Steem Power and Proper Calculations of Gains.
I was reading a thread, which will be mentioned below this and saw the confusion and over complication of how gains are calculated in the comments and wanted to provide a much simpler way of thinking about how to calculate your SP and estimated steem.
https://steemit.com/interest/@bacchist/steem-power-interest-is-not-compound-interest
In this post the author describes what is wrong with another authors claim seen here:
https://steemit.com/steemit/@anonymint/it-s-so-easy-to-become-a-millionaire-with-steem
@bacchist is correct, SP does not compound interest like @anonymint claimed however nice it may be to think a 400$ investment will get you a house and a lambo in 2 years. It does however have compound interest at a lower more linear rate and after reading the comments in @bacchist article I realized the over complication of the rewards, how to calculate them in a much simpler way and show this for readers.
Alright, I'm going to create a scenario that shows how to calculate this.
(Note these are not the exact numbers Steemit uses, although if those can be provided I will edit and show that calculation properly)
5,000 SP at 3.45% annual interest rate, or a monthly compounding interest of 0.002875.
That would look like the following:
? = 5000 SP (1+0.0345%/12 months)²years12
? = 5000 (1+0.0345/12)²12
Now additional breakdown
? = our full value when all is said and done
Your % is calculated by taking the interest rate and dividing it by 100, you will then divide this number by how many times it accumulates yearly.
5000(1+0.002875)²*12
Now you will want to calculate the exponent portion and the parenthesis formula separately.
5000(1.002875)^24
5000(1.069)
thus providing a total of 5,345 SP at the end of your 2 years. Sounds great right? At the current steam price that's almost 1,000 dollars for absolutely free, let alone what you make for diligently curating and posting!
Well its not quite that simple, that only works if the current value of steem stays stable.
Where will Steem's value go in 2 years?
A common speculative question, well given that Steem is created out of nothing and given naturally to those who hold Steem its safe to say there will be an inflated amount of Steem in several years. If there is even 1 billion Steem at this moment by the end of those 2 years given the formula I provided above there would be a total of 1,069,000,000 that is a total gain of 69 million Steem and unless price increases and Steem's market cap goes up, this could cause a decrease in Steem's value creating either of the following effects.
A) 100% ROI because you still hold the same share of Steem as you originally had
B) Steem becomes slightly devalued and you lose some of your investment or all of your investment.
Now on the other hand given that Steem is a social media platform that rewards users it could gain popularity and become a giant, and the price of Steem could double within 2 years which would not be uncommon in the cryptoworld. Considering crypto is notorious for doubling its value overnight and being extremely volatile.
This gives us option
C) Doubling or even going to the moon and beyond!
Well in this case enjoy your brand new lambo and mansion you early adopters you.
Although this seems like all we would have to worry about there is one other pesky fear, due to the recent ethereum/dao scandal I feel it must be mentioned. An outside factor crushing steemit, or a fatal flaw in the programming yet to be realized that causes the death of Steemit.
However I don't believe this would be the case, the developers here seem very competent and know what they're doing and are very transparent with the community. We also seem to have a large amount of
here to keep things in like and make sure problems get fixed quickly and safely for the users.
Thanks for reading guys and I hope this explains how to calculate compounding interest rates and provides a better understanding of what the possible outcomes are for all investors, and Steemit participants.
Im not sure where you got the 3.45 percent... but i you have 5000SP right now, it will double twice in two years. You'd have 20000 SP at the end of 2 years. The daily percentage increase is 1.9% two posts i made about it .
https://steemit.com/interest/@sigmajin/how-anonymint-and-bacchist-both-got-it-wrong
https://steemit.com/interest/@sigmajin/understanding-the-steem-economic-system-vests-sbd-steem-dilution-interest-and-all-those-crazy-things
Anonymint is actually mostly right... though sp isnt really interest, if you want to look at it like interest it yields 100% apr compounded annually. (which is to say it doubles every year)
This is linear, not exponential.
Anonymint's main error, or at least the main weak point of his argument, is tucked into his post is the assumption that steem is going to increase another 10X in 5 years.... so the 10X increase in price is what gets you 90% of the way to 1M in 5 years...
Also, a 3.45 annual interest rate is not the same as a 3.45 monthly interest rate
It was an example and it even lists that in the post.
The second part you list is still how you would go about calculating compound interest however it does seem I made an error by saying annual and not converting the next part to the monthly % 1 am posting -- read the entire post this is listed within it as to your first point.
(Note these are not the exact numbers Steemit uses, although if those can be provided I will edit and show that calculation properly)
Also as for the doubling every year (at this moment I have not read what you linked me but if it's an official post from steemit itself I will update my post). However if it is not then it's no better than anyone elses guesswork towards SP gains.
oh i get it you were showing how to start with the rate and figure out the $ yield....
the problem with that is there really is no % rate. Its just the exchange rate between steem and vests increasing exponentially.
I wish Ned or Dan had a post saying it does ____ guaranteed lol.
-- although in the situation of 100% Apr
5000 it would make things significantly easier, 5000x2x2
OK, as an example check the observations here
https://steemit.com/steemit/@lukestokes/do-you-know-your-steem-power-interest-rate
When that was written, 2 weeks ago, the conversion was 210.9 steem per m vest. Now, its 236.55.. so thats more than 10% in 2 weeks.
5000x2x2 is 20Kand yeah im looking for it to add
My phone won't let me show that properly 5000x2x2 and if it's within the white paper should add it within the post as a reference since there is undoubtedly alot of speculating with how it's calculated
Driving currently so my math skills are going to suck lol. Although it's slightly past 10% right?
I can't check if it's exactly 2 weeks but if it is that confirms slight compounded interest and that in turn means the Apr is higher than 100% lol must not steemit and drive
Nice Post @rogue91 Following you for more.
Thank you :), Been trying to get around to posting this all day and helping the community out.
Man you could have sighted my picture I made of the Steem Flag on Mars that I made 5 days ago. https://steemit.com/steem/@brianphobos/the-top-reasons-steemit-will-bypass-the-moon-and-will-beat-nasa-and-spacex-to-mars-not-click-bait
I could have sighted it? Liked aimed at it with a gun? Or cited it?
I googled the picture lol