There is no "competing" when people simply allocate Steem to themselves or the highest bidder. The analogy of Bitcoin mining difficulty breaks down there because mining difficulty increases for all miners, whereas there is no difficulty increase for self-voters or vote sellers. In fact it gets easier as they allocate themselves more stake with which to vote.
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Wouldn't that be the same as Bitcoin miners buying better equipment with their earnings?
The moment you stop buying new equipment and start cashing out Bitcoin you can't keep up with the difficulty.
You have to reinvest and keep investing in better miners.
Ultimately leading to fewer parties being able to earn Bitcoin (but the price going up anyway).
When you compare SP to mining equipment it would be the same.
The difference on here is that it's possible to 'use/receive' someones else's SP to mine.
i think this answers my question.
No, nothing like buying mining equipment. Mining equipment gets obsoleted as difficulty rises, there is only a window of operational profitability which declines over time. Self voters only increase their share of issuance perpetually with no ongoing costs or window of profitability.
I think that there are costs, but they’re hidden. There’s a lost opportunity costs for every self vote. 100% self-voting is very effective in the short run (I’ve seen estimates in the 30-35% annual return range), but it achieves that at the expense of building relationships. If you’re not voting for and commenting on other’s posts, you might completely miss the chance to attract the attention of dolphins, orcas, and maybe even whales who might provide upvotes for years to come.
does this hurt the system?
Yes. Over time more and more of the budget will be lost to unproductive rent seeking.