is over 600 STEEM/minute. That means it's actually 15x less STEEM created each day. Just keep that in mind, but I will use the original 400/minute conservative value, at 10x reduction, for simplicity and to show that even at 400, instead of 600, how that was/is still an issue.


BTC Halving and STEEM Tenthing

When Bitcoin halves, it's 2x less Bitcoin being created. At first a block rewarded 50 BTC, then in 2012 it was 25 BTC, and the recent halving made it 12.5 BTC. This will continue until 21 million BTC are created.

Since Bitcoin was created, the creation rate went from 50 to now 12.5, which is 25% of the original.

And that is during an 8 year period we can say. After 50 has been divided 64 times (64 halvings), there will be no more BTC created. Halving will go on for 256 years if its every 4 years... LOL.

STEEM will be dropping to 9.5% of the original, within less than 1 year.

STEEM's creation rate is dropping by over 10x within a year, and Bitcoin drops 2x every halving (each 4 years?) and has only dropped at total of 4x the original in it's whole lifetime of 8-9 years.

Does that mean STEEM will go up? Probably, after the dumping at 3 month which will drive the value down until the mass exodus ceases. Will STEEM reach BTC status? Not likely. For the comparative inflation to equate in a price value, STEEM would need to be used by 13x more people compared to the amount of people who use Bitcoin (see below for 13x figure).


Issues - Not So Simple

Note that the halving on BTC is per block which is how it's created, while for STEEM it's on a timescale, as processing blocks is not the only way to create STEEM, unlike BTC. Below I have adjusted calculations to match on an equal denominator, that being per day.

STEEM also doesn't have a future cap in place, so it's different that way in terms of the value difference they will have in a market. Less currency in existence makes it more valuable. Maybe this can also change in the future and make STEEM that much more valuable, who knows where things will end up...


Supply

From my calculations, the original 400 STEEM /min, 60min/our, 24h/day, 30d/month, 8 months since Steem was created about (April-November), gives a total STEEM created of 138,240,000 STEEM in existence. But since inflation was set to 110%, and apparently was actually running at 160%, we now have 210,117,297 STEEM in existence.

At 210,117,297 STEEM, the average creation rate per minute (over the past 8 months) was actually over 600 STEEM/min. That's a 50% increase. If 110% was the rate before, adding 50% is about equal to the 160% inflation rate that @smooth mentioned.

To compare the supply of STEEM to BTC, it's 210,117,297 STEEM vs. 15,976,428 BTC. STEEM has 13x more supply than BTC.

To also compare the BTC block creation to the STEEM time based creation... Each BTC block takes 10 minutes. So originally there were 7200 BTC/day, compared to 576,000 STEEM/day. At the 1st halving, BTC was at 3600 per day, and now at the 2nd halving it's at 1800 BTC per day. That's a huge difference.

Per day, 1,800 BTC are created, and 576,000 STEEM is created. That's at 400 STEEM/min. At 600/min, it's 864,000 STEEM created each day.

1,800/day compared to 576,000/day is 320x more STEEM created each single day. At 864,000 each day, its 480x more STEEM than BTC created each day.

With the new STEEM economic changes, it will be 54,720 STEEM per day, and only 30.4x more STEEM compared to BTC created each day. That is still a big difference to BTC, but much better than 320x or 480x.


Conclusion

Although STEEM is doing a tenthing (90% cut from 110% inflation),or a fifteenthing (150% cut from 160% infaltion), with a 10x-15x reduction in creation rate in less than 1 year, while BTC does a halving (50% cut) each 4 years, STEEM still has a much larger supply which devalues it compared to BTC.

This inflation rate change was very much needed, at least at this early stage with not enough adoption.

Going from 600 STEEM/minute to 38 STEEM/minute, is a huge benefit to the value of STEEM in the market. Reducing the amount created each day to 1/10th or 1/15th of what it was, will greatly affect the price.

The STEEM Tenthing/Fifteenthing will help STEEM. Even though it's a greater cut in 1 year than Bitcoin has cut in 8 years, the supply of STEEM will mean we don't reach Bitcoin's value until STEEM is used by many more people. Step 2 of world domination is up: create a market place to buy and sell. Then STEEM will get adopted greatly and it's value will increase much more.


Summary Table

Creation Rate STEEM vs BTC Daily Supply
Start Actual Next Month Reduction % Supply Current Change
BTC 7,200/day 1,800/day 1,800/day 50% 15,976,428 -480x -30.4x
STEEM 576,000/day 864,000/day 54,720/day 90-150% 210,117,297 +480x +30.4x

[Images: 1, 2]


@krnel
2016-11-14, 9:46am

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Step 2 of world domination is up: create a market place to buy and sell.

This. If this can happen, Steem could become very, very interesting. Unfortunately, it's not an easy thing to do. Facebook has local marketplace functionality built into their mobile app, and I've yet to use it. I've yet to put money into Facebook at all. That said, if Steemit creates real value by converting blogging / curating into physical things people actually that other community members provide (art, 3D printed items, pre-pared food, medicines, etc). Well, I think that could get interesting. We could pay for something cheaper on Amazon (prime members getting free shipping also), but I think the key will be the uniqueness of the items offered here (such as art). Still will be interesting to see how it pans out. I for one would love to buy stuff via STEEM and SBD. :)

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We came to Amsterdam using Bitcoin converted from SBD and Steem. Plane ticket, hotel and all expenses using our Wirex card. It could be that we never have a Steem based economy but as long as we can build many tools and apps on the Steem blockchain we will be moving forward. I believe we are heading in the right direction. It is cool seeing so many new faces coming to crypto who would have never showed up if it wasn't for Steemit.

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It is cool seeing so many new faces coming to crypto who would have never showed up if it wasn't for Steemit.

Totally! My wife is among them and has her own bitcoin wallet and exchange account now. :)

So glad to hear stories of people doing real world stuff with STEEM. Unfortunately, I also have to recognize how much of that was paid for by huge early investors like @laonie. Until new value is created within the Steemit ecosystem directly by people selling their own work, etc, it may be hard to avoid the stigma of one person holding the bill for someone else. But I guess that's how it always goes when it comes to crypto market value.

In my mind, Steemit is the gateway into crypto because it's super accessible . I just got back from Steemfest and there were allot of people there that never used crypto before until they heard of Steemit.

I can easily envision 20x more people using Steemit over Bitcoin in the future for that reason alone. It's easy and fun to use plus non-tech girls use it!

The new hard fork will be interesting. So many different opinions about what might happen. I will be buying if the price will dip more and I heard many saying the same. Of course, there is always a risk in investing so don't invest more than you are willing to lose.

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I'm one of them :D I never used crypto before Steemit. I agree, Steem has much more potential. It can really take over in adoption compared to BTC if the cards are played right in the next few years. BTC is coming into adoption, while the blockchain is still a decade away probably.

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Yup, we are the gateway to the Crypto world for many people. It was great meeting you the other day @Exyle.

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That's me. I was going to get into Bitcoin as soon as I heard of it, then saw how difficult it can be and gave it a pass. Regretting that now! But now I have some STEEM, I used it to buy Bitcoin (fractions), and traded it right back to powerup for SteemPower. I might take some out someday, but this is enough for me now.

So we're probably going to see a price spike soon and shouldn't fall for it ... anticipating even higher valuation going forward?

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I'm no expert. But the value will increase, since the supply creation rate will go down. But, to contrast that, the next 3 months will likely have people exiting the doors, driving the price down. I think it's a slight price up, then down for 3 months or so, then back up after things settle and we cleaned up shop, with more changes to the platform as well.

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I totally agree with this analysis and I was thinking the same. I am convinced that the STEEM price will go down for the next three months, which will coincide with the time needed by people who want to leave with their money to power down (and then leave).

But then, things should be better and we will be able to start on fresh grounds.

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What you describe sounds like a lot of new crypto, I think. People exit when they think the time is right. The coin usually drops and stays down. A lot of them though, are coins created to be coins. The wildcard for Steem is all the development many don't have. You're right, there'll be forces pulling up, forces pulling down and hopefully the innovations will push back up when the dust clears IMO.

Where do you get data feeds for daily prices for BTC & STEEM? I'm looking to do some partial hedging of the dollar and need to do correlation studies.

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Much obliged

Interesting analysis. The inflation rate was nearly 400% when I joined in July - must have been even higher before that during the early distribution phase. Over time it has fallen to 160%.

While the inflation rate will be much lower, so will the power down period. We'll see how these two forces balance out the price, at least in the first three months.

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Wow... 400% jeez! I don't have data, like blockchain access to full specifics. I got around ~607/min 8 month average with the existing supply, by comparing to the supply that was supposed to exist at 400/min. It comes out to 160% roughly give or take for 8 months. Thanks for the info on the 400% inflation, that's nuts. I'm really glad these changes are coming, because it's something I didn't get as viable long-term until mass popularity hits. Peace.

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@hisnameisollie used to do weekly reports. You can see https://steemit.com/steem-stats/@hisnameisolllie/steem-it-statistics-week-4 and https://steemit.com/steem-stats/@hisnameisolllie/steemit-statistics-week-11

Inflation rate falling from 360% to 235% in 11 weeks. 5 more weeks have passed since the last report, we can only assume it has fallen from 235% to 160% in that time.

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