No it does not, and this is the source of your confusion.

Let's use another example here. I have 10 coins, you have 10 coins. Now we create 20 coins out of thin air (100% inflation!) and give you 10 and me 10. Has anything changed here? No.

As I said earlier, this is a stock split dynamic, and does not change anyone's purchasing power, despite that scary "Inflation!" word.

Steem is a little bit more complicated than this, but not much. Until you understand how stock splits work and why the "inflation" created by stock splits is only an accounting adjustment and has no economic relevance, you will never understand Steem.

That is not at all the purpose of the hyperinflation. Inflation for posting rewards is something like 2% per year. It might be a bit higher now, as some of the formulas were changed around, but it is a single digit percentage. The hyperinflation you talk about serves a completely different purpose, as I described above.

Price of currency goes down means prices of good and services you would buy with the currency go up.

Now go back and reread my earlier replies (and others' ) which explain how Steem Power is protected from the effects of Steem inflation.

High Steem inflation serves a purpose, which is to encourage vesting so people have a long-term incentive to protect their own reputation and the well being of the platform as a whole. Inflation without vesting (and the associated inflation-protection) would be, well, just inflation. Vesting without high inflation or some other incentive would be stupid. The two work together.

They certainly won't join at the same rate for smaller rewards but they won't necessarily leave either, if it is a good platform for the posting and commenting they do anyway (fluffypony commented, for example, that he really likes the markdown formatter). You are right that we will have to see how sticky it is turns out to be. The answer is not clear.


I agree this aspect of the incentive structure is broken.

It was 30% in the example given. That's how I came up with 30%. Let's make a new example:

You have 10 coins, I have 10 coins.

Over a hypothetical year, the system creates 2 coins to pay for something. The system also creates 18 more coins to give to you as antidilution (or alternately, inflation protection). The money supply has now doubled (100% inflation, just like Steem). Prices have on average doubled due to this hyperinflation.

You now have 28 coins. Meaning almost 3x what you had before. Even though prices have doubled, you are better off.

The loser here is me, I had 10 coins before and I have 10 coins now, so my purchasing power has been cut in half.

I answer questions and respond to errors (including yours). I'm not promoting it, and I've made my skepticism well known about both the financial model and the daunting complexity that an investor faces in trying to be an informed investor (though many frankly don't).


That certainly won't happen. As I said earlier, some future increase is already capitalized. The only real question is whether the rewards will remain acceptable, not whether they will remain as high as they are now (though in the short term they may, and probably will, go even higher).


I agree, there is a lot of circle jerking and posting whatever fad style of post happens to get upvotes. There are some bloggers who post pretty much what they would post elsewhere anyway and get paid for it. Dan is even one of these, although he gets way more votes than anyone else would as the Steem developer (basically a subset of celebrity effect). I sometimes downvote his posts to try to offset that a bit.


I agree this seems to be going on. Whether it can sustain and become a useful critical mass remains to be seen.


We can't control what speculators want to throw money at. You are well aware of that.


Everybody knows the payouts will decline. What we don't know is how far they will decline and how much people will care. If people get a few token bucks instead of posting for free as they do on Facebook, Reddit, the "keeping score" aspect of it may still be more of an incentive than cashing out and buying refrigerators. By that time there may be a lot of users onboarded (including as you point out different demographics from traditional crypto) who could form a very large network of token users. None of this is guaranteed of course.

It was answered. In the example there is a 30% increase in the money supply yet you received an 80% increase in your holdings. You more than made up for lost purchasing power. Yes there is hyperinflation but you are not harmed by it, unless the mere fact of nominal hyperinflation bothers you as a religious conviction. Shrug.

As a user you can ignore the illiquid portion entirely (treat it as having zero value), and still get paid for your posts. For bloggers that might well be a valid perspective since the vested portion doesn't really affect their blogging earnings (they gain a tiny amount of extra visibility by having more power to upvote their own posts, but it is negligible; talent matters more).

The pyramid argument here is no different from Bitcoin or any other token that depends on people wanting to buy it for other people to be able to sell. That doesn't make it a pyramid, just a scarce token that may or may not have significant value. Mostly it has value if people expect it to be useful in the future. If the Steem token develops a very large network of users comfortable using it, that will likely be useful.


I'm not a fan of DPoS. I agree with most if not all of your criticisms of it.

50% of the rewards are promised as cash. 50% are promised as illiquid stake. The promised cash portion can be cashed out immediately. Nothing is an illusion.


There has been no issue with liquidity. The amount of rewards is actually quite tiny relative to the market cap (and scales along with it, so this will always be true). Rewards may not always be big though, if the market cap falls.

Didn't read the rest of your post yet. Too busy right now.

His example was correct. The price will not drop even more. In fact 50% is overstating it. In his example the money supply has increased by 50%, meaning prices will drop by 33% all else being equal. You actually come out ahead with your 9 additional coins. You have not lost any purchasing power.

It didn't see it, but it is inaccurate. Half the reward value can be cashed out immediately, and many authors have done so.

I'm not disagreeing about the longer term economic sustainability, btw. I don't really see it myself, but I'm willing to allow that things don't always play out the way they appear at first.

That and the GUI miner (and built-in wallet on the site) is very user friendly. Ya know, people like dem GUIs.

Only CPU mining so far

The sneeky-mine coins went into the 'steemit' account. That huge account (I think that is around 60% currently, but it may be less as they are giving away coins to new user signups at a rapid pace given the high level of publicity) does not post, does not vote, and does not earn rewards. It just sits there transparently, slowly giving away a steady stream of coins to new user signups (and some exchange dumping to fund development, also plainly visible).

It is a very transparent blockchain, with no privacy features at all, and named accounts. That works in their favor in terms of developer transparency.



Please research the concept of a stock split. Until you understand it you will likely be lost here.

BTW, Steem has an automatic 1-10 reverse split every 3 years which reverses the cumulative effect of the previous three years and prevents the individual token from becoming inconveniently small. If you think that ongoing stock splits are inflation, then the 1-10 reverse splits reverse the inflation right?

Probably not. The amount of PoW distribution in Ethereum is quite small compared to the ICO. The "initial distribution" effects discussed at the above link are dominated by the ICO.

Probably not. There is an early adopter dynamic where the reward pools is set as a percentage of capitalization, capitalization is being driven by expectations (right or wrong) of a future user base, but rewards are divided among the current user base. One the actual use base is more in line with the expected user base, rewards per post should be much smaller.

The could be self-fulfilling though, as users continue to be attracted by the large rewards and it becomes a form of promotion. Rewards will probably continue to increase dramatically over the next few days, since they are calculated based on a trailing average price.

Also, the customers here aren't really the readers. It is those who want influence. Being a passive reader you may benefit from a positive externality if you happen to like what is being produced and given exposure on the site, but you will have no say over what you get to read.

It isn't an 100% inflationary system overall. The 100% inflation is applied to the liquid STEEM token to encourage people to shit or get off the pot. I.e. either power it up into Steem Power form or trade it to someone else who will. This ensures that at any given time most of the stake is locked and people owning it have incentives to care about the longer-term health of the system. Once in Steem Power form the effective inflation is much lower. The exact number varies depending on the percentage that is powered up but in practice will likely be single digits positive inflation. In theory it could be zero or negative inflation (unlikely though).

Inflation that is done by giving coins to someone else is not the same as inflation which gives coins to people who already own coins. The latter is more like a stock split and has no real effect on the value of your holdings. You might go from owning 1 STEEM worth $1 each to owning 10 STEEM worth $0.10 each (still worth $1 in total). Net result is little to no change in the value of your holding despite the high nominal inflation.

The website is not totally separate from the blockchain. It is a view of the blockchain, essentially a feature-rich web wallet.

OP, the 90%/10% stuff does not work the way you suggest. Authors who have gotten payouts have in many cases converted those coins to BTC, then to fiat, and ended up with real money in their bank accounts. Many of these stories were posted when payouts started July 4th. The idea that the payouts "aren't real" is nonsense. None of the author rewards go to the devs (unless of course, they make posts and get upvotes like anyone else). Stakeholders can get rewards by voting, but the main dev account 'steemit' with millions of early-mined coins, does not vote so it does not get any rewards.

None of this means it is a good investment. Do your own research. If you don't understand it, stay away.

It the cli you can. In the web GUI you can't.

In the GUI, even though it starts powering down all your SP, only 1/104 is powered down per week in practice. So you can stop it after a few weeks.

While the process is ongoing, the portion that isn't powered down yet is unaffected (still counts toward voting power, still earns more Steem, etc.)