Introduction
Since January 2017 I'm an active Steemian. While it is my first ever experience with active blogging - as in producing content rather than forwarding and commenting (like I sometimes do with other social media services - I not only started to love blogging but I also started to love Steemit as a concept.
In 7 months I'm part of the Steemit community, I also noticed many posts and comments singing and dancing Hallelujah on anything from Steemit becoming the biggest every social media service, to Steem getting values of enormous heights.
While all is possible; The realities may not be considered!
Will Steemit become a network with 10s of millions of active users? Well, it has the potential, but some serious challenges are ahead of us - like much better user interfaces, many more features, power redistribution, culture of respect - before this can ever happen.
Will the value of Steem reach heights equal to what Bitcoin is valued today? Maybe, but the value it has today is already at a serious high level. Yes, due to the limited supply of Steem, values can increase tremendously over time, but it may not. It depends on so many factors.
Do We Not Want To Think?
What triggers me in a negative way is when we start to sing and dance Hallelujah and praise Steem, Steemit and all, based on untruths, based on no understanding at all of the matter at hand. I also am very surprised many others in our community simply follow such messages and posts based on plain old wrong information and join in the Hallelujah song and dance. Are we indeed that type? That type that cannot be critical? That type that cannot think? That type that believe in dreams? That type that cannot see realities and truths?
Maybe we are! It is for a reason why in the real world we see issues everywhere in the world, from Trump voted for to run an important economy and country of more than 350 million citizens, to how we are dealing with the issues we have over here in Europe. Issues that would be solved in different ways when we would use common sense; when we would think; when we would rationalise; when we would take a honest view at the realities; when we would not close our eyes.
The Claim
The other day I was reading a post that actually triggered me to write this post. It was a post about a Hallelujah song and dance with the following claim:
- Earn 0,1 Steem per day for 4 years and be valued 150.000 US Dollar (hundred and fifty-thousand)
- This is the WORST CASE scenario
This is the post:
- Title: "4 Years From Today You'll Have Over $150,000 US - Worst Case Scenario - If You Keep Posting, Commenting and Curating Daily"
- URL: https://steemit.com/steemit/@ana-maria/4-years-from-today-you-ll-have-over-usd150-000-us-worst-case-scenario-if-you-keep-posting-commenting-and-curating-daily
Calculations are given in this post, but apparently by someone who doesn't understand what he or she was calculating and what values to give to the parameters.
In addition to the more than 21 USD pending rewards this post received at the time of writing, the post I am referring to here above, is already commented by many Steemians (with low and high reputation) simply praising the post! 0,1 Steem per day for 1.460 days and then 150.000 US Dollars as the worst case scenario, and no questions raises by all those minds? 0,1 Steem per day times 1.460 = 146 Steem. This would mean Steem will need to be valued at more than one thousand US Dollars in 4 years time, and that is the worst case scenario as the author of the post was stating and as so many commenters just went along with it! When I read such kind of posts and comments, my believe in the capacities of people is reduced big time! And that bugs me!
Anyway I did some investigations myself and wrote back my initial findings in a long comment to the referred post. Since then I did some more research. The outcome of all that research I present to you in the remainder of this post.
The Research
The poster assumed we enjoy an interest rate on Steem Power - the Steem we Power Up and gives us our voting strength - of 0,6% per day. There it went totally wrong!
My research tells me that we create a set amount of Steem every day that is distributed as rewards, payment to witnesses for their work, and some form of interest or inflation compensation to Steem Power to give powering up Steem an incentive.
The Steemit Whitepaper (here) tells us this:
- The majority of inflation is actually an accounting artefact rather than true reallocation of wealth. 90% of non-SMD inflation is distributed back to existing holders of STEEM
- Because Steem wants to encourage long-term growth, it is hardwired to allocate 9 STEEM to Steem Power (SP) stakeholders for every 1 STEEM it creates to fund growth through contribution incentives.
While 9 Steem out of 10 Steem created on daily bases was - initially - the setup of the Steem blockchain, this is changed with the Hard Fork rolled out in December last year.
From a post by Steemit Inc ex-CTO Dan Larimer (post here), we can read:
Things that have been implemented:
- Instantaneous Annual Inflation set to 9.5% (except for Steem Dollar variance / interest)
- 75% of inflation awarded to reward pool
- 15% of inflation awarded to Steem Power
- 10% of inflation awarded to witnesses
- top 19 witnesses receive 1/5 the pay per block of miners and runner up witnesses
- no more reward for including a POW transaction in a block
- price feed median period changed from 7 days to 3.5 days
- Steem Dollar conversion delay changed from 7 days to 3.5 days
Of all the changes made to the Hard Fork of December 2016, only the two bold statements are important to calculate the future value of the claim made.
- inflation rate is set to 9,5% per year
- 15% of this inflation goes to Steem Power
Note1: Inflation rate will decrease over time as far as I understand, and should by now be around 9,3% (read this post here).
Note2: The above is verified with several Steemians who know what they are talking about
The Calculations
Regardless of the many posts on Steemit publishes by authors months to a year ago; And the availability of tools that calculates some future values of Steem Power users have today and/or could earn in the future, I took matters in own hands and used a trusted tool to calculate future value: The FV function in Microsoft Excel, the perfect tool for such calculation!
The claim we have:
- Earn 0,1 Steem per day, every day for the next 4 years and power up 100%
- Steem will be valued 10 USD in 4 years time
- This will result in an value of a total of 150.000 USD (hundred-fifthy thousand)
The results of the future value calculation taking the facts, is however:
- 150,14 Steem and
- 1.502,38 USD
after four years when assuming Steem is valued 10 USD in 4 years time.
That is about 100 times less than what was stated in the other post; A tremendous difference! And what was even worse?! The additional claim: the WORST CASE scenario!
Note: The fact is that the results as calculated above, will be slightly lower, since I've used an inflation rate of 9,5% per annum for the coming 4 years, while the inflation rate / percentage decreases over time.
For those who want to know the values of each individual parameters I used in the FV function of Microsoft Excel:
- rate: interested rate per period = 9,5% * 15% / 365 = 0
- nper: is number of periods = 365 * 4 = 1.460
- pmt: is value per day added = 0,1 Steem
- pv: is present value of future payment = 0
- type: is when interest is given, at start of end of period, in our case at end of period and this value shall be 0
Note: This formula returns a negative value since I've set the value today of all future payments at 0 therefore this formula results in the negative value. But simply take the minus sign away and the value represents the number of Steem after 4 years.