Why I believe investing in Steem or Steem Power is bad! (debunks welcome) *

  *Unless you are here to create and contribute with great content!!! 

Here I will address an issue I came across when studding the economics of steem. I, in my argument, will consider the dynamics as I believe it is intended and will try to point a couple issues I see with how things are. This might be a superficial analysis and any criticize is welcome.  

Disclaimer: This is not a rant, not a complaint about fairness, not a matter of the platform is a scam, a Ponzi or anything in tat matter. It is a simple observation of the economics of steem, but I believe it is an important observation if we (As I do) believe in the longevity of the platform as a decentralized social/content network as well as a functional currency.  

Images (except for graphs), were found in google images   

  1) First point: Inflation Rate.   

Yes, again the matter of inflation rate. And NO, I do not mention it in a bad way. But, we gotta see this in two perspectives, Steem Power (SP) and Steem Dollars (SBD): If you hold SBD, you get a 10% interest yearly. This is a great long term investment in most countries where the official fiat currency is relatively stable, however you carry on with two main risks, the dollar risk in the means with exchange rate with your home currency and the risk of steem. The good point is that you are less exposed to the inflation rate of steem and if you do things right you might even profit from it.   

 On the other hand, if you carry mainly SP, you get more weight in the platform and get a 90% interest yearly. This sounds on a first look, great. See, bellow the nominal value (in SP) of a wallet in a case where a person invests 50 dollars every month for ten years, but NEVER got an author or curation reward (assuming compound interest onto SP, not based on the VEST – I know it super estimate the final result, but this will not change the final conclusion:    

  It looks great at a first glance, However, if you just let it sit, Because Steem inflates at a 100%, it will mean a 10% decrease in your overall holdings value. So, unless you get author or curation rewards, you’ll be losing money in a relatively fast rate! See the value of the wallet relative to the USD over the same 10 year period.   

So, provided steem value stays stable and you never receive any reward, you’ll be losing about 35% of your holdings value in 10 years. Not so good now!  

But yes, you might argument that steem will increase in value through time! And that is I come to my second point:    

 2) Steem Value: Steem may or may not increase in value.   

This is mostly speculation on the bull or the bear side. Its pointless unless we evaluate some underlying points. On long run, any asset only increase in price when its underlying value also increases relative to something else or demand increases relative to offer. And this is one thing I keep meditating on. It seems to me, it doesn’t matter how bullish we are for the steem coin, under 100% inflation rate, demand would have to increase on a very steep rate and the platform would have to evolve fast just to follow. 

Taking short term fluctuations aside, I believe just holding SP, without creating content will never pay off! Even if you break even or have small profits, in the end, it is not enough to compensate the risk, there are better and safer alternatives out there.  

HOWEVER, if you create content, get rewards and the platforms evolves, it can be VERY lucrative. This is where I come to my final point:  

3) Reward Health: Can the current model hold a healthy community? 

This is where it is less clear to me, and I would appreciate input. If the platform doesn’t grow in a healthy pace, it will always be a struggle to have a good number of followers and people interested in the type of content you create and reward distribution will always be uneven (not meaning unfair) and I believe little by little it will be impossible for the little ones to even “break even” and therefore, if somewhat smart, will never invest staying forever in a “lurker” type of user.  

I understand that the platform will always have a large percentage of users just enjoying the content created. And it is fine, but it is needed that more and more people have value in voting and commenting. In a centralized model, a few people would have enough power to upvote their own content and few users to keep their holdings accumulating real increase.   

Conclusion:  Well, my conclusion is, simply investing in steem (SP or SBD) and not creating content is a very bad thing to do. You will support the platform, yes, but you will likely never make those bucks back. Not going into mechanics, don’t be fooled by the apparent growth in your SP and just relying in a promise of increase of steem value in the future is just too lean for me. 

 I, myself, believe it can be something great, if it matures economically and as a platform.