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RE: How should Steemit Inc decentralize their stake?

in #steem3 years ago

Burning the stake of the steemit account will reduce the author rewards by about 1/3. Remember that the rewards pool comes from inflation and the amount of new steem is a percentage of the total supply.

Since the stake of the @steemit account is not part of the actual circulating supply burning it will not have any direct impact on the price of steem while reducing the marketcap and size of the rewards pool.

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You don't and can't know for sure what is the effect on the price from the steemit account. Investors know that 41% (based on quoted number, probably not that now) is out there and may be sold, so it weighs on the price. Looking at the worst case scenario, that is potentialy a huge pile of STEEM that may continue to be sold and depress the price (and/or limit price rises) for years to come. That is absolutely something that matters to the price. If it is burned, it can't be sold and does not weigh on the price.

Of course, no one can know for sure what the price will do in the future nor what the effect of any action (such as a burn) might be, but to suppose it has no effect is an extreme claim and unlikely to be accurate.

There was a volume last week of about 500 million dollars in a day... they could have divested 50% selling it easily... this would have hurt the price temporarily, but then no one party could hurt the price anymore like they can do now..

You are correct we can not predict what reaction investors will have in that hypothetical scenario. In the short term we will see a small reduction in the supply (after all just between Poloniex and Bittrex there are is already about 45 million steem that can be traded which amounts approximately to 1.8 years of inflation at the current rate).

Inflation is less the issue than 41% of the total supply which is always going to be a massive amount with enormous direct and indirect effects on the market. Inflation is currently about 8.5% per year so 41% is more than 4x as much as one year's inflation. That is, if Steemit decides to divest by selling over a 4 year period that is more than doubling the inflation. And that is not implausible, as they have been selling regularly since the start.

I agree, divesting the stake will have a direct effect on the tokens available on the market and therefore on the price. Even if most of it is powered up it will effectively dilute everyone else (depending on how it is allocated). The real issue is the existence of that massive stake. To be honest I would prefer that Steemit burn their stake even if it means a short term reduction in the rewards pool.

In Steem terms, yes. However, I'd wager there'll be a massive pump shortly following a burn (that's just how the crypto markets work). It'll stabilize somewhere, no one knows where, but I'm fairly confident it'll more than offset the drop in reward pool in Steem terms.

That is a great point, and one that I had overlooked.

On the other hand divesting that stake will effectively dilute everyone and probably depress the price in some scenarios. Either way this only proves that having such a high percentage of the supply is a liability to the whole network.

That's a very good point that I have not seen anyone make before. But it's certainly very interesting that it will lead to a lower reward pool.

Since the stake of the @steemit account is not part of the actual circulating supply burning it will not have any direct impact on the price of steem while reducing the marketcap and size of the rewards pool.

While it might not have a direct effect, I believe that a potential burn will give faith to investors who might be skeptical of investing because of the huge stockpile held by Steemit Inc.

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