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.
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.