There is a lot of discussion about the price of STEEM, how it dropped, and the reflection it places upon the ecosystem. Personally, I do not buy into it since price has little to do with what is taking place. The ecosystem is still the same when the price was 40 cents as it is today at 25 cents. Nothing changed.
If the price magically doubles or triples, does that mean Steem is any different? Let us make the price 65 cents, how is this ecosystem? Are there suddenly more apps or people? Sure higher prices might lure in new users but are those the ones you want? We saw what happen when people who were enamored with higher prices met a bear market. They left.
The truth is most of us want higher prices to validate our decision to be in Steem. If the market verifies our choice, it takes a lot of the pressure off because then we are not alone. It is difficult to remain steady when everyone is running for the doors. Thoughts such as the price going to zero enter into our minds.
Of course, those who live off STEEM to pay some bills or entrepreneurs who are paying developers in STEEM do better with higher prices. That, however, is not the vast majority of us.
So how does one remain calm when the price of STEEM is falling?
The answer comes from simple mathematics. It is the same approach I used in looking at the ENG token on Steem-Engine.
Basically, the math works out that people need these tokens. It cannot be avoided.
STEEM is vital for one reason: everything done on the Steem blockchain requires it. There is a "cost" in terms of Steem Power (actually Resource Credits) to transact. This means that anyone that is doing anything on Steem requires some Steem Power.
The same is true for the transactions taking place on Steem Engine. Since all transactions are sent to Steem via custom JSON, an individual needs some SP to operate on there also. Without this, nothing is happening.
This is simply one application that is built upon Steem yet it exemplifies what is required. Can you picture a time when Steem Engine has a couple million transactions happening on it each day? Is it possible that could reach 10M? 20M?
It might seem like a large number until you consider what it is like if there are a million people using Steem Engine tokens. Suddenly, if you have people converting tokens 2-3 times a day, these numbers are not so big.
Of course, each time someone puts up an @actifit post, that requires SP. The same is true for Sportstalk, Steemleo, SteemAce, and all the other tribes being formed using SCOT. How many of these are we going to end up with?
Upvotes require Resource Credits also. This means that those who are on 3Speak, supporting their favorite "banned-from-YouTube" videos, will need Steem Power. Do not think for a moment that @theycallmedan and a few others behind that project are happy with small fish. They are intent upon going after some bigger personalities.
In the long run, this is how the economics of STEEM work out. Obviously, with only 40K accounts transacting per day, we are a long way from this realization.
That said, let us look at ENG. This is a token that has only 4M tokens offered. At present, there is no inflation rate. According to @aggroed, it requires a smart contract change to increase the amount. While not all that difficult, it is not as if one can just log into the account and triple the supply.
ENG is required by each application. For every account that is staking a token, one ENG is needed. This means that an application with 1,500 accounts staking the token will need 1,500 ENG. Again, this is nothing compared to 4M but it does become an issue if the application has 500K users.
A few people already spoke how they can foresee a time when earning STEEM is going to be difficult. I agree with this assessment. When the number of users grow, the reward pool gets diluted. We see math come into the picture. The reward pool is fairly standard (actually it will decrease over time). There is a major difference when there are 500K posts splitting up the rewards compared to 50K. No matter who you look at it, the extra 450K will dilute the earnings of the others to some degree.
Steem has a crappy reputation among this involved in cryptocurrency. There is no way to avoid that fact. This is compounded since the growth rate of crypto users in general is not mooning. The FUD put out by the establishment is working. People are scared of crypto and not embracing it. This will not always be the case.
The price of STEEM is down. We can fret about this all we want or we can see it for the opportunity it is. If you believe in Steem long-term, it is a great time to add to your holdings. At the moment, one can become a Minnow for $125. Certainly, there are many in the world who cannot swing this type of money, even in the developed countries.
However, can 50% of the Planktons afford that? 25%? Realistically, there should be a massive shift in the number of Minnows. We should see a couple thousand added in a short period of time if people would buy. Alas, that is not what happens.
Instead, we see larger accounts purchasing. I see @exyle, one who has close to 200K SP, keep buying. Why does he do that? Is an extra 3,000 SP going to make that much of a difference? If Steem hits, what he already has is going to set him up in a great way.
Yet he still keeps buying? Why?
It is something for all to consider. He is one who spends a lot of time researching what is taking place. He does not limit his analysis to what is promoted to the Trending Page. He is looking much deeper than that.
In my mind, using simple math provides me a lot of the answers. With each downturn in the market, STEEM gets into stronger hands. It is during these times that people like @exyle buy and power up. Of course, the opportunity is open to everyone.
My bullishness on STEEM comes from my optimism about the platform. I see a lot of people focusing upon stuff that, in the long run, does not matter. It has been the same for two years. Probably half the stuff people opined as a detriment were magically solved. With development comes answer. While we still have issues, none of them are insurmountable.
And sadly, I believe too many focus upon price as a gauge to determine what is going on. The lessons from the 1990s should ring true. There were a lot of internet companies that the market valued highly yet never materialized. One in particular, Yahoo, was worth over $500 a share at one point. This search engine was going to take over the world.
While Yahoo was the darling of the markets, another Silicon Valley company was quietly developing. They were overlooked yet somehow managed to become part of the "evil empire". The Google boys were not worried about what others thought of their company. They knew what they were creating.
The question is do you know what is being created on Steem? If you do, it is fairly easy to see the long term potential. And to me, this is very bullish.
Down the road, the question is who is going to be kicking themselves, the people buying STEEM today or the ones passing on it?
You know what camp I am in.
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