Hey guys, it's been a while since I explained why @steemit's powerdown was great news for SP holders, but recently I believe we may have reached a peak of earning potential for SP holders.
In this post, I will explain why SP holders have an earnings potential of around 25.195% per year and why I believe this may be a peak.
Current inflation rate of SP holdings
As you can see, you can earn 4.29% per year from holding SP alone, without even doing anything. However, the real earning potential comes from posting and curating.
From the distribution listed above, we can see the 4.29% inflation merely accounts for 15% of the total inflation. Therefore, you can earn approximately 9.295% on average from curating and you can generate 9.295% of rewards for others, assuming 100% of all SP is being utilized.
However, I'm sure not everyone utilizes their SP to the maximum extent, people having their voting power sitting on 100% just means higher earnings potential for others, since their share of the rewards pool is not being used. Therefore, realistically the 18.59% from the rewards pool isn't a rough estimate, it's actually a floor, or a minimum. Therefore, realistically the earnings potential is much higher than that. Let's assume conservatively 90% of weighted SP holders never let their voting power hit 100%, which I assume is a somewhat conservative estimate but since SP is so heavily concentrated at the top and those large SP holding accounts likely won't have their voting power sitting idle, this may end up being a rather accurate estimate.
Utility from holding SP
Don't forget, you don't just get inflation/rewards, you also get voting rights and other benefits of SP. For example, you have RCs which can create you free accounts, you have voting rights for witnesses and lastly you have the ability to help push a post to trending.
All of these additional utilities are not considered in our calculation of your earnings potential for SP, so I have decided to simply but a 1.01 multiplier in the calculations for a conservative estimate of the earnings potential.
Putting it altogether
- From holding SP, we get 4.29%
- From the rewards pool, we get 18.59% as a minimum, but assuming only 90% of people use their voting power, we get 20.656%.
- That's a total of 24.946%
- Assuming we get a 1% multiplier from bonus utilities, we have arrived at the conservative estimate of 25.195% earning potential per year.
- Of course, with tools like @upvu or dlease, we can easily achieve much higher than that
Why I believe this is a peak
With crypto going down at the moment, I believe there will be more people dollar cost averaging on their holdings and with STEEM, that means powering more STEEM up.
As more STEEM is powered up, your share in the pool decreases since it's a constant (actually decreasing) pool with more people sharing it.
Please let me know if any of my calculations have been wrong. @jondoe pointed out a mistake in my previous post which helped me understand our economy more and using his insights, I have been able to improve this post and all future posts regarding the steem economy.