STEEM Dilution Rate - MUCH higher than you might think…
Highlights;
Current Rate of Steem Dilution (today): 0.95% per day
Rate of Steem Production on first day of Year 2 (from now): 0.21% per day
Minimum Rate of Steem Production (100% per annum rate): 0.19% per day
Dilution Rate of Steem, from now till 1 Year's time: 346%
Dilution Rate of Steem in Year 2: ~100%
After a second read through Steem White Paper (https://steem.io/SteemWhitePaper.pdf), and a reply from @dantheman on an oversight I made on a post yesterday, I have decided to explain the Steem dilution, so it is easily understandable for all.
So, first things first, the Dilution Rate not currently 100%. It will eventually get to that number (and stay there) over time, however Steem is still in distribution mode currently, so it’s is running at a much higher rate.
Steem is currently being created at a rate of 800 Steem per minute.
This is currently split in the following way;
Content and Curation Rewards: 40
Mining: 40
Steem Power Rewards: 720
Currently, the Steem rate of production is much higher than the 100% per annum cap. The 100% dilution rate (0.19% per day) will be hit sometime soon after 12months from now. Year 2 starts with Steem of 541,849,616 with supply for the @800 Steem per minute to be less than that at 420,480,000 (calculations to follow).
Here is the extract from the White Paper explaining how the Contribution Rewards Change;
- Curation rewards: 1 STEEM per block or 3.875% per year, whichever is greater
- Content Creation rewards: 1 STEEM per block or 3.875% per year, whichever is greater
- Block production rewards: 1 STEEM per block or 0.750% per year, whichever is greater
- POW inclusion rewards before block 864,000: 1 STEEM per block (awarded as 21 STEEM per round)
- POW inclusion rewards after block 864,000: 0.0476 STEEM per block (awarded as 1 STEEM per round) or 0.750% per year, whichever is greater.
From here on out, I’m pretty confident I’m close with the calculation, however I may have misunderstood some minor details, so if your a better educated user, and see a mistake, let me know and I will edit…
From this, I have calculated that, the generous mining rewards remain constant (in Gross Terms, diminishing in Real Terms) until (by my calculations) 2.8bn Steem are in circulation (Roughly 5 Years) (See Chart Below for further info). However Curation and Content Rewards Begin to increase in Gross Terms when 542m Steem are in circulation (Roughly 1 year from now).
For simplicity, I am going to provide some calculation so you can visualise the dilution rate for the next year…
What this essentially shows is that, the Dilution rate for Steem over the coming 12months will be 346%. This is however heavily weighted towards the present, with todays dilution rate running at 0.95%.
The first day of Year 2 looks like this..
Steem in Circulation: 541,849,616
New Steem Supply per day: 1,152,000
Steem in Circulation After Day 1: 543,001,616
Steem Growth Day 1 Year 2: 0.21%
The 100% Steem Growth Rate kicks in at 0.19% per day (0.19% compounded 365 times comes to 100%). Moving into Year 2, the Steem Daily Growth Rate will move slowly towards the 0.19% cap, and then stay at this rate moving forward.
Why is a High Dilution rate a good thing?
The sky high dilution rate is going to distribute Steem more evenly amongst users. The larger accounts cannot keep up with Creation Dilution, and thus this gives credence to @danthman stating that;
“Last analysis I saw showed money being distributed to more people and away from the top.”
Please see https://steemit.com/steemit/@hisnameisolllie/the-top-1-steem-v-the-real-world for further information on equality in the Steemit ecosystem and how this should change moving forward. Especially comments from @dantheman correcting me on a few oversights. There are a number of EDIT's that need to be done to this article, and it will be reposted over the weekend...
Sources
https://steem.io/SteemWhitePaper.pdf (Pages 35 onwards)
https://steemd.com (Right Hand side of Home Page)
Remember that Bitcoin used a fixed 300 BTc per hr for the first 4 years. That meant it's inflation rate was on the same curve as steem.
That's good to know. The information on $USD in the White Paper was very useful too. For anyone that missed it;
(Extract from page 36) https://steem.io/SteemWhitePaper.pdf
From August 2008 through January 2009 the U.S. money supply17 grew from $871B to $1,737B, a rate of over 100% per year and then continued to grow at about 20% per year for the next 6 years. All told the money supply in the U.S. has grown by 4.59x over less than 7 years. During that same time, the value of the dollar relative to goods and services has fallen less than 10% according to the government's price index18. This real-world example demonstrates that supply is only one component of price.
i have a very small account but I have watched a $62,000.00 dollar SP account go down to $44,000.00.
I was thinking it was mainly because of the seven (7) day price reduction and average . I thought it would level off after the seven days, because the price was holding in a range. Now, if I am understanding correctly, what your saying is that this will basically continue to drop based on the dilution over the next year.
Sorry, I am a hard learner and there may be a few others....... Lol
Based on the extract from the White Paper on USD, not necessarily (Dollar fell 10% on 459% Dillution). If demand outstrips Dillution, the price could in fact rise...
Lots of if's and but's ;)
Thanks ... Still attempting to understand the dilution. Thanks for your time and response. :)
This. Many people don't realize how inflationary BTC was and still is. The difference is that Steemit has found a much, much better way to distribute the inflation.
But the thing with Bitcoin is we know how many will exist. The US government is still able to print money like paper.
Yes, that is why BTC will become a store of value. All western governments are stealing value from their citizens via fiat, and Bitcoin will give people a way to opt out. Many of the smart citizens are already doing just that.
Glad to have people like you filling us in who are newer to cryptocurrency. It's really reassuring to know that steemit is on the same track as bitcoin. Bitcoin is the gold standard, but steemit has the true potential to bring the masses to crypto and introduce them to bitcoin as a legitimate form of currency instead of only connecting it to the silk road and illegal activity and super volatility.
These numbers were much needed! You've done a lot of research for that post! I bet I wasn't the only want to wonder about those exact numbers. I also loved your previous article though I knew it was off for the first year. Thank you for this awesome article!
Thanks for your kind words and interest @teamsteem
Yet another reason to be here from the start, right?
But many will say in year2 year3, that "early adopters" have an unfair advantage they were here when more distribution occurred etc etc but to get the most you need to be active on steemit and REALLY contribute so in a way it's fair. As dan said, a lot of accounts are not active so the ones that are deserve even more credit.
thank you for this amazing post.
@razvanelulmarin Thanks for the reply. I agree with you whole heartedly.
I saw your post yesterday and wished to comment, but somehow forgot to. I have been running an analysis and had my first post up last week. Do go through my Blog, it's titled "Steem Power distribution trends". I deliberately tracked the "Active 24 hours" metric and it was clear what was going on.
I'm into the third week now, and the observation holds - Steem Power is indeed in massive (re)distribution, and a high creation rate is required to back it up. I shall post an update some time this month.
I didn't know the exact number, but 350% seems about right to me.
Thanks for that @liberosist I will keep up to date on your posts.
This post definately puts things into perspective. New members should be notified. Nice job
You've upped your game in the value you can offer. You've come to conclusions and insights I wasn't even remotely aware of.
Thanks! I've got a whole swarm of ideas floating around now. Looking forward to your future posts.
Thanks @wingz my bearded friend :)
Oh, I did enjoy your detailed analysis right there.
Req: Could you edit the post and include links to the places you got or derived the data from? I ask not because I don't believe but because it's a completely awesome post :).
Thanks @faddat
Done. Only 2 Sources, but I've added them to the bottom of the Post with a little direction towards the pertinent information...
Oh, no. That means I should power up everything unless I believe the market cap to rise by at least 300%. Dilution of powered-up will be 35% the first year if I understand it right.
If you think Steemit will be here for the long haul, and your not speculating on a short term basis, Powering up NOW is a good idea. Your numbers are right, but in real terms it's still 10%..
First off, thanks for such a concise post that is written in a form that a n00b like myself can understand.
Im a new user on Steem, with no major intentions of being a content creator or the knowledge to actively day trade crypto currencies. All im doing is buying a few hundred potentially a thousand USD worth in Steam Power and wait. I do some light curating at night. I swear id be a billionare if I had boobs though. Those upvotes....
Hi,
Thanks for the great analysis. i started following you!
if you like my posts, pls follow me too
Thanks for the research, lots of good info in your post!