Where to keep your STEEM
STEEM, Steem Power and Steem Dollars
One of the most difficult aspects of Steemit to grasp for newcomers can be the difference between Steem, Steem Power and Steem Dollars.
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Choice
When you get STEEM you have a choice of how to store it. As new STEEM is created the money supply increases and the value of existing STEEM will be reduced proportionally.
Creating new currency out of thin air may seem like some sort of charlatan trick but it is actually a fairly standard mechanism in modern economies, where it would be controlled by the central bank. It does result in general inflation caused by increasing the money supply.
Steemit
The Steemit Economy gives you 3 ways of storing your STEEM cash. There are 3 Asset types but here I will simplify it and describe, instead of assets, types of accounts. You need to make a choice of which of these accounts to store your STEEM cash in.
Please note this is not investment advice and the percentages quoted are subject to change and are merely a guide to help you understand the mechanics of the different forms of STEEM.
STEEM
This account keeps your STEEM in its liquid form. Its value is eroded over time at a rate of 9.5% per annum (currently) as new STEEM is created. But you are free to spend your currency as you wish and you also benefit as the value of STEEM rises compared to other currencies.
Steem Dollars
This is an account that holds your STEEM pegged to the US dollar. You get paid interest for holding your STEEM in this account. This form of STEEM is also liquid and you are free to spend you currency as you wish but you do not benefit as STEEM rises in value compared to other currencies. Importantly you also don't lose out to inflation as the money supply of Steem is increased. Remember the value of STEEM stored in this account is pegged to the US dollar.
Steem Power
This represents a longer term investment in the platform. There are a few benefits to storing STEEM in this account.
- As new STEEM is created you get a portion of the new STEEM (15% of it)
- Your votes carry more weight when you vote on posts
Your value will reduce over time as the money supply of STEEM is increased but at a slower rate than if you stored it as liquid STEEM because you get 15% of the new money created. In this form you also benefit as STEEM rises compared to other currencies.
Holding STEEM as Steem Power has similarities to keeping your STEEM in a notice deposit account. You earn interest but to get your money out you have to give notice in a process called powering down which takes 3 months to get access to all your STEEM locked up in this account.
There is one last choice you get to make when storing your STEEM...
Savings Accounts
Steem and Steem Dollars are both liquid currencies. They can be transferred to anyone at any time. This means that if someone got access to your Steemit account (your Active Key) they could steal your Steem or Steem Dollars.
To provide an added layer of Security for Steemians you can choose to store your Steem Dollars and Steem in a savings account that has a 3 day waiting period before you get access to your funds. Its like a vault for locking up your liquid currency.
Thank you for reading this. I write on Steemit about Blockchain, Cryptocurrency, Travel and lots of random topics.
Special thanks to @timcliff for his help on some of the more subtle points of the different states of STEEM, and review of an early draft of this article
This is great information and finally! I now understand what the use is for the savings accounts :-)
The 3 day window means you will have time to get a notification that the funds are set to transfer before it happens and the transfer can be cancelled. Its an added layer of security.
Yes, that makes a lot of sense! Thanks for that information, I was really wondering what it was for and I've seen others wondering the same thing.
Two questions I think need to be clarified, correct me if I'm wrong here, but I think this applies to the savings account as well:
To clarify your first point its Steem Power that increases your voting power not liquid Steem
On your second point relating to Steem dollars, I cant find anywhere confirmation of this but I expect you still get the interest, without getting too technical your asset is held in Steem dollars and its Steem dollars that collect the interest.
Ah, of course I would mix them up, I knew that it's Steem Power and not Liquid Steem but at the time I read your post it was long gone :D
I couldn't find either on the interest part, I guess It's just trial and error to see what happens :)
Hopefully someone closer to the code will be able to confirm the interest on SBD in the savings account. Its worth noting thought the interest rate isn't fixed so I wouldn't bank on it.
SBD is in my opinion one of the cleverest aspects of Steemit. Its a counterparty-free peg to the US dollar. Nothing like this exists anywhere else that I know about. It's a complicated instrument but the important thing for most to know is the value is around the value of a US dollar. It can fluctuate but its designed to be fairly stable.
I can't agree more. The SBD is genius as it's pegged to the USD. It makes anyone able to hold cryptocurrency without the shifting of prices since it will be relatively stable against the USD (some rules apply here, anyone should read more before considering it). At the same time you get a Yearly APR on top of it as a bonus for holding the asset.
As you point out thought, the APR isn't fixed but determined by the witnesses.
Excellent information.
I also wondered about the savings account.
Understanding this more brought some thoughts into my head _I wonder if in the future someone might start up investment accounts where if they invested their Steem dollars in an investment that yielded a higher rate than the Steem dollars rate. Like Bitcoin goes up far higher than the dollar for example
But of course thinking about it now that is probably what Whales do when they power down. They convert to Bitcoin an either keep it in Bitcoin or cash it out into regular dollars.
But of course someone who is very good at speculating / gambling on the price of stocks/share or crypto-currency - could increase your Steem dollars better than you could yourself and so such an investment account is feasible. Just thinking out loud.
Thank you.
I am not a trader but I imagine there are many ways to make margins on this Asset and we will see Options Future and Other Derivatives take shape as they pile on the bandwagon. Have you been following what is going on with the MtGox Bitcoins? Some were recovered and Hedge funds are now speculating on them, paying off people to get the value of their claim from MtGox when the court case finally settles.
For the everyday user/writer/blogger the Steem Dollar provides a currency peg that has low volatility compared to STEEM. The golden rule of investing (for stability) is to match your assets and liabilities in currency. If all your liabilities are in Dollars then its very useful to have a crypto currency that is pegged to the dollar. If your investing for high risk/returns this doesn't apply.
It not inconceivable that in a few years when STEEM is more widely used though that its less volatile than the Bitcoin or even the Dollar :)
Good points.
Not heard about the MtGox Bitcoins. The name scares me to death lol!
Thanks
Thanks @eroche! I'm a newbie learning the ropes and need this info!
Thank you for reading.
thanks !
i bought steem on poloniex but now how should i send it to steemit?