# Why Steemit's Powerdown is Great News for SP Holders

in Project HOPE5 months ago (edited)

Hey guys! I'm sure many of you have seen Steemit's recent powerdowns, but what does that really mean for SP holders?

To truly appreciate the effects, we will first look at the interest rate for holding SP and rewards pool for authors and curators.

# Interest Rates

Remember, inflation is calculated as the amount of Steem that is produced over a year's period divided by all steem in circulation, not just the Steem that is powered up.

This image shows how much your SP goes up by, by simply holding it without doing any curation. However, this is not where the majority of your interest is coming from (15% of total inflation).

# Curation and Post Rewards

As you can see, 65% actually goes to the reward pool which you can influence by being an SP holder. This accounts for approximately 4.3 times the inflation of just holding SP, roughly 16.03% per annum. This 16.03% is assuming you use all your SP efficiently and you get an equal number of upvotes compared to upvotes you give, which isn't really considered an "inflation rate" anymore, so let's call it your "earning potential". Alternatively, you can simply rent it out on dlease which at this current moment is yielding 22.16% as the highest interest rate for leasing.

However, the base 16.03% is assuming everyone uses their SP and no one wastes any voting power, unfortunately I don't have the data to what proportion of SP is wasted (voting power on 100%), but I'd conservatively say at least 25% is wasted, which means 75% of the SP controls 100% of the 16.03% inflation, meaning there's effectively 21.37% earning potential with the SP held, if you would like to actively use it.

This does not even factor the account creation tokens you can make, the extra power for witness voting and the utility of being able to bring something to trending. Lastly, this earning potential is multiplied by (1+(SBD Price - 1)/4). If SBD is \$1.08, this earning potential is multiplied by 1.02, since 50% of rewards pool goes to authors, and 50% of author payout is in SBD, so 25% of this earning potential is in SBD. If SBD is below \$1, you can always just set your payout to be 100% Steem Power.

# How Does Steemit's Powerdown Effect This?

Remember how we mentioned that inflation is calculated as the increase of tokens in circulation, over the total number of tokens in circulation? This includes Steem that is not powered up too! Steem's inflation rate is a hardcoded variable rate, decreasing by a set amount periodically.

"The inflation rate decreases at a rate of 0.01% every 250,000 blocks, or about 0.5% per year. The inflation will continue decreasing at this pace until the overall inflation rate reaches 0.95%. - straight from the Steem's economics FAQs"

Therefore, the amount of Steem being created is the same, but being controlled by a much smaller amount of SP, thus increasing the innate power of each Steem Power. In other words, each SP earns much more inflation than before and has more control over the rewards pool!

## This piece focuses purely on how much STEEM you can earn from inflation and does not aim to analyse the effects on the price due to Steemit's power down.

As always, this piece is merely an observational/educational piece and not to be taken as financial advice.

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The part about controlling more of the reward pool is technically accurate but realistically inaccurate. That SP wasn't voting on anything prior to being powered down and thus didn't impact the reward pool at all. Your ability to allocate the reward pool is based on total steem powered up, but more importantly, the SP powered up AND voting.

For example, if there was 100 million SP powered up in total and someone with only 100 SP cast the only vote for the entire month or 3 months or whatever the average SP calculation period is in regards to reward pool, that one vote would allocate the entire reward pool. So, it's more than just steem powered up, it's steem powered up and participating. The main steemit account was not participating and therefore their powerdown will not directly impact the value of your vote.

Hey there, thanks for commenting!

Great point here, you are absolutely right and this is not something I did not take into consideration; Steem wasn't participating in voting to begin with! Would you know if there's any data on exactly how much SP is being used, or what percentage of SP is "going to waste"?

excellent explanation @jondoe

thans

Great article. In particular I like the term "earning potential"!

I'll try to make more Steem/crypto centered articles in the future

Resteemed already. Upvote on the way :)

Ey such a good info friend.

Thanks for sharing! 🤝

Hey there! Thanks for the comment, it's been a while since we last talked, I hope the situation for you is improving but I can imagine it must still be very hard.

Stay strong my friend

Thanks for the insight. Re-blogged for references. Hope to better grasp what this means for going forward.

5 months ago

Dear @cryptoeater

Thank you for posting within PH community. I hope to see "more of you here".

ps.
Just several days ago I wrote my own publication on this particular subject: "Do we have a real reason to be WORRIED with recent @Steemit account 7mln SP POWERDOWN?"
https://steemit.com/hive-175254/@crypto.piotr/do-we-have-a-real-reason-to-be-worried-with-recent-steemit-account-7mln-sp-powerdown

You may find it worth checking it out and reading through comments.

ps. consider setting up some profile picture. Right now your account does look like it's bot or it's belonging to someone very new on the platform.
Yours, Piotr

Thanks, for the link, I'll have a read through it when I get some time later :)
In regards to a profile pic, many people have told me I should get one, for years! Maybe I'll actually upload one if I find something that really captures the "cryptoeater"

5 months ago (edited)

How about you use this as your profile picture @cryptoeater or what do you think @crypto.piotr

Excellent, very complete and explicit information, thank you for sharing it !

###### Looking for a new project/investment?

That was in interesting read. One thing is that JS cannot see steem down. it's his hard investment. Every decision taken at this point is to see the system grow and yield more interest.

5 months ago

Hello @cryptoeater.

Thank you for posting within our community.

That would help you understand more our goals and how are we trying to achieve them. Hopefully you will join our community and become strong part of it :)

Do you use telegram or discord? If you do then join our server and give me a shout. I would gladly share with you goals of our community and introduce to others from our team.

Consider joining our discord server: https://discord.gg/uWMJTaW

#### Remember: No to content plagiarism!

Regards, @juanmolina
@project.hope co-founder

These are good observations and posts like this are good to get people to understand that they are directing rewards from the reward pool. It reinforces the idea that upvotes should be given daily and failing to use it is failure to reward people.

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