Introduce a Minimum Power Down Allowance

ottodv (55)in #steem • 8 years ago (edited)

You can power-down any time you like, but you can never leave!

There is an oft repeated claim that it takes 2 years to power down your Steem. This is based on the fact that you can power down 1/104th of your total Steem Power every week (about 0.96%).

However the amount of new Steem will double every year (more the first year), 90% of that gets paid out to Steem Power holders. Which means that for every 1 Steem Power you have at the beginning of the year, you'll have 1.90 Steem Power at the end. This comes to about 1.25% interest per week. Of course this is meant to compensate for the dilution of Steem and the resulting loss of value that should cause for Steem.

You can already see the problem, the interest is higher than the power down rate.

I ran a little calculation with those percentages, to see what would happen when trying to power down 1000 Steem over 2 years. My calculations assume that the power down command is renewed every week so as to raise the amount one can power down to the max possible each week, and for simplicity I have ignored any curation (or author) rewards that might still be made over that period.

Week	Total	Power Down	Interest
1	1002.804453	-9.615385	+12.419837
2	1005.616771	-9.642351	+12.454668
26	1075.530168	-10.312715	+13.320553
52	1156.765143	-11.091636	+14.326657
104	1338.105596	-12.830418	+16.572577

The result of all this is that you end up with more Steem Power than you had when you started to power down.

You can of course continue to power down... forever, and your children and grandchildren after you, it will never ever end.

Being able to power down your Steem to zero in two years, would already be a very long time, but as we can see even that is not possible.

Restricted Currencies Have Never Been Popular

If one looks at the history of currencies for a moment, it is pretty evident that currencies that are hard to exchange into other currencies are never popular. No-one wanted to hold on to Soviet Rubles for instance. The Venezuelan Bolivar, which can't be freely exchanged, is unwanted even by the country's own citizens. No-one in their right mind would ever dream of investing huge amounts in such currencies.

The lesson from this is that the ability to divest from a currency is rather important for anyone willing to invest. Take that ability away, or heavily restrict it, and you automatically reduce investment.

To gain a little voting power, I invested 1.1 Bitcoin into Steem. The power down restriction is what prevents me from investing any more. Sometimes I even regret having invested what I did, because I can't ever get it all back out!.

Introduce A Minimum Power Down Allowance

A good start would be to introduce a minimum power down allowance of 100 Steem per week. This allowance should of course rise with Steem inflation. Over a year it would rise to 200 Steem, the next to 400, etc... Basically it should be a constant expressed as a tiny percentage of all outstanding Steem at a given time.

Each week, anyone would be allowed to power down either 1/104th of their Steem Power, or their minimum allowance, which ever is greater.

Benefits

Steem really needs many small investors, i.e. people who are willing to buy a few hundred dollars worth of Steem. Hoping for more small Steem holders to appear via whales upvoting articles, is not realistic with the growth of the platform.

Allowing someone who invested 1000 Steem to divest in 10 weeks max, by using the minimum power down allowance, is in my opinion a reasonable policy for Steem, and could well get a lot more people to decide to buy into the platform.

The whales aren't impacted by this change, 1/104th of their Steem Power is always going to be greater than the minimum power down allowance, so this introduces no risk of whales running for the exit and tanking the price even further as some fear.

If it proves successful at attracting small investors, the allowance could even be raised in the future, to attract bigger investors.