Question
I was going through the white paper.One of the take away was that this is designed in such a way
that SMC is pegged to USD and is expected to trade in a narrow range.This is mostly true but last few months it has gone up
on may 17th it was 27 dollars??but STEEM prices didnot impact. is that expected?
Another question is if STEEM is diluted .19% everyday, then why would investor buy or trade in STEEM? As far as i understood there is a relation between STEEM(which is in exchange) STEEM POWER (which is equity) valued based on content generated and thus value created by the community and STEEM DOLLARs which was supposed to earn interest and make is more flexible....but for an average investor why would you buy something that is devalued everyday even though the entire "value created by content" may be higher and thus compensating the devaluation ??
Doesn't this whole scheme very confusing and concerning for an outside investor (who just buys steem from exchanges and not a steemian)
Steem Dollars are designed to not go below $1, the pressure to bring it down from above $1 is less intense. There are proposals regarding changing this and keeping the Steem Dollar more closely bound to the US Dollar, but I don't think too many people have an issue with their Steem Dollar rewards being worth more than a dollar so the motivation doesn't seem to be there. Bigger fish to fry I suppose.
The reason the money supply increases is to fund the pool to reward various actors in the Steem Game and stimulate economic growth (content creation) without pulling money out of anyone's wallet. Every economy in the world increases their money supply over time. If the productive output of the economy is greater than the growth of the money supply, then the value of the money goes up, even though new money is being created. If the productive output increases in direct proportion to the money supply then the money retains a stable price. If the productive output decreases while the money supply increases the currency loses value. So to answer your question, I suppose all of the people buying Steem on markets believe that the Steem Based Economy will expand at a rate of greater than 9.5% a year. In addition they probably are aware that the inflation rate will decrease over time to .95% so as the Steem Based Economy matures and slows, the money supply growth will slow as well. That being said, as an open source protocol, if a better economic system is proposed, then the crowd can implement it. Perhaps investors understand this as well and are betting not on the fact that the system is perfect, but that it is well designed to adapt and evolve over time.
thank you.great explanation. I donot think many investors or people would be aware of this though!!!
Sure, and STEEM is still trading at $2. What will it go to when they do understand?
That's the point - I bet that most of them are not aware of this fact because this information is not exposed properly. Which is quite strange, as for most people (especially the skeptical ones) this is absolutely a crucial piece of information.
The most powerful marketing strategy we have is to leverage the popularity of Bitcoin and draw analogy between Steem economic model and Bitcoin. Basically it goes like this: "If Bitcoin makes sense, so does Steem". But to be able to do that you cannot leave out the decreasing inflation aspect, as this is definitely the most convincing argument that (for most people) separates Bitcoin from a Ponzi scheme. If you leave it out, Steem becomes incomparable to Bitcoin.
I'm not arguing that this assumption is true in economic terms. Instead, I'm just arguing that this is how people perceive it. And perception matters a great deal. And it matters both for investors and actual users - people don't want to participate in something which they cannot grasp conceptually. Who would devote their time and commitment to something that they think can collapse any moment?
In the video you only say this:
Otherwise, this video is great. You have a real talent to explain complex things in a very clear manner.