Steemit - What am I missing?
Like a lot of people here, I road the Steem train to the top and bailed out. I saw this as the only guaranteed way to make money. I looked at the 100% yearly inflation rate and was sure I didn't want my money to sit there very long. But I realize that Steem was designed to grow over the long term.
What I don't understand is, beyond the initial hype and the ensuing bubble, where will the money come from? As an investor I see no reason to keep my money in steem or to power up. Powering up in the hopes that more money piles in behind me doesn't seem like a good strategy. What happens in two years when everyone wants to cash out?
As I understand it Steem doesn't sell anything. Its free to join. If Steem itself has no income how will it offer interest? How does it plan to reward investors who power up?
The lure of cryptocurrencies, at the moment, is the chance to ride the wave to the top. Whether it is the long term wave or the short term, we're all doing it. These currencies have various other uses but none of those uses have been fully realized yet. Are there plans for Steem to monetize parts of its service in the future?
Thanks in advance for the answers. I really do like the basic idea behind steem and the posts so far have been great.
Edit: I just wanna link to this other post it elaborated on some of my questions and answered some of them. https://steemit.com/investments/@coinfund/blockchain-investments-and-the-new-problem-asset-for-conventional-vcs
This basically summed it up for me.
"Mainstream users of SteemIt enjoy incredibly low entry barriers: they can post content and get compensated in cryptoassets right away without the learning curve of buying cryptocurrency, and the value of their holdings is upheld by the market demand for the platform asset. In turn, larger entities like content publishers and advertisers could eventually create demand for the asset by purchasing influence and audience reach, thus validating the long-term position of asset holders. "
What you don't get is that there isn't 100% inflation, there is only 10% inflation which is less than Bitcoin has had until the recent halving. 90% of all STEEM is allocated to STEEM POWER holders and every 3.3 years there is a 10:1 reverse STEEM split. This means that you have an effective inflation rate of much less than 8% when you hold STEEM POWER.
Everything is an accounting artifact. We could remove inflation entirely by charging a huge negative interest rate on STEEM to fund posts, but that wouldn't be received well and would complicate the lives of exchanges.
Also a large part of the inflation is actually paid out as "steem dollars" which has a deflationary effect when the price rises because the "steem dollars" need less STEEM to back them.
Thanks, it makes more sense to me now.
It's your responsibility as an investor to profit using the platform in whatever way you care. Steem power gives you visibility and the users have money. Eventually people will start selling stuff here. Go make it work. Don't just sit back.
Right, but if its free to join what incentive do readers/users have to invest in steem and begin paying the content creators? I apologize if this is extremely obvious.
Content creators are paid by the inflation. They are the PR engine that bring all the boys to the yard. As an investor you can sell/convert your upvotes to a profit or create your own brand to push. You invest in steem because you think the core values of the platform will make it grow. Free speech, the money system and open innovation at the edge.
Ok, that make sense. I'm thinking of it from a pure risk/reward standpoint.
Thanks - perfect question... as I finally registered today (I know way too late) but that was exactely what I was asking myself too. Why should I invest my Bitcoins in exchange for Steem or Steempower?
The market in one year will look totally different + inflation will force the price down massive. When Steem will be seen as plattform and steemit just as app it could grow on long term but that is quite a long way to go.... or I don`t get something :-)