How to have your cake and eat it to - or how you can have your SP increase even while you are powering down

A lot of people are reluctant to lock their funds for 2 years in SP and rightly so, that is something you need to think through and make sure you are comfortable with before you do it as there are no takebacks!

However, it is best that you base the decision using at much information as possible. I have seen a lot of figures tossed around about how fast STEEM is diluted, which directly controls how fast SP grows. We are in the expansion phase now, so the steady state inflation rate of 100% that is in the whitepaper is not here yet. It is currently growing a lot faster, about 300% per year, though exact rate is subject to change.

I like to actually verify numbers so I look at steemd.com in the upper right corner:
steem_per_mvests
260.284

5 days ago as I wrote in https://steemit.com/steemit/@jl777/vests-the-true-power-of-steem-and-why-i-personally-put-100-btc-into-steemit-ecosystem it was:
steem_per_mvests
251.534

Let's do some basic math -> 260.284 / 251.534 = ~3.48%
yes that is correct, over 3% in less than a week. Now as the issued steem rises, the percentage will drop, but even if there are only 30 such 2.5% increases, that means 2.5x growth in 1 year.

Now to the topic at hand. Powering down gets you 1/104th of your VESTS per week converted to STEEM at the then current conversion rate. So after 2 years you will have ever increasing weekly payouts and then no more VESTS, no more SP. This is probably not an optimal strategy if you believe in steemit. But to not powerdown might be a little too much risk as if anything happens then all your steemit is locked away.

So for people that want to have their powerdown and still gain SP each week and also want to end up with SP at the end of 2 years, do the following each week:

1. powerdown
2. wait for the weekly powerdown payment
3. cancel powerdown
4. repeat process starting with 1. powerdown

Huh? You might think what is the point of this. The idea is that as long as the steem_per_mvest is growing faster than 1/104 per week, the doing this will mean your SP balance will still increase every week, even as you are extracting liquid STEEM with the weekly powerdown. Granted you wont end up with anywhere near as much SP as compared to never powering down, however the risk/reward equation is drastically changed.

The reason is that it wont take anywhere near 2 years to extract all the capital out as long as STEEM price is anywhere close to stable. The 1/104th per week is recalibrated each week to your new total and that amount is increasing each week by the difference between the ~3.5% and the ~1% or about 2.5% per week. Now 2.5% compounded is not as good as 3.5%, but it is still a 40% growth per quarter, so in 6 months the powerdown is extracting closer to 2% than 1% (still assuming STEEM price is relatively stable). So a cashout schedule that is something like is possible:
Q1: 16%
Q2: 25%
Q3: 38%
Q4: 50%
meaning instead of 2 years, within 1 year to extract via powerdown enough liquid STEEM to recoup any capital you have put in. Of course, if STEEM price drops according to the 3.5% inflation rate, then it is a different story, but I am writing about liquidity extraction under the "steemit doubles its userbase and marketcap in its first year" scenario.

If you believe in steemit's future growth but were a bit hesitant due to the 2 year period, the first year's expansion phase provides an exception and allows you to grow your SP while powering down continuously. And you will still have SP at the end of the year.

Since fiat govt's are continuously printing money at mind boggling rates, it doesnt seem so crazy that steemit can do the same, as long as userbase continues to expand.

James

crypto777 is my witness account #37 on https://steemit.com/~witnesses