Steem pyramid scheme revealed

[AlexGR]

Let's see if I can earn any money telling the truth on Steemit:

https://steemit.com/steem/@anonymint/lies-about-steem-and-steemit

Please consider upvoting me if you appreciate my effort. Lots effort has gone into this detailed analysis.

I hope @smooth upvotes me so he can show he was not overly biased by his large stake and thus showing the authorities he was not participating in misleading any investors. I would hope other whales have the similar conscience and rationality.

Of course I don't expect it to be upvoted.

You can criticize something without being aggressive with labels like "liiiiieeees", which then, due to creating friction and a bad environment, creates a self-validating prophecy of not getting upvotes.

I don't think smooth will upvote you, but then again, it's his vote. I won't (even if its worth 3 cents) due to the labels. We can have a mature conversation without them.

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[iamnotback]

Or maybe they will downvote since you used links to other post without their approval. lol

I edited my blog post to clarify that all the linked posts are written by myself.

[iamnotback]

Let's see if I can earn any money telling the truth on Steemit:

https://steemit.com/steem/@anonymint/lies-about-steem-and-steemit

Please consider upvoting me if you appreciate my effort. Lots effort has gone into this detailed analysis.

I hope @smooth upvotes me so he can show he was not overly biased by his large stake and thus showing the authorities he was not participating in misleading any investors. I would hope other whales have the similar conscience and rationality.

Of course I don't expect it to be upvoted.

You can criticize something without being aggressive with labels like "liiiiieeees", which then, due to creating friction and a bad environment, creates a self-validating prophecy of not getting upvotes.

I don't think smooth will upvote you, but then again, it's his vote. I won't (even if its worth 3 cents) due to the labels. We can have a mature conversation without them.

Excuses. Political correct circle-jerk systems are not informational. Useless system being confirmed.

You refuse to upvote a very detailed post which gives users and investors very valuable information not available in any other post, because of one-word you don't like, which is just an excuse for being butthurt and the word "lie" hurts you because you invested in this crap. It hurts your ego because you really thought this crap was great.

[AlexGR]

Let's see if I can earn any money telling the truth on Steemit:

https://steemit.com/steem/@anonymint/lies-about-steem-and-steemit

Please consider upvoting me if you appreciate my effort. Lots effort has gone into this detailed analysis.

I hope @smooth upvotes me so he can show he was not overly biased by his large stake and thus showing the authorities he was not participating in misleading any investors. I would hope other whales have the similar conscience and rationality.

Of course I don't expect it to be upvoted.

You can criticize something without being aggressive with labels like "liiiiieeees", which then, due to creating friction and a bad environment, creates a self-validating prophecy of not getting upvotes.

I don't think smooth will upvote you, but then again, it's his vote. I won't (even if its worth 3 cents) due to the labels. We can have a mature conversation without them.

Excuses. Political correct circle-jerk systems are not informational. Useless system being confirmed.

You refuse to upvote a very detailed post which gives users and investors very valuable information not available in any other post, because of one-word you don't like, which is just an excuse for being butthurt and the word "lie" hurts you because you invested in this crap. It hurts your ego because you really thought this crap was great.

It's not what you say. It's the way you package it.

I'm not invested anymore than you are, we have around 4-5mn vests each.

[iamnotback]

Let's see if I can earn any money telling the truth on Steemit:

https://steemit.com/steem/@anonymint/lies-about-steem-and-steemit

Please consider upvoting me if you appreciate my effort. Lots effort has gone into this detailed analysis.

I hope @smooth upvotes me so he can show he was not overly biased by his large stake and thus showing the authorities he was not participating in misleading any investors. I would hope other whales have the similar conscience and rationality.

Of course I don't expect it to be upvoted.

You can criticize something without being aggressive with labels like "liiiiieeees", which then, due to creating friction and a bad environment, creates a self-validating prophecy of not getting upvotes.

I don't think smooth will upvote you, but then again, it's his vote. I won't (even if its worth 3 cents) due to the labels. We can have a mature conversation without them.

Excuses. Political correct circle-jerk systems are not informational. Useless system being confirmed.

You refuse to upvote a very detailed post which gives users and investors very valuable information not available in any other post, because of one-word you don't like, which is just an excuse for being butthurt and the word "lie" hurts you because you invested in this crap. It hurts your ego because you really thought this crap was great.

It's not what you say. It's the way you package it.

You confirm Steem is about political correctness that must match the dominant political slant on Steem, and  not about the enormous amount of factual information and valuable content in the post.

If you think the creators of Steem don't already know the weaknesses I am pointing out, then you are delusional. Of course they lied. They had to lie. They had no other choice. They had this DPoS blockchain design that was going no where with Bitshares.

They even admit in the whitepaper that they are lying to users on purpose by using a quadratic weighting function for rewards, thus their intended effect of fooling the users into misjudging their earning capacity on the site.

I am now pointing out that the same sort of lies have been played on investors as well.

So Steem is going to censor any post with "Lie" in the title. Wow great journalism ethics you have there...

Controversial slants are not allowed at Steem. Don't try to be yourself, because you won't be able to match up with like-minded communities on Steem. Either you follow the groupthink or leave.

[jwinterm]

Dude, you're trying to criticise a system while at the same time reap rewards from it. Do you not sense a bit of the absurdity? Also, your pleas for upvote scraps come off kind of pathetic.

My point is to prove the ranking system is a circle-jerk and thus the system has no value.

I entirely expect to not get upvotes. I will be surprised if I do.

There is a difference between criticizing and stating facts. The facts I stated have been vetted by all of you here, as you had every chance to refute me during the discussion. I want to test if otherwise very smart people will reject and ignore facts.

Also perhaps you failed to notice, the first item is not a criticism against Steem but rather in support of it (except that Steem doesn't yet support community building).

P.S. I wasn't going to post again on Steem because I realize most of the whales have probably figured out that I am strongly leaning against supporting it. I realized I needed to compile all my recent analysis, and I might as well prove to myself that my assumption is correct that the system is a circle-jerk lying system.

Sorry, I didn't fail to notice, I just failed to click your link at all. I don't read steems, or steemers, or steeming piles, or whatever hackneyed terminology they're floating.

[iamnotback]

Here is an example of lady Bitcoin enthusiast and I can see her motivation is to socialize with the people of this technology she had been enthusiastic about (see her "let's have some fun" at the end):

https://steemit.com/introduceyourself/@veerprit/hello-steemit-veerprit-in-vancouver-entering-the-community

So my point remains that they are not coming for a Reddit clone, nor for a groupthink, but to find their own people within the Bitcoin community. And to validate Bitcoin as being capable of impacting them socially, not just a digital concept which doesn't really impact them. And they are riding a burst of euphoria to see the first social thing they could do with a "blockchain".

All of that points to me to depression down the line when the feature set of Steem is so far incapable of them really building community. Sure the first few blog posts support the eurphoria but after a while the reality will set in that they aren't getting much community from this. And more of just a self-congratulatory back slapping (which will become redundant).

Although those who earned $1000s will probably for a long-time be influenced to try to maintain the enthusiasm, as this is the nature of how money impacts attitudes.


I am not sure if this is sincere and/or an attempt to get some money:

https://steemit.com/academia/@coinbitgold/hi-steemians-i-am-moving-my-phd-research-to-steemit

She is emphasizing the importance of blockchain storage of content so no party owns it. She probably doesn't realize how Steem/Graphene is really a top-down owned system.


Edit: another one:

https://steemit.com/introduceyourself/@chhaylin/being-born-in-a-cambodian-refugee-camp-my-story-in-pictures-and-text#@chhaylin/re-eeks-re-chhaylin-being-born-in-a-cambodian-refugee-camp-my-story-in-pictures-and-text-20160725t000233531z

There are several things I want to use Steem for. I'd like to use Steemit as a platform of self-expression. I like to write and share original content about Philosophy, Politics and Economics. I have also put high hopes that Steem, supported by Steemit, will become the first wide-spread crypto adoption which will eventually disrupt government monopolies over the issuance of money. In addition, I look forward to have a market place in which people can trade goods and services with Steem.

You know what I really like about Steemit? It's that it allows people to get closer to each other. A certain way of centralizing isolated information. People to connect, share information, and interchange values. But at the same time, it uses a cryptocurrency that is decentralizing. Making us less depending on governments money issuance and probably more personal financial freedom. Positive movements in two major macro dimensions.

Lots of idealism, but the devil is in the details:

https://steemit.com/simplest-explanation/@kevinwong/asdf-the-simplest-explanation-for-steem-s-key-characteristics-for-long-term-growth
https://steemit.com/anarchism/@flandude/the-future-of-the-blockchain

[iamnotback]

Amplication groupthink effect not good (also adding another mental computation cost on the voter to decide when he/she should vote):

Payouts are nonlinear: As a post accumulates upvotes, its rewards per upvoting SP increase. So 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.

[Dafar]

Looks like attractive women and people with sob-stories are getting all the votes.


It's hilarious to see retards complain about their posts not making money... fucking lol. Women have ALWAYS got the pedestal treatment in social media, no reason to cry about it. And a lot of the retards who are complaining are also mimicking top voted posts thinking they will get the same treatment. 


Is this supposed to be a personal BLOG? or something more similar to Reddit? If this is meant to be the next Reddit they need to change the layout drastically because I try to discuss current events or bitcoin trading and stumble across some retard's personal blog/intro post in every section.


My steemit account is "worth" $2.5K which I mostly acquired though posting, which is nice I guess. This is a new concept and it's been gaining a massive following and newcomers into crypto... it's not even a competition for bitcoin, if anything this is a compliment to bitcoin, so not sure why some of you here are hating so much and trying hard to make it seem like a ponzi scam

[iamnotback]

Looks like attractive women and people with sob-stories are getting all the votes.

It's hilarious to see retards complain about their posts not making money... fucking lol. Women have ALWAYS got the pedestal treatment in social media, no reason to cry about it. And a lot of the retards who are complaining are also mimicking top voted posts thinking they will get the same treatment.

The reward algorithms are designed to create groupthink content (see my prior post as well). If they had designed rankings by like-mindedness, then the lady gawkers would be confined to their own coterie and thus they could have the same vortex effect of sucking in all the rewards.

It is an algorithmic design issue of the system.

Is this supposed to be a personal BLOG? or something more similar to Reddit? If this is meant to be the next Reddit they need to change the layout drastically because I try to discuss current events or bitcoin trading and stumble across some retard's personal blog/intro post in every section.

Agreed there is no organization by like-mindedness nor communities.

My steemit account is "worth" $2.5K which I mostly acquired though posting, which is nice I guess. This is a new concept and it's been gaining a massive following and newcomers into crypto... it's not even a competition for bitcoin, if anything this is a compliment to bitcoin, so not sure why some of you here are hating so much and trying hard to make it seem like a ponzi scam

The ponzi scheme math for investors is detailed here (but don't worry nobody will see it as it is ranked so lowly):

https://steemit.com/steem/@anonymint/lies-about-steem-and-steemit

[iamnotback]

Just more fanboy delusion here. Same as Ethereum. Wash, rinse, repeat. (Everybody wants the ideals, but virtually no one pays attention to the details)

Here we go again with denial and shitcoiners logic. He doesn't even address any of my points and just dismisses them:

It amazes me how people assume Steemit comes out of the box a full and complete product. They assume that everything is set in stone from day one. Steemit is designed to be able to adapt to what is needed. There are many more features that will be added to off set some of the criticism people have. Steemit is hybrid company/government economy. There are many variable that can and will be tweaked. The developers right now are focused on making Steemit a stable platform to interact on. Once that is done, they can continue to focus on the economics. It's funny how quick people want to try and tare something down . But if you gave these people a million dollars to build something valuable from scratch they couldn't do it. It is easier to throw rocks than build a castle with them.

There are some items listed in my blog which can not be changed nor improved because they are fundamental to the vested interests and/or the design of the system. For example, this issue #2 reducing the up to 6.7% debasement rate for STEEM POWER holders would reduce blogging rewards.

The issue #5 is inherent in the business model of Steem which is dictated by the way blog rewards are funded in issue #2.

facebook shares were in huge demand even before the monetization began.
Its's about believes.

But Facebook wasn’t debasing investors by up to 6.7% yearly. There is no incentive to invest long-term in Steem, unless you are a fool who hasn't read this blog.

[chryspano]

anonymint ·  3 hours ago
The 5% calculation appears to me incorrect. I calculate 15 - 21%. You are not factoring for example the 50% payout in STEEM POWER.

arhag  ·  35 minutes ago
No, I am factoring in the payouts in Steem Power. A far more sophisticated analysis of the math is necessary to get more accurate numbers in more realistic scenarios, but I am pretty sure the numbers you have calculated are incorrect. However, by being slightly more careful in my analysis (rather than the first approximation I did for the OP), I find that my original number of 5% was also too low of an estimate in the worst case scenario. It is really more like 6.7%.

First, as I mention before, I am not factoring in the effect of price changes and Steem Dollar conversions on STEEM supply (or the virtual supply used in the code). Trying to factor that in makes things too complicated and requires assuming models for how the price of STEEM will change and how people will convert Steem Dollars. To greatly simplify the analysis I assume that people convert Steem Dollars into STEEM as soon as possible and at the same price at which it was issued (actually I really go further and assume the blockchain skips a step and just gives the bloggers the reward as STEEM rather than Steem Dollars so that they can then convert to Steem Power as soon as possible).

Second, I am looking at the worst case (in terms of maximum inflation of Steem Power) by assuming nearly all of the STEEM is kept in Steem Power at all times. Meaning if people receive rewards in any other form, they convert it into Steem Power as soon as possible.

Converting STEEM into Steem Power (i.e. VESTs) does not change the ratio of STEEM in the vest pool to the total amount of VESTs, whether done by the user or done by the blockchain directly. The only thing that changes (specifically increases) that ratio is when the blockchain directly adds STEEM it issued into the vest pool without creating a corresponding amount of VESTs.

If we define S to be the current virtual supply of STEEM (which with the assumptions above is also exactly the amount of STEEM in the vest pool), then we can approximately say that the blockchain creates 7.894E-5 * S STEEM each hour (90% of which is added directly into the vest pool and the other 10% is given out as rewards which are ultimately all, since this is the worst case scenario we are looking at, converted into Steem Power).

Let S_0 be the virtual supply of STEEM at the start of the year period that we will be analyzing. Let S_n be the virtual supply of STEEM n hours after that start time. Then we can write that S_n = S_0 * (1 + 7.894E-5)^n.

The recurrence relation for updating the total outstanding amount of VEST tokens V_{n+1}(at the time n+1 hours after the start time) is given by

V_{n+1} = V_n (1 + \frac{\Delta s_n}{S_n})
where \Delta s_n is total net amount of STEEM converted into Steem Power (VESTs) within the corresponding hour (because I am lumping these conversions into hour intervals it is actually just an approximation of the real update rule, but good enough for our purposes). The quantity \Delta s_n is given by 7.894E-6 * S_n, since in this worst case scenario I assume all STEEM created for distribution as rewards (the 10% of the total amount created) will all be converted back into Steem Power. I can use the recurrence relation above to write an expression for V_n:

V_n = V_0 ( 1 + 7.894E-6)^n
If a user initially holds v VESTs, which is a fraction f of the total VESTs at that time (so v = f * V_0), then after a year (n = 8766) the total virtual supply of STEEM will be S_{8766} = 2 * S_0 and the total outstanding amount of VEST tokens will be V_{8766} = (1.07165 )* V_0. And so the new fraction of total VESTs the user will hold (assuming they received no more VESTs through rewards or powering up) is f' = v / V_{8766} = 0.93314 * f, which corresponds to a 6.7% decrease over the year in the user's fractional ownership of VEST (and therefore their fractional ownership of the marketcap of STEEM in this worst case scenario). So, if the market cap of STEEM were to stay constant (in USD), the user would need to buy up approximately 6.7% of their holding value each year to maintain the same USD value they started with, thus we can say it amounts to a 6.7% wealth tax (via a hidden inflation tax) on their Steem Power holdings. But this is the worst case scenario where all STEEM is held in Steem Power. In reality, not all of it will be held as Steem Power, and so the actual wealth tax rate for Steem Power holders should be less than 6.7% (again assuming we ignore other complicated effects left out of the above analysis like the Steem Dollar conversion effect).

Unfortunately, since the OP has already paid out, I cannot edit it to correct the 5% number to 6.7%.

https://steemit.com/steem/@arhag/where-does-the-money-come-from-a-look-into-the-economics-of-steem#@anonymint/re-arhag-re-innuendo-re-arhag-where-does-the-money-come-from-a-look-into-the-economics-of-steem-20160725t173848519z

[techfm86]

The topic has useful references, I will not judge like such scheme until perform more conclusive analysis though.

[Pheonike]

2. This high interest rate will only last for 9 months... so might as well take advantage of it

What makes you think that? I don't think that is correct. The Steem Power compounding is perpetual.

I read form a post by dan himself if I remember correctly... I think the interest rate changes  

I am bit confused about this. There is one form of compounding that comes from the perpetual creation of 9X Steem Power for every 1 Steem that is minted. Those 9X SP are distributed proportionally to all SP holders. So your SP holdings are always increasing. I don't think it ever ceases nor changes.

Is there also another form of interest paid on SP?

The 9-1 ratio between SP and Steem never changes. I'm pretty sure what he means by the "high interest rate" is the numerical reduction in the rate of effective interest as the supply increases.

Example starting with a supply of one coin:

Add first coin (interest/inflation is 100%)
Add second coin (interest/inflation is 50%)
Add fourth coin (interest/inflation is 33 1/3%)
etc.

Hopefully this explains it correctly:

https://steemit.com/interest/@bacchist/steem-power-interest-is-not-compound-interest#@anonymint/re-bacchist-steem-power-interest-is-not-compound-interest-20160723t033339934z

The problem with this design is that if everyone wants to power up, then the STEEM POWER investors are paying for all the exponential debasement, which is paying for blogging (and mining).

The Bitcoin money supply was debased at 100% per annum only the first year in 2009 and is now around 5%; whereas, Steem plans a perpetual 100% annual minting rate, but much of that is a forward stock split not debasement (approximately 2.8% per annum[1] appears to be the typical rate of debasement of STEEM POWER holders assuming STEEM remains about 10% of the money supply). Forward stock split means the price drop due to money supply increase is compensated with an increase in the number of tokens held.

In order to pay for the blogging without taking it collectively roughly 25% (9/10ths of 2.8% versus 1/10th of 100%) from STEEM POWER investors pockets, will require significant demand to hold STEEM tokens (note ownership changing hands rapidly is still demand as long as the demand doesn't want to power it up).

[1] 50% of 2 of the 4 STEEM created are paid as STEEM POWER for rewards, and that is at a ratio of 1/9th of STEEM POWER money supply per annum.

The flaw in this model is that although the STEEM POWER investors are protected from most of the debasement individually due 9/10th of it being a forward stock split, the price must decline due to 100% per annum increase in the money supply. Thus there is no incentive to hold STEEM for speculation. Thus most STEEM will end up powered up, thus most of the cost of funding the blogging will come from STEEM POWER investors.

However, the price might not decline because the supply of STEEM for purchase may become so limited. Locking up most of the money supply gives the impression that the money supply has increased but actually it is at worst 103/104th illiquid on any given week and at best only 50% liquid per year. So in that respect the model is clever.

Let's try this again.

The analysis of this bizarre design is somewhat complex. (The following is for the eventual case when current very high rate of minting of STEEM will reduce as a percentage of the money supply)

https://steem.io/SteemWhitePaper.pdf#page=35

• 100% of the money supply is minted yearly, but this is not all debasement.
• 10% of the money supply minted yearly paid out to various parties (77.5% of the 10% paid to blogging and curation rewards, which is 7.75% of the money supply).
• 90% (9X the prior item) of the money supply minted yearly paid proportionally to STEEM POWER (SP) holders (which is equivalent to a forward stock split, if SP supply is exactly 9 × STEEM supply, else +/- variable interest rate).
• STEEM holders are debased 100% yearly, because 100% new supply created yearly and nothing is paid to STEEM holders.
• If STEEM holders don't power up (and SP holders aren't powering down), SP holders are debased approximately (100% × (1 ÷ 9)) + (7.75% ÷ 2) =  15% yearly (because half of the 7.75% is paid as SP, which increases the ratio of SP to STEEM to greater than 9[1].).
• If STEEM holders don't power up and all SP holders are powering down, SP holders are debased very roughly 15% - (43.875 ÷ 2)% ≈  -7% yearly, i.e. a 7% positive compounding interest rate.
• If all STEEM holders power up immediately (and SP holders aren't powering down), SP holders are debased approximately (100% × (1 ÷ 9)) + 10% =  21% yearly.
• If STEEM holders don't power up and all SP holders are powering down, approximately 90% + (7.75% ÷ 2) - 50% = 43.875% of the money supply is held as SP.
• If STEEM holders don't power up (and SP holders aren't powering down), approximately 90% + (7.75% ÷ 2) = 93.875% of the money supply is held as SP.

The fairly low debasement rate of SP, means the "pre"-mine insiders will control the money supply for years to come.

It appears to me (in the bullish scenario) the economics incentives encourage most all STEEM to be powered up with some % of the SP being powered down over 104 weekly disbursements and (some % of the 10% STEEM created yearly) immediately being sold at an exchange then powered back up again. So the liquidity will range up to 67% of the money supply yearly, but it can be in the low single digit percentages while the users (investors) are ramping up their SP holdings before initiating the powering downs.

[1]	When the ratio is above 9, the 9 SP created for every 1 STEEM, is a negative interest rate (instead of a forward stock split) which debases the SP by the difference of ratio minus 9 (normalized to 100% yearly minting).

Note that when and while the curation rewards are disabled, then the numbers change as follows (and again assuming the eventual case):

• 92.5% of the money supply is minted yearly, but this is not all debasement.
• 9.25% of the money supply minted yearly paid out to various parties (83.8% of the 9.25% paid to blogging and curation rewards, which is 7.75% of the money supply).
• 83.25% (9X the prior item) of the money supply minted yearly paid proportionally to STEEM POWER (SP) holders (which is equivalent to a forward stock split, if SP supply is exactly 9 × STEEM supply, else +/- variable interest rate).
• STEEM holders are debased 92.5% yearly, because 92.5% new supply created yearly and nothing is paid to STEEM holders.
• If STEEM holders don't power up (and SP holders aren't powering down), SP holders are debased approximately (100% × (1 ÷ 9)) + (7.75% ÷ 2 ÷ 0.925) =  15.3% yearly.
• If STEEM holders don't power up and all SP holders are powering down, SP holders are debased very roughly 15.3% - (44.175 ÷ 2)% ≈  -6.8% yearly, i.e. a ~7% positive compounding interest rate.
• If all STEEM holders power up immediately (and SP holders aren't powering down), SP holders are debased approximately (100% × (1 ÷ 9)) + (9.25 ÷ 0.925)% =  21% yearly.
• If STEEM holders don't power up and all SP holders are powering down, approximately 90% + (7.75% ÷ 2 ÷ 0.925) - 50% = 44.175% of the money supply is held as SP.
• If STEEM holders don't power up (and SP holders aren't powering down), approximately 90% + (7.75% ÷ 2 ÷ 0.925) = 94.175% of the money supply is held as SP.

Edit: Note the exponential quality of this design (excluding the 7% compounding scenario enumerated above) is the 92.5 - 100% yearly minting of new money supply. And apparently also a pressure for the price to increase at the start as most are powering up. Thus the market capitalization could become a $10 - 100s of billion bubble before the powering down kicks in and the bubble pops. This would pay for $billion of blogging rewards yearly!

So the 90% compounding scenario I outlined originally is actually still the case in the bullish scenario!

And unless they are able to create a sustained transaction (aka transfers) use case demand for the STEEM token, eventually the bubble will crash as the SP powers down en masse. If they can created a sustained transaction use case demand, then it will peak and fall but find an equilibrium.

One potential flaw I see if that (in the non-bullish scenario) long-term investors may be hesitant to invest because they must power up, but they may not feel confident they can power down with perfect timing. And holding STEEM is debased at 92.5 or 100% yearly. Lack of demand to purchase STEEM could cause the price to be on a downtrend, thus denying the creation of a bubble and the growth in funding for blogging rewards. A declining price might encourage powering down and not powering up, thus reversing my assumption above about the economic incentives.

I am thinking this design has basically eliminated the medium-term speculation case. Investors must choose between holding STEEM for weeks only, or SP for 2 years (1 year weighted average of cashing out price).

Rapid increase of STEEM transactions (aka transfers, not Steem activity) would probably give long-term investors more confidence.

Where does the 10% interest paid to holders of Steem Dollars factor in your equations? I don't see.

[iamnotback]

anonymint ·  3 hours ago
The 5% calculation appears to me incorrect. I calculate 15 - 21%. You are not factoring for example the 50% payout in STEEM POWER.

arhag  ·  35 minutes ago
No, I am factoring in the payouts in Steem Power. A far more sophisticated analysis of the math is necessary to get more accurate numbers in more realistic scenarios, but I am pretty sure the numbers you have calculated are incorrect. However, by being slightly more careful in my analysis (rather than the first approximation I did for the OP), I find that my original number of 5% was also too low of an estimate in the worst case scenario. It is really more like 6.7%.

First, as I mention before, I am not factoring in the effect of price changes and Steem Dollar conversions on STEEM supply (or the virtual supply used in the code). Trying to factor that in makes things too complicated and requires assuming models for how the price of STEEM will change and how people will convert Steem Dollars. To greatly simplify the analysis I assume that people convert Steem Dollars into STEEM as soon as possible and at the same price at which it was issued (actually I really go further and assume the blockchain skips a step and just gives the bloggers the reward as STEEM rather than Steem Dollars so that they can then convert to Steem Power as soon as possible).

Second, I am looking at the worst case (in terms of maximum inflation of Steem Power) by assuming nearly all of the STEEM is kept in Steem Power at all times. Meaning if people receive rewards in any other form, they convert it into Steem Power as soon as possible.

Converting STEEM into Steem Power (i.e. VESTs) does not change the ratio of STEEM in the vest pool to the total amount of VESTs, whether done by the user or done by the blockchain directly. The only thing that changes (specifically increases) that ratio is when the blockchain directly adds STEEM it issued into the vest pool without creating a corresponding amount of VESTs.

If we define S to be the current virtual supply of STEEM (which with the assumptions above is also exactly the amount of STEEM in the vest pool), then we can approximately say that the blockchain creates 7.894E-5 * S STEEM each hour (90% of which is added directly into the vest pool and the other 10% is given out as rewards which are ultimately all, since this is the worst case scenario we are looking at, converted into Steem Power).

Let S_0 be the virtual supply of STEEM at the start of the year period that we will be analyzing. Let S_n be the virtual supply of STEEM n hours after that start time. Then we can write that S_n = S_0 * (1 + 7.894E-5)^n.

The recurrence relation for updating the total outstanding amount of VEST tokens V_{n+1}(at the time n+1 hours after the start time) is given by

V_{n+1} = V_n (1 + \frac{\Delta s_n}{S_n})
where \Delta s_n is total net amount of STEEM converted into Steem Power (VESTs) within the corresponding hour (because I am lumping these conversions into hour intervals it is actually just an approximation of the real update rule, but good enough for our purposes). The quantity \Delta s_n is given by 7.894E-6 * S_n, since in this worst case scenario I assume all STEEM created for distribution as rewards (the 10% of the total amount created) will all be converted back into Steem Power. I can use the recurrence relation above to write an expression for V_n:

V_n = V_0 ( 1 + 7.894E-6)^n
If a user initially holds v VESTs, which is a fraction f of the total VESTs at that time (so v = f * V_0), then after a year (n = 8766) the total virtual supply of STEEM will be S_{8766} = 2 * S_0 and the total outstanding amount of VEST tokens will be V_{8766} = (1.07165 )* V_0. And so the new fraction of total VESTs the user will hold (assuming they received no more VESTs through rewards or powering up) is f' = v / V_{8766} = 0.93314 * f, which corresponds to a 6.7% decrease over the year in the user's fractional ownership of VEST (and therefore their fractional ownership of the marketcap of STEEM in this worst case scenario). So, if the market cap of STEEM were to stay constant (in USD), the user would need to buy up approximately 6.7% of their holding value each year to maintain the same USD value they started with, thus we can say it amounts to a 6.7% wealth tax (via a hidden inflation tax) on their Steem Power holdings. But this is the worst case scenario where all STEEM is held in Steem Power. In reality, not all of it will be held as Steem Power, and so the actual wealth tax rate for Steem Power holders should be less than 6.7% (again assuming we ignore other complicated effects left out of the above analysis like the Steem Dollar conversion effect).

Unfortunately, since the OP has already paid out, I cannot edit it to correct the 5% number to 6.7%.

https://steemit.com/steem/@arhag/where-does-the-money-come-from-a-look-into-the-economics-of-steem#@anonymint/re-arhag-re-innuendo-re-arhag-where-does-the-money-come-from-a-look-into-the-economics-of-steem-20160725t173848519z

Agreed he has corrected his calculation incorporating the term that I showed he had forgotten and also I have realized that I was stating the delta for my first term. So we both had a mistake.

The correct value is 6.7% where everyone is powering up, and lower than that if many are not powering up.

Note this doesn't change the point that not powering up is a 50% debasement/100% dilution (assuming liquidity rewards are restored, else 46.125% debasement/92.5% dilution). Thus I am still questioning the incentive for long-term investors to power up given the 1 year weighted price risk to cash out and the requirement that they must ramp up transaction (transfers) demand to the level that the STEEM not powering up is at least 10% of the money supply so that SP holders aren't debased.

Also it doesn't change my criticism that they've killled medium-term investment.

Where does the 10% interest paid to holders of Steem Dollars factor in your equations? I don't see.

Please re-read that post as I have corrected it.

In both @arhag and my computations, we are assuming they are converted to STEEM.

[iamnotback]

The voting and reward algorithm in Steem seems to me to have a fundamental flaw.

If they made voting rewards linear, then all SP holders could simply vote for their own posts and recover their share of the dilution of the money supply. The game theory would be there is no financial incentive to vote for posts of others (although there might be an incentive for minnows who value the site functionality more than the tiny bit of rewards they control).

So instead they made rewards quadratic and even time incentivized so that you have to risk your vote on a post that you can't be sure will gain you the most rewards (since you don't know which post all the other users will vote on until later, which is why the votes are time incentivized to vote early). That also had the hype benefit of creating posts with exaggerated $50,000 rewards due these non-linear amplification algorithms.

But the quadratic and time incentivization game theory highly favors whales who can collude since the remove the risks the algorithms intended to create yet the colluding whales can take all the non-linear reward amplifications. I am not saying whales are colluding now, but for example if the media moguls can obtain significant stake and then accumulate 100% of the tokens over time by this game theory strategy thus controlling ranking of content on the site.

I believe the only solution to this is to let users control their own ranking algorithms (so whales can't predict rankings even if they collude on voting) and votes for computing rewards should always be linearly tallied. In other words, rankings need to be truly decentralized else the entire system is a clusterfuck back to centralized media control again. Meaning that if you only vote for yourself, you voting pattern make not align with like-mindedness with others thus you may have no influence on the ranking of your posts on the site, so you lose income from the votes of others. Meaning if you vote for yourself, you opt out of blogging.

Meaning I see no solution to the fact that it is impossible to incentivize whales to vote meaningfully and it is impossible to charge whales for the voting of minnows¹! Dan's communism fails.

I'll be reading over @theoretical's blogs to see if I have made any errors or incorrect assumptions. I'll update you if I find any.

¹ I do see one solution to this where whales are charged for voting but not allowed to vote but it can't work in the Dan's current design where STEEM are debased 50% yearly because obviously whales won't decide to hold STEEM.

[chryspano]

So we both had a mistake.

Not exactly, it's one thing to miscalculate something to be 5% instead of 6,7%...
and it's another thing to miscalculate something to be 21% instead of 6,7%

Instead of admiting and apologize that you were blatantly wrong in every post you previously rambled about your "21% calculations", you you are now editing your STEEMIT "thread" to do some damage control to your image! thats pathetic!

As a "general rule" everyone knew that STEEM has an inflation of 100% and SP 10% but you starting crying and whining that its was all LIES 21% was the real number! YOU WERE WRONG! and it was not the first time.

Is it malice or stupitidy iamnotback?

[iamnotback]

Instead of admiting and apologize that you were blatantly wrong in every post you previously rambled about your "21% calculations", you you are now editing your STEEMIT "thread" to do some damage control to your image! thats pathetic!

He did not admit that I pointed out his error. I admitted my error. I told him "thanks".

I explained my error in detail so readers would understand. I corrected all my posts every where and did not erase evidence of errors.

The percentage difference of an error is not a valid criticism as an error not seen could be small or large until seen. It doesn't reflect on anything except your desire to grind an axe. Btw, 1.7% of 5% is +34% error, and 5% of 21% is -76% error. Hardly the huge difference you were thinking.  

You seem ready for a fight or competition. Make sure you are really ready.

I also notice you stalking me with positive votes on comments that I have refuted yet you don't even upvote my blog post even though you find enough worth voting on there. Nice.

Now address my criticism in the immediately prior post about the voting algorithms being totally whacko.

Edit: I guess you didn't notice I was awake 24 hours straight yesterday (and given my illness that is like saying you had been awake for 48 hours straight). And written I don't know how many detailed technical and marketing analysis BCT posts yesterday.

WHERE IS YOUR PHOTO?

https://steemit.com/@chryspano

You can criticize those of us who put our real photo and LinkedIn account online, yet you are hiding you weasel. You dish it out but can you also allow yourself to be exposed?

Ah you are INTJ and I am ENTP, so that explains some of the reason we are not going to get along well. You hide and judge. I discuss and perceive.

It is all about production. That is all that will matter in the end.

That is why I don't want to join some clusterfuck circle-jerk one-size-fits-all ("winner take all" power vacuum) where I have to kiss ass on INTJs. You should be filtered out of my coterie and myself filtered out of yours. You go hang out with your INTJ types and I will go hang out with the extroverts who prefer production and discussion over judgemental impossible perfection.

[iamnotback]

Do users really want to put all their activity and text comments to friends on a public block chain?

At least on Facebook, I can decide who views my posts and stuff. Obviously the NSA can read it all, but I can still have some privacy from others if I want to.

Has anyone worked on how we could put it encrypted on a public block chain and limit readers to those whom we give a decryption yet, where each reader could have a different decryption key? So we could identify who is letting their reader keys escape into the public domain?

[Dafar]

Umm, what do you have against introverts dude?