Debate: There is no incentive for NOT powering down
Here's the premise and topic of this debate:
I have no reason to remain powered up full time. If I powered down now and remained powered down, there is absolutely no opportunity cost to me. There is actually an opportunity cost for NOT powering down since I lose out on the opportunity to receive liquidity each week if needed. If I don't want or need the liquidity at that time, I can simply power right back up again. No loss.
Whether or not this is wholly intended, I argue that this creates an artificial downward pressure on the price and scarcity of Steem when combined with the dilution rates.
If long-term investors into the Steem platform want to hold, there should be incentives for remaining 'powered up'.
Anyone disagree?
I agree, remaining powered down is probably prudent.
For example, I use a bot to accumulate STEEM on Poloniex when the price is going down. I convert to SP whenever I can. I power down in case I over buy and/ or the price turns and selling some STEEM is prudent. Invariably I end up cancelling my power down and reseting it for another 7 days.
Also some people may choose to remain powered down in case of an emergency need for extra funds. Others power up SBD whenever they earn it and pay themselves weekly in powered down STEEM.
Whatever works for the indivdual concerned is all good in my book.
There is unnecessary stigma attached to being powered down IMO.
I think the down pressure can simply be put down to a couple of whales selling (which is their prerogative) and not enough demand (at the moment) to prop up the price.
My original assumption was that there were penalties associated with powering down. Possibly that is the source of part of my thinking... regardless, I think stigma may be the wrong word to it. For anyone who understands economics, both macro and micro, powering down is the most logical, rational choice. Given the existing reward and incentive structure that seems to be the running theme of Steem (thankfully), I found it odd that there was no such incentives to remaining powered up.
I think the Steem price is in a race towards the base price at this point. Without any change to the power-down structure incentives, the price of Steem will naturally seek bottom.
I definitely agree that there should be incentives for being powered up. @dantheman is already talking about nerfing whale power, so even more reason to power down.
I simply subscribed to the "Powering Up is good " logic, though have been reconsidering lately...
To my understanding, if holding in for the long term, staying powered up is the way to go. Inevitably, the price of Steem likely will rise, hence the value of keeping locked in - and earning a cut of the new Steem created while holding on.
Though, the other factor to be brought into the equation is opportunity cost.
I think there's a potential benefit in powering down, as it offers the option of investing a percentage of funds elsewhere if the potential for rewards is greater elsewhere.
i.e. When Steem was around $4, that might have been a good time to take some out via Powering Down to throw into some other cryptos. For instance, I earned 3x ROI on ETC in the first 24 hours I'd heard about it. Had I powered down, I could have thrown more down. And/or - I've been looking at investing more into Bitshares... Had I powered down at $4, I could've invested double versus now...
I've been thinking about it... Though still not well educated enough, and may wait until Steem's next wave up until it's past its first high.
And as you say, there's no reason you can't just turn around and reinvest the weekly payouts straight back into power ups.
Though, do you know - are weekly power down payouts at the official rate you'd get on an external market, or the higher rate of the internal market?
I think this has a degree of inevitability if the user growth rates and content production continues.
@spiz0r here dropped a truth bomb that I didn't even consider --
That changes my calculus a good deal. Need to to look at some models of those rates now.
yeah, SP incentives make it about 300apy right now, more like 90apy generally (now is higher becaue its the first year)... assuming the price remains steady thats a great deal. then again, a guy who powered up a bunch at $4/steem might not feel the same way.
ALso, its important to realize that powerdown doesnt take as long as you think because of the increased conversion rate.
For example, if you have 10000SP in your balance right now and you start a power down, it would probably take you somewhere around 8 months toa year get your 10K SP (the remaining year or more would be the effect of SP incentives)
assumes facts not in evidence.
the powerdown payouts are in steem, not SBD.
Yes - though the STEEM that's paid out weekly - do you know if that's at the "official" rate on the external markets like Poloniex/Bittrex, or the going rate on the internal market (which may be average 10% higher)?
I don't get what you mean... the steem is paid out in steem... there's no "rate" to it... maybe im just not getting what youre saying.
So like if you power down, say your balance is 104000 steem. The first week, you get 1000 steem, it has nothing to do with a rate because there's no kind of exchange to it.
Like the internal market is just the conversion of steem$, not steem. When you power down, steem$ never come into play. You have steem as SP and you convert it to "liquid steem"
Ah ok, yes of course. I got it now.
So if were to power down, would end up better selling Steem (if choosing to do so) on the internal market as the rate is higher...
All cleared up. Thanks.
I disagree.
You are powering down M Vests and receive STEEM. When you powering up you pay STEEM for M Vests. The M Vests per STEEM ratio is going up really fast. Now 1 M Vests= 272.9 STEEM, a day ago it was 269 STEEM.
When you refresh your wallet balance, you can see the Steem Power balance is always going up, the reason is the steem_per_mvests ratio is getting higher and higher with every block.
So you need more STEEM to get the same Vesting balance after powering down.
Ahhhh! Interesting.
Could you model that out on a graph?
per the white paper and other discussion, the normal rate for vest conversion is increasing about 90% every year. This is whats making your SP balance seem to increase. BEcause your SP balance isnt steem really, its vests which are constantly increasing in steem value as new steem gets created and placed in the vesting fund.
RIght at the moment, the rate of this increase is about = to 250-300APY, because its the first year and we're in rapid production mode. thats going to slow down to about 90%apy which is still respectable, provided the currency maintains a stable value. I think steemstats.com can look at your SP balance and guess at your effective interest rate, though the system isnt perfect.
I wrote a couple blogs if youre interested in how the system creates Steem to fund vest value increase if youre interested... i got bored and stopped though.
https://steemit.com/interest/@sigmajin/understanding-the-steem-economic-system-vests-sbd-steem-dilution-interest-and-all-those-crazy-things
https://steemit.com/economics/@chiefjay/where-does-the-money-come-from-part-2-of-my-steem-economic-model
Wov! Fantastic posts in this subject! Great work!
Thanks. im sure its a little dense for most people, but i really feel like a big source of confusion right now is no one understands how vests and the vesting fund work. Looking back through old posts, it seems to me like the founders decided at some point that the notion of the vesting fund would be either too complicated for general consumption or wasn't a desirable topic of discussion for some other reason, because now no one talks about it at all. I think part of it is also that theyre walking a very fine SEC line. BEcasue at the end of the day, SP (or at least the vests that represnt it) is really an equity. And you can't just hang a shingle and sell equities. There are license issues.
I didn't get the equity thing until i saw them use the term dilution, which really probably goes right up to the line.
The problem is that without it, its even way way more complicated to figure out whats actually going on. If you read anonymint's recent blog post, he has a whole absurd nth triangular number series where he tries to figure out debasement with a series of like 300 different equations, and i explain to him that its just as easy with a simple 2 part equation, and now hes mystified why because he doesnt understand that all hes doing is reverse engineering a mechanism thats already built into the system.
I don't have historical data yet, all I know it was around 196 STEEM / MVEST a month ago.
I am planning to make a post about it in the next few days. Now I have really limited information about this. :)
I don't know what the actual rate is, but even with a power down running I make more SP per week than pays out on the PD. I decided to do the power down because I like the liquidity coming in without having to go crazy writing and promoting a post. I had been exchanging my the PD Steem for BTC each week when I got it, but I've decided to stop doing that (for now at least). What I'm trying to figure out now is whether it's more beneficial to the whole Steemit community (myself included, of course) to keep my holdings in Steem or SBD. I see value to doing it both ways. Perhaps I should just split it 50/50 across Steem and SBD.
But to get back to your point, I don't find any obvious value to staying powered up instead of powering down.
Well, right now with the SBD peg operating at around 84 cents on the dollar, it would make more sense to hold in SBD... but I never claimed to be an economist :) I could probably pretend to be one on TV or something.
Great post @blakemiles84 . I think the incentive could be "production" costs. As content creators, there are a variety of costs associated to production. Planning, Strategy, Account Management (clients), etc. It would appear that this should be wrapped into a "Smart Contract" where the funds are released when the contract players need the agreed upon funds. Powering down seems connected to the contract of the creators.
Power Down not an option!
[
] Hello blakemiles
Yes I disagree. I love this freedom. I want cheap STEEM. I want even more cheap STEEM again. If you power down you will end in the situation that you cash in some US $. So you sell STEEM. I buy them cheap. Most people end up spending their credit. The lender makes money on you. Powering down is exactly the same.
Regards
The Viking from Norway
While I completely agree with what you're saying, the timeline of your premise is what concerns me.
Furthermore, I'm advocating for MORE investor authority in how their shares are invested into the platform.
what is it with you and debates.
I'd go a step further even. There is really no incentive to power up. If you get a big chunk of liquid steem, it makes more sense to hold it, or sell it for btc or steem $ (if youre afraid of inflation). The "built in" incentive for buying and holding SP is its effect on your influence in the system (ie, your curation power) but because the marginal ROI on that is so low due to concentration, its effectively worthless in that regard.
Also, one of the things that many ppl miss is that Steem is much more scarce than SP (98% of steem is SP) and convertible only one way.
So i can change my very rare liquid steem to very common steem power. But if i do, it will take a year to change back.
Even with the SP incentives, that amount to almost 300APy at the moment, its just not the best deal.
You'd be cutting your prize pool by 1/6th. If you compound that, it'll make a pretty huge sum of cash. I'm going to dump on the masses!
Explain that please... where did you get the 1/6th?
I have to look over my math, shit doesn't make sense at all, now that you mention it. Transfer your one week power down to an alt, just to see how much it grows over time. Now multiply that account each payout.