Dan has been quoted - ## "There's only 10% effective inflation per annum for Steem Power Holders"
That in itself is not big deal.
But Steem speculators experience **110%** effective inflation.
# **This is the problem!**
Because of this asinine inflation rate there can never be a virtuous cycle of growth by speculation like Bitcoin experiences!!!
Speculation is not evil. Steem apparnetly tries to make a point that price is a function of order book. It is, but at 110% inflation there is so much leakage into the market that price will be almost impossible to sustain in an upward manner.
Lucky for you guys, I HAVE A SIMPLE SOLUTION!!!!!
## Change the inflation rates.
Keep Posting and Witness rewards as they are. Now Drop Steem Power rewards to a new mechanism.
1. Lock up your Steem (Power Up) and earn 5% per year and get voting rights etc.
2. Knock Power Downs from 104 payments over to two years to 4 payments over 4 weeks.
If we don't do this this system will never reset in a manner that makes upward price action sustainable.
Witnesses. Founders. Users. DISCUSS. If you don't make a change like this, then this innovative system is doomed.
The question is - FORK STEEM to this upgrade? Or FORK STEEM and sharedrop? Only the founders can choose who to sharedrop to according to their license. I suggest the community upgrades THIS chain.
Really interesting concepts. I'd like to hear your expanded thoughts on:
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The insane inflation that steem has is completely unecessary and as bobsunday said the price will be impossible to sustain.
A fork could be done to reduce steem inflation from 300% - 100% to about 10% and steem would work perfectly fine, much better actually. This would mean that the reverse split won't even be needed,not for decades at least.
They could make the system much more attractive to investors by simply stopping printing so many coins. There is no real purpose for having so much inflation, they are shooting themselves in the foot with the insane printing.
I have discussed this with smooth and apparently the inflation is there as a psychologic incentives to buy steem power ( your balance is growing when you have steem power ). As we have seen recently this incentives does not work, people want to grow the value of their account not the number of SP and investors are not falling for this. I would also argue that a growing number of steem power have a negative psychological effect ; users think they earn money without doing anything which means that many don't bother curating and actually work to earn.
Want to keep talking human psycho? Well, If you lock someone in a prison this person would be a lot more eager to want out than someone sitting in the same cell with the keys. Which is why a shorter lock time period would probably result to more people locking their steem.
There are also much better ways to incentivizes people to buy steem power, as OP said you could reduce the lock time period, you could also increase curation rewards percentage.
So you ask what is going to change if we completely remove the unecessary inflation?
Not much, your steem power balance will remain exactly the same instead of growing but your account value is much more likely to grow. Most importantly the price of steem will be allowed to breath and grow which is essential to pay for the increasing amout of bloggers.
As OP said speculation is not evil, it is actually the lifeblood of every crypto. Steemit thought it could do without but it can't.
Some links where I have been discussing this matter
https://steemit.com/steemit/@snowflake/5a2p2k-why-not-inflate-steem-by-only-10-or-whatever-reward-pool-is-instead-of-having-this-crazy-printing-going-on
https://bitcointalk.org/index.php?topic=1558366.1040
Regarding Op's proposals they are meant to incentivize people to buy steem power. I would argue that the first proposal is not even necessary because there is already an incentive to buy steem power which is curation rewards, the more you have power the more steem you get, maybe they should increase curation rewards but the system is working as intented.
Also the very reason we are concerned about people powering up or down is because of this crazy inflation, remove it completely and you will see that powering up won't be so needed to keep the price steady. The second proposal however is good in my opinion, people will be much more likely to convert to steem power with a much reduced time lock period.
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Good points. I would like to hear the counter arguments too.
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There is one argument which is that a low steem price allow for faster power distribution . Steem inflation was designed with this in mind with a "distribution" period.
However I don't think this is necessarily true. When you have a low price sure people can get more share % for less money but there is also a lot less people buying because of lack of confidence in the project. If the inflation was only 10% there would be a lot more buyers/traders and overall interests in the platform and sellers wouldn't have to sit on their steem, so the redistribution would probably happen at the same pace in both cases. A shorter time lock period would actually allow for much faster distribution as people who want out would be able to sell all their share quickly.
I am personnaly not worried about distribution at all, it may take time but it is only going to get better and it doesn't prevent the platform from functionning.
I'm also interested to hear some counter arguments.
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People who want out quickly can already sell their accounts directly, although not everyone know that, nor convenient enough to do that. Perhaps it's good to add an account trading market on the site.
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I hear what you are saying. The distribution will not matter if people don't want the Steem in the first place. Whereas if there is a lot of demand then distribution will happen anyway as people sell off to make profits. Good points.
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My initial reaction to @bobsunday's solution #2 was complete disagreement, but your comparison to a prisoner with the keys in the cell made me soften that a little. It's still speculation that it would happen that way, and a major change like that would be drastic. I still think there is immense value in binding people together for a couple years. It puts us all in the same boat, and gives anyone with stake the common goal of wanting it to be worth more.
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The current lock time period is fine. My proposal is mainly about removing all the unnecessary inflation and you could do that without changing any other settings.
However if people can invest in steem at 10% inflation without locking their steem they might be reluctant to power up and commit for so long unless there is a good incentive. Which is why reducing time lock period make sense here but you could also increase curation rewards or reward SP holders with some of the newly created money as OP said ( however that would mean inflating steem more than necessary to pay steem power holder so we are back to square one).
If you want people to power up it should not be seen as an inconvenience. The reason people buy steem power today its because its the only way to invest in steem without getting hit by the inflation, this is an inconvenience.
If people could power up and get their coins fully back in a month you will see many people that wouldn't have powered up before that would do it now, because they don't feel trapped and you will see a lot less people powering down.
I personnaly don't think that locking people's coin is necessary to achieve these things and create a great community. Do you think the people involved in steemit are involved because they have a stake that they can't take out? Do you think people participate more because they have some steem power that will take 2 years to withdraw? I don't. I think that locking people's coins for such a long period actually prevent many people from investing and participating in the platform .
Give me one reason why there would be less people powered up than it currently is if we shorten the lock time period?
I can't think of any
People who want to participate, earn and curate will have to power up, so the time lock period makes no difference, people will have to power up regardless if they want to upvote and make money. And I think there will be a lot more people that would participate in steem with a shorter lock time period.
Think about this, if someone has a lot of money and wants to earn a bit from curating he will be obliged to commit for 2 years, this is a no go for most people.
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Idea 1 is good. Idea 2 is bullox
Frankly a powerdown would be 10, 20 or even 30 years if it were up to me with a huge interest payment for you, while not powering down.
Quit investing short term. Investments like this should be for the long term. But I also agree, they need to turn the printing presses of a spell and catch a breather.
Too much steem is keeping people away.
They see the price slide and slide without any break and they believe that in the future it will be much cheaper to buy steem. So they hold off on buying and then they forget.
We need to make the price of steem make the news. Don't threaten a fork though, it'll adversely impact the price for everyone and your fork won't gain traction due to all the people pissed off you crashed the price of their investment.
No reason you couldn't spin your own though and even do an ico.
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Powering up doesn't give you interest , you actually lose money every year when powered up.
The price is not going down because people forget to buy, it's going down because people don't understand how they could possibly get a return with such inflation and they are questionning the long term viability of the platform.
You don't need a fork to achieve this, it 's going to happen regardless. People are already pissed and the price already crashed. The situation is pretty urgent if you ask me.
Some say that steemit would still work if the price was 0.001$. That's probably true however you won't have many people left to post content and the reputation of the site would have taken a big hit, so I suggest we do something about it soon before that happens because that's where the price is heading. I see no reason why people wouldn't want to fork to remove the unnecessary inflation, it will instantly make their stash more valuable.
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I agree... We are in the midst of a death spiral and if we don't do something about it, we are looking at $.0001 in the not too distant future. It concerns me that there doesn't seem to be any urgency by the founders to correct this or at least slow the slide down. The argument that the market will find it's correct price is bull because there is just way too much supply coming onto the market every day, it is impossible to be absorbed, and it likely won't be absorbed with the current platform specs.
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How about punishment for exiting position quickly? Like skip the 2 year power down by taking only 50% of your stake.
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You could just sell your account if you're going to do that. There are in fact buyers for these things. Be less of a hit too.
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instead of chnaging the inflation rate, it's better to stop the steem power from growing for anyone who is powering down
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This might mitigate the crash but it won't be enough to sustain upwards price action.
The more coins is being printed the higher market cap will have to be to support the same steem price/unit.
You think that inflation is no big deal because you are being compensated so yeah you are not necessary losing money but the inflation means you are invested in a project that will reward less and less users overtime.
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Witnesses are eating 50% of the daily reward and providing very little added value to the network in exchange. Almost all witnesses are whales, they are almost all powering down, and have zero incentives not to do so given that they are so much showered with Steem Power that their stake keeps going up in spite of them powering down at maximum rate.
Don't look any further for the price drop. Dan and Ned need to man up and explain to their Bitshares days cronies that the free lunch is over and that they have to suck up a 90% cut of their witness salary if the network is to have any chance of going anywhere in the long run. Some will quit, but hey no-one is irreplaceable, and for each Bitshares crony witness who quits, there are ten candidates among well regarded folks in the community waiting in the queue for a witness position to open.
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Great points! I did not realize that witness compensation accounts for over 50% of the daily rewards... And they are mostly all powering down... as you mentioned that is probably the first place to start if you want to reverse the current trend.
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I agree that witness pay should be changed. Its problem is IMO linked to how they're paid in SP. It causes seepage. I expand on my views here: https://steemit.com/saving/@bobsunday/round-2-community-organized-rescue-mission
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There is allot of truth to what everyone is saying. We cannot justify buying anymore Steem until the price shows some stability. At this point we are staged for .01 value, and at that price we consider the investment very high risk. We don't mind investing for two years as long as we can see progress, and price growth. The daily steps downward do not provide confidence, and we can ask our supporters to take more risk. So stabilize the price so people who invest longer term can consider. We have a great opportunity here that no other social media platform is doing. We just need to look like we are heading in the right direction. @johngentry
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Great points and I agree. No one is willing to put any money to work here or even power up when the price is falling by 10% per day... why would they?!
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Don't necessarily agree especially with the Doom and Gloom presentation but some interesting ideas.
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NEM has now overtaken us in the market caps today, so any ideas that can stop this death spiral must be heard.
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The lack of urgency by any of the founders to do something about this is what concerns me the most... And no the market will not find the right price because the market is constantly being flooded with supply that it can't possibly absorb... Something needs to be done.
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The solution will need to come from the community. Otherwise wait for it ... It's centralized!!!
The founders will probably just leave like Bitshares if we don't make the upgrade feasible as it's notoriously hard to upgrade blockchains this drastically
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Good points. Inflation is a problem. Thing is we don't see that much sell pressure. Price is mainly falling because there is no significant demand for STEEM and especially SP. And so the major question is why there is no demand? Answer is there is no demand for STEEM because of horrible inflation and no demand for SP because of still high inflation and no motivation to hold it except some radical hard-core holders.
Summary:
What I would like to see is:
No one wants to live in highly inflationary environment, anything beyond 1% p.a. is unfair and anything beyond 5% unbearable. If one should be locked for two years, there must be major benefit
Steemit is great, please don't kill it by keeping wrong parameter settings!
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Here is my take on this topic: https://steemit.com/steem/@samupaha/high-inflation-in-steem-is-an-interesting-experiment
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I think this is a non issue. The price will find its true value, sooner or later.
Once there is a tiny uptrend the price will explode again, as when there is any demand there is little supply.
For speculators the inflation does not matter as they only look at short term. They are not holding for a year.
I think there are real issues that need to be fixed.
The reason why SP work well I think is be a use investors really need to be invested long term and for that they get a real stake with voting right and influence. I think that is very important.
The price I think will fix itself. Imho
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People have been saying that at 0.5$, 0.4$, 0.3$, 0.2$. Now the price is lower than before the launch. How do you explain that steemit's value was higher when nobody even knew if the platform was working?
That won't be the case next time, people have been powering down for months in anticipation for the next rise so you can be sure it will be short lived. Many people are holding off selling for now but still the price is crashing.
It does matter because when a currency has so much inflation there is no market for it, speculators are running away. No one wants to touch a currency that is losing 10-15% of its value every couple days. That's way too risky.
There is no need to lock people's wealth in order to get them invested long term. All you need is a project that is sound with a sustainable model and an investment that gradually grows in value.
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But you made a great suggestion and I may be wrong
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All good, but none of the actual founders have been tagged in this post...how are they to see it and discuss what you have mentioned...?
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Tagging people in posts doesn't do anything to notify anyone unfortunately :)
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It's a thing that really ought to though. I'd upvote that feature.
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@smooth @dan @ned @blocktrades @pfunk @nanzo-scoop @cryptoctopus @fyrst-witness @tdv.witness @dantheman @roadscape @jesta @sneak @luminati
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Handled it.
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Tagging the founders does not do anything - it does not notify them as it might on say Twitter. I suspect they will see it anyway since it as at the top of the promoted list or because someone they know might notify them.
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I dunno, I have my own notify bot, maybe they do too? Worth keeping in mind that tagging can't be assumed as part of the platform though.
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I did not know that and will be more careful about using your name in the future. I hate it when I get a flood of notices about casual conversation including my name.
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I wouldn't mind something like that myself:) I actually use Steemwatch instead but it is currently down.
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