In today's video I discuss whether Steem is "inherently inflationary" and how to deal with "Steem Skeptics" who have an irrational belief that it is.
If you found this interesting you might also like an interview I recently did with the wonderful @georgedonnelly and @piedpiper.
P.S. This post was inspired by conversations with the always interesting @sterlinluxan
The main issue skeptics I've talked to about the Steem money supply is not the rate of inflation, but the fact that the money supply is infinite. This means that Steem lacks one of the important characteristics of money: scarcity (see here for more on the scarcity of bitcoin). Digital scarcity is the problem that Satoshi's proof-of-work consensus solved and the primary reason Bitcoin has emerged as an attractive store of value to people around the world. Steem fundamentally does not possess digital scarcity.
That's not to say that a predictable but infinite money supply does not have a place in the world. It could very well be that a predictable but infinite money supply is better than an unpredictable but infinite (all fiat currencies). But this is the most important thing about money supply to acknowledge and it's why most Bitcoin maximalists are skeptical of Steem.
Important for a currency to survive is the main criteria of sustainability. The criteria of scarcity doesn't necessarily totally define if a currency is sustainable or not. That's why I find it a good point that you say there is a possibility that predictable infinite money supply have a place in this world. Meaning Steemit could become successful.
Steemit solves the sustainability issue from a totally different angle than bitcoin. Rather trying to replicate attributes of money similar to gold and silver, it takes the approach of free market mechanism. A free market mechanism based on a fair system of voluntary membership. You can use it and at the same time literally own parts of steemit. Joining it offers everyone the same chance of being able to profit or make loss in it. Profiting (beating inflation rate) by creating quality content. Or to make a loss by buying steempower to promote their products to sell --> eventually turning it into a profiting process. This censorless free market mechanism of supply and demand will make steemit sustainable even though the scarcity criteria is not met.
Very well said. I've looked at your posts and like what I see. If you'd like to join my new-talent incubator reach out to me on steemit.chat (https://steemit.chat)
Hello @andrarchy!
It sounds interesting and I would love to join your talent incubator. I looked on steemit.chat, but couldn't find you there. So I replied this way.
The issue of an infinitely growing money supply is not unrelated to the rate of inflation. When I talk about the rate of inflation being their sticking point, what I am saying is that they are arbitrarily fixating on the fact that the money supply could theoretically grow infinitely at a constant rate of 10% a year. Maybe I should have made this point explicit, however it is certainly implicit within my logic. It is a good point though.
Eh, by my estimation the premise of your whole video is that skeptics overstate annual inflation rate and under appreciate who the funds go to. Again, this misses the main point skeptics have -- infinite inflation.
The major point should be this is an economic experiment worth trying and no one really knows how it will play out because its never been attempted before. And its great that digital currencies can test new ideas in economics (previously you had to control a nation to test a new monetary theory idea).
well said @ntomaino
To me the point that's being missed here is while SP may be an accounting artifice, that SP can still be powered down to steem. Perpetual printing. How could Steem hold its value in the long term? I don't see the scarcity either.
Nevertheless I like the idea and throwing in a few bucks :)
Yes! That did help. A lot to think about here, thank you @andrarchy.
Loved it! I shared it on twitter and hope many other bitcoiners who don't wanna give Steemit a minute of their day.
The rate of inflation and the way it goes back one digit once every 3.5 years, is good the way it is now in my opinion. If someone wants out, they can divest and it will take 2 years. While at the same time curating and posting. With adoption and more users it won't matter much how the inflation is, cause its gonna be better than many other "real/fiat" currencies.
The rate of inflation isn't the issue most bitcoiners have. It's the fact that the money supply is infinite. Bitcoin's digital scarcity is its most important characteristic as a store of value and Steem lacks it.
That doesn't mean Steem can't be a useful digital asset, just that it's never going to stack up to Bitcoin as a store of value.
I remember thinking along these lines when btc first came out and I am exited at the thought that one day SMD if maintained in its present form will eventually outpace even btc. We have never seen attention commodified to this extent centered around indisputable economic trinities of interest that is designed to generate good content at the core. Thats whats really important here, the product of the currency itself, DATA, CONTENT...What do other crypto-currencies have that is as highly sought after?
I view the potential of this site as one to simplify the experience of blogging in general. Sites like wordpress and facebook are converted. All of the elements and services of those sites are already here they just have to be made more prominent and reliable. Hopefully this site never goes public...But if it does, we should demand a fractional payout of steam power in 51% stock ownership.
You should be posting. If you'd like to be part of my new talent incubator hit me up on Steem.chat (https://steemit.chat)
Tthanks for the invite, Ill stop by some time soon!
Reality vs Religious dogma? Great point! Looking forward to future developments and where still will be! Cheers mate!
Nice well out thought. If you have this stuff included in written form include that with your videos if you have time. I prefer to read, I am much faster at that. Some people definitely prefer videos though and you are very good at emoting while making a video so I wouldn't stop doing that.
Good job on the topic. I am not one of those you needed to convince, but I still listened to it in it's entirety.
That's a great idea. Maybe I'll write up a kind of "cheat sheet" about how to defeat a steem skeptic :)
Thanks, the hope was to at least give people better weaponry when dealing with the irrational barbarians at the gate :)
You did a good job of that... Next time just add some more cowbell.
MORE COWBELL
If you are not familiar with the term... youtube search for it pretty funny SNL skit.
very entertaining, I laughed several times, great video :)
Thanks Craig! Glad you liked it.
That was a very good and clear video. I learned a lot about STEEMPOWER and inflation. It is true that the system is designed too support the people who would rather have STEEMPOWER more than anything else! Therefore most steem will keep rolling back into STEEMPOWER as an accounting entry mainly, meaning that 90% of that steem may never hit the market!
Yes!
What a concept? Great post, and I didn't tire my eyes with reading it!! Thank you for sharing.
Wow! such information. Followed!
@andrarchy Everything you post is Gold! Actually it is better than gold. STEEM!
Very nice video!
From an other point of view, inflation is not a problem as far as the population using steem increases.
For example if the population using dollars should double, then double circulating dollars would be needed, otherwise the value of dollar would double (but this leads to deflation, that is a problem because when people expects deflation in the future than is not willing to spend the currency in the present).
On one thing we still do not agree: I actually believe that Steem is a currency, and that over time a market using Steem will evolve from Steemit. Maybe it is also in the plans of the founders, if I didn't misunderstand.
I find that when people use the word "belief" they are often revealing their hand. You may believe that Steem is a currency. That does not make it so. Steem could be used as a currency. However it is not used as such currently, at least not by any reasonable definition of the word "currency" for example: the official medium of exchange for a specific population.
I can disagree. The fact that he believes it is a currency makes it a currency. I could offer him 20 steemdollars for something that had fair value to him. Same with most of this specific population. It's a small population, but the majority in it would see it as value for barter.
(accidental comment removed)
Mind blowing video! The system was created from the very beginning for steempower to be where the actual value of steem is stored. This post sums that up beautifully. Easy upvote.
Yes thank you that helped, hopefully one day I have some steem.
nice post
Inflation is everywhere.
It is not only in money, you can actually see this thing everywhere.
It is very simple.Only one thing can end the inflation. If no more resources/products will be produced/gained , because the fluctuating amount of resource overall, depends on its price, and also inflation depends on that too.
thankfully i personally haven't come across any sceptics who know anything about cryptocurrencies but will send them to this video if i meet them.
Nice video, good point of view.
I suggest the managers of steemit should experiment on control and see how the market reacts.
About to get to the whitepaper, but a note about "inflation."
In the normal parlance, it means price inflation... which in the Steem locale would mean how many Stem does it take to buy one steem dollar to reward a post or comment (use for other purposes is not material to the Steem ecosystem.)
But, the economic definition of inflation is inflation of the money supply, which is the minted Steem. If this has a distribution which is not 100% matching to existing ownership stake, then it will neccesarily steal purchasing power from some to distribute to others; in the Steem community, this is stealing a bit from the existing Steem holders value to recompense the community rewards program. Which, I believe, is the actual intent.
So, yes, the Steem community rewards program's funding is inflationary, but this is clearly the intent of the system creators.
Now, economicaly, what does a rational actor do in an inflationary regime? cashes out to a store of purchasing power with lower inflation, then come back and get more of the inflationary stuff later if they need it - Time Arbitrage.
Now, no one has set up a Steem options market, or a Steem lending bank, or anything else to make a robust currency out of the Steem Dollar. Steem Dollars buy Steem, and vice-versa; translation to other currencies is completely instant market-based - a volatile situation at best. If Steem becomes a noxious place, the Steem Demand will drop fast and the value of a Steem Dollar go to nothing.
Next point: the Steem Power = cares about Steem.com argument.
You claim the one is the other, because that is the case now. But lets say I have an expectation that Steem Power will pay out its percentage of the Steem created, as per the model. This means you can easily set up a static Steem dividend stream, using your 100,000 SP as a basis. Even if you never do anything for the community. If you find your stake seems less valuable, sell off less SP per payout.