The Stability of the STEEM Economy in One Graph
The one thing I can safely predict for 2019 is an increase in volatility and a rash of creativity - OK, that was two things. But how volatile is STEEM? A glance at its price chart shows the same deep bear market that has plagued almost all cryptocurrencies. But, how volatile is STEEM within its own economic system? How does STEEM behave within the Steem blockchain?
Below is an update of previous graphs showing the values of pure upvotes and author rewards in STEEM terms per SP, calculated as APRs.
The bump in the middle was due to HF20. Most people were unable to post, hence most people were also not voting, hence the reward pool rose sharply to a whisker above 1 million STEEM, hence the value of an upvote also rose sharply. It took about 3 weeks for the whole process to unwind, after which rewards returned to about the same level as pre-HF20.
What should be striking about this graph is how stable STEEM earnings have been. Your upvote per SP is worth about the same now as it did 6 months ago in STEEM terms.
Yes, of course STEEM is worth less in US$ terms, but that is an external transaction and of interest if you are either buying or selling on an exchange. If you are working within the Steem blockchain economy and looking at the STEEM in your wallet, you should be seeing a significant increase - so long as you haven't out-exchanged it.
This is somewhat like going on holiday and converting everything into your native currency. We all do this as a comparison of the relative prices of goods and services between the two countries. But if you move abroad, become an expat, work, earn and spend in the new local currency, it becomes pointless making the comparisons with your homeland currency all the time. It becomes more important to gauge the price of local things relative to your local earnings.
This is something that Steemians should learn to do. I have to admit that showing pending rewards in "$" (that are not actually dollars) has the psychological consequence of always thinking of rewards in terms of "dollars" rather than the native currency, STEEM.
The take-away here is that STEEM is actually fairly stable within the Steem blockchain economy, and that this should be promoted to merchants.
One thing not obvious from the above chart is that a large part of the last 6 months saw the SBD Print Rate at zero (or close to zero) and this has added to the stability. I do not have daily data to plot the whole of 2018 but I do have weekly data that shows that in the early part of the year the author rewards were higher than the upvote values. This was due to the price of SBD being much higher than US$1, this increased the supply of SBD pushing up the debt ratio. Once that ratio reached 5% the SBD printing presses stopped, thereby slowly returning the blockchain rewards to their current values.
We are in a similar situation at the moment, with SBD Print Rate at 1% and the blockchain STEEM price moving towards the market price, albeit very slowly. At the same time, the supply of STEEM has been increasing, as has the reward pool. However, despite all these financial complexities, the value of your upvote in STEEM terms has remained astonishingly stable.
One issue that I see being discussed across different channels within the SOS Discord server set up by @pennsif, is that of giving STEEM more value within its own ecosystem. This means setting up structures and online businesses that give STEEM more value than it would have by being converted to fiat. One concern has always been about how volatile the prices of STEEM and SBD have been, but what I hope to have shown is that if trades are conducted within the native currency then they are actually more stable than many fiat currencies. One irony is that this relative stability does not come from SBD but from STEEM itself.
So the second take-away is that any merchant willing to create added value for STEEM, within its own economic system, can estimate profits in the short to medium term with a fair degree of accuracy. Of course, changes happen, but if one looks daily at the Steem macroeconomic data even those can be predicted before they become fully-formed.
One thing that seriously needs to be changed is to show pending rewards in STEEM. But that argument is for the next post.
- - 
- -Please Comment, Resteem and Upvote. Thanks!
@rycharde manages the AAKOM project and the MAP Trail.
This post has been included in today's SOS Daily News - a digest of all you need to know about the State of Steem.
Editor of the The State of Steem SoS Daily News.
Promoter of The State of Steem SoS Weekly Forums.
Editor of the weekly listing of steem radio shows, podcasts & social broadcasts.
Founder of the A Dollar A Day charitable giving project.
To listen to the audio version of this article click on the play image.
Brought to you by @tts. If you find it useful please consider upvoting this reply.
It's very interesting to see the post HF 20 payout in that way. I do think that the $ display is useful to demonstrate the value of content or activity to the external world. Perhaps it should actually be clarified that it is "US$". Thanks for sharing these thoughts, keep them coming.....
I'm not sure that the external world is more important than existing users. A non-member browsing will see a snapshot of rewards; it is the user who experiences pending rewards changing even without any voting activity. This leads to the impression that such rewards are unstable plus that the number shown appears to have a mysterious relationship with the actual payouts, none of which are in $.
Congratulations! This post has been upvoted from the communal account, @minnowsupport, by rycharde from the Minnow Support Project. It's a witness project run by aggroed, ausbitbank, teamsteem, someguy123, neoxian, followbtcnews, and netuoso. The goal is to help Steemit grow by supporting Minnows. Please find us at the Peace, Abundance, and Liberty Network (PALnet) Discord Channel. It's a completely public and open space to all members of the Steemit community who voluntarily choose to be there.
If you would like to delegate to the Minnow Support Project you can do so by clicking on the following links: 50SP, 100SP, 250SP, 500SP, 1000SP, 5000SP.
Be sure to leave at least 50SP undelegated on your account.
This is dead on. I have had SBI upvote values pegged to a target SP ratio per unit (initially a soft peg, but now hard pegged with the automation), and the ROI (in STEEM terms - not relative to USD of course) has been relatively consistent for almost a year.
It is worth noting that the APR's shown are 2-3x the inflation rate. This is possible because of the high proportion of Steem's SP base that does not upvote. As more STEEM/SP go into circulation and diminishes the % of total held by Steemit, the APR multiple over inflation will gradually decrease over time.
Hi, just noticed this; we are possibly the only two on this platform on the same page here! There must surely be more, but they are keeping quiet.
The inflation rate is also the profitability rate. Yes, it is very high now, and has been creeping upwards as activity drops. Although not as high as a year ago when SBD>>$1!
Looking at this problem afresh, it strikes me that the coin-creation macroeconomics is doing a decent job, it is the coin-distribution algos that need a thorough look (without making them worse!); in essence, it is the idea that one can earn close to max self-upvoting by using one's SP to engage in transactions that have no value beyond the purely monetary. I think the way forward is to explicitly split Steem-as-central-bank from Steem-apps that distribute coins using different types of transactions, eg, one sees many steemmonsters transactions on the blockchain that are not all purely monetary. I'll be posting on this soon; before any solutions one needs to articulate the problem.
This is also why STEEM is the official enrollment currency of Steem Basic Income, which was met with a lot of skepticism in the early days. We launched when SBD was trading for close to $10 and almost every upvote service at that time took took payment in SBD instead of STEEM.