I’m new here and I like Steem. It’s obviously great for content creators and I think it’s amazing that some people can earn many months’ worth of income just by writing a few words or making a video. Where else can you do that? Certainly not on reddit or facebook. Not even on tsu will you earn that kind of income. I would like to do that too, but after reading the white paper a few days ago I’m not sure if Steem is sustainable in the long run.  

The problem 

When I read about Steem it sounds like everyone gets paid. You get paid for creating content, you get paid for voting and you even get paid 90 % interest for your Steem power. That sounds great but in the real world you can’t create money out of nothing unless you are either a central bank or a commercial bank. When someone earns money someone else will lose money. For Steem that might not be true in the beginning. As long as the price continues to rise more than you lose due to inflation everyone can win, but at some point the market cap of Steem will stop growing. What will happen then? 

My guess is that people will power down and sell their Steem. If they don’t they will lose money every year. In the graph below I have assumed that you have $1000 worth of Steem power at the point when the market cap(total value of all Steem in dollars) stops growing, that the market cap stays stable at that level(very unlikely but best case scenario)and that each Steem is worth $10 when the market cap stops growing(the real numbers could of course be different). That means you will start with 100($1000/10) in Steem power. After a year you will earn 90 % interest and end the year with 190 in Steem power. At a constant market cap the price for Steem will have fallen by 50 % because inflation is 100 %. So the price for 1 Steem is now $5. Your original $1000 worth of Steem power is now only worth 190*$5=$950. You lost 5 % in a year because of inflation. 

A transfer of wealth happens from you(the owner of Steem power) to the content creators. If the total value of Steem increases by more than 5 % every year it won't be a problem because the price will have increased by more than the 5 % you lose because of inflation. But the price can't increase by 5 % every year forever. At some point Steem will reach the highest inflation adjusted value that it will ever reach. After that point every owner of Steem power will lose money because of inflation, and they will have a huge incentive to power down and sell their steem. But who will they sell to? There will not be many buyers because the only incentive to buy when Steem has stopped increasing more than inflation is to get more voting power, and who would be willing to lose 5 % every year for the privilege of deciding which posts get to the top? Certainly not me. Would you? If nobody wants to buy there can’t be a market and you won’t be able to sell your Steem at any price. I read every single page in the white paper(not easy to do for a slow reader with ADHD) and I think the 5 % yearly transfer of wealth from Steem power owners to content creators will become a problem when Steem stops growing, but maybe I'm wrong. If that’s the case then please feel free to tell me how big an idiot I am for missing whatever it is that I have missed. I would love to hear that I’m wrong because I would like Steem to exist even after it has stopped growing, and I don’t want to see people lose a lot of money. 

If you see a problem I would love to hear what you think the solution could be. If you don’t see a problem I have a question for you. In your view who would continue buying Steem after it has stopped growing and owners of Steem power will lose money every year? And will there be enough of those people to prevent the price from collapsing? I don’t see who would be willing to lose 5 % every year just to vote on content.