Unfortunately, this is an uncommon topic on Steemit yet, I have seen a few misunderstandings and controversial thoughts regarding how the economics of Steem really work.
So this is my attempt to explain the economics behind Steem, and I made it a little clearer for everyone.
NOTE: This is an analysis from my research on steemit. So feel free to criticize or contribute to it. Thank you!!!
Steem could be described as a decentralized blockchain-based social media business type, but actually it might be more appropriate to use the system of government to explain it because it has expenses and revenue. The expenses include payment charged by block-chain/bitcoin companies to run the infrastructure, powering the Steem blockchain, liquidity rewards and lastly, the major cost of paying out content/creation rewards.
Steem is like a startup that raises funds from investors to pay their expenses.
All crypto-currencies money comes from the people (Fellow Steemian), we give value, to this virtual money, without the people there is no Bitcoin or Steem Backed Dollar (SBD).
It is a brilliant system which encourages investors to contribute content and to invest their time talent.
Its revenue, is quite synonymous with government’s revenue, as it is accrued from taxes
Steem has two types of wealth taxes (hidden as an inflation tax). It taxes liquid STEEM at approximately 50% per year, and it taxes Steem Power at a variable rate of less than 5% per year (This figures are subject to changes considering the market factor).
Charges on steem power could be seen as a sort of subscription fee charged by the platform whose price discriminates users based on the stake the user has in the system (although a larger stake in the platform does provide greater benefits in using the platform's services, such as larger weight in one's votes, a greater curation reward earning potential, and a larger bandwidth quota). Technically, it’s a form of regressive tax (the higher your steem power, the lower the tax and the lower your steem power, the higher the tax).
If a Steemian (STEEM User) wants to maintain some dollar value of their Steem Power holdings (assuming the market capitalization of STEEM in terms of dollars does not change), they would have to earn via upvotes or buy more STEEM over time. Some may earn the necessary amount of STEEM to cover the deficit (either in the form of Steem Power directly and/or in Steem Dollars which are then converted into Steem Power) through upvotes on their content or through curation rewards.
Many may need to make up for the deficit by purchasing more STEEM from an external exchange using external currency (via bitcoin).
If the market cap value of Steem Backed Dollar were to increase by say 5-7% annually, there won’t be any need for steem members to purchase steem power or power up their steem earnestly.
If a steem user doesn’t earn or buy enough Steem Power, then their Steem Power will gradually decrease eventually, they will no longer be able to use the platform (as in post, comment, vote, transfer money, or anything other than only read the content on the platform). This is evidently noticed from the quantity of Steem power given to newly registered steem users.
So to continue using the platform, they must maintain a sufficient fraction of their Steem Power holdings.
Steemit’s Payouts are nonlinear as a post accumulates upvotes, its rewards per upvoting increases its Steempower. This means if your account adds $1.00 to a new post, it will add a lot more than $1.00 to a post in the $5000+ range thus, boosting your steempower relatively.
Internally, upvotes are based on STEEM, not dollars. So your account's upvote dollar value will go up (or down) based on the market price of STEEM. This means Steem’s exchange in upvotes value is variable.
Luckily, using steem social media platform at its most basic level without terribly restrictive bandwidth quota limits does not require the steem user to hold a very large amount of Steem Power in dollar terms.
Nevertheless, they do need to continue to maintain at least that minimum amount of Steem Power to be able to reasonably use the system, which means that if the user cannot earn (e.g. through content and curation rewards) that minimum amount to counteract the less than 5% per year effective tax on their Steem Power and thus maintain economic status quo, they will need to buy more STEEM (and power up) every year. This effectively results to a subscription fee to use the platform. Thus, earning steem some royalties as well plus that is a convincing reason why the platform could continue to operate indefinitely even after reaching market saturation. Now whether it actually does so or not depends on many factors, but I think the most critical of those factors is whether people would be willing to pay that effective subscription fee (in the form of a less than 5% wealth tax on their Steem Power) to continue using the platform.
The same psychological dynamics that happens in betting games could take place with Steem's social media platform. The comparison is better made to games requiring some skill, since it is clear that writing ability, deliberate timing of when one posts, and the content one writes about are all very important factors influencing the amount of payout one's post will receive. But there is some element of randomness that is involved as well. Some posts that many people would expect to get a high payout do not get all that much. And some posts many people wouldn't expect to get much money end up getting tens of thousands of dollars worth of payout. These are similar dynamics to playing many casino games which are clearly appealing to many people. And whether one wins big or doesn't win at all, similar to the casino games providing them joy and excitement from simply playing the game, Steem still provides value even with no payouts because it allows people to communicate with others and find interesting content on a decentralized censorship-resistant social media platform.
A good demand for STEEM to power up might help maintain the economic value of Steem Power and thus maintain the expected bandwidth quota status quo to keep the platform operating even when it reaches saturation. But of course no one really knows what the future will hold. It is important for people to remember that this is all a brand new experiment.
Some Facts you need to know about Steem Payment:
Every time a post gets paid, 50% of the payout is directed toward those who contributed the most to increasing the posts payout. So acquiring enough steem power would be advantageous.
Vote as early as possible after a content is been posted
The less steem power you have; the more you earn on upvoting early on post with a greater chance of acquiring good steem dollars.
Happy Steeming!!!
You could still get upvotes and followers with little or no efforts. Simply follow this link below:
STEEMFOLLOWER REFERRAL LINK: https://steemfollower.com/?r=2806