The title is a bit of a mouthful, but bear with me. I was talking to @wingz the other day who questioned whether the dilution of Steem Control when holding Steem Power would be zero if the amount of Steem held in Steem Power hit 90% of the overall supply.
The answer is Yes. It is worth digging a little deeper into this aspect of the Steem system, as there is a little more to this story than first appears.
What is the Current % of Steem Held in Steem Power?
For anyone who wants to get access to this information visit this website and pull the following information;
Total Vesting Fund Steem = Steem Power
Current Supply = Total Steem Supply
132,532,278 / 138,073.345 = 0.9599 = 95.99%
Is it Changing?
Yes, you see by data here this metric is steadily declining from 97.16% just 4 weeks ago. This is declining because users are Powering Down and Converting Steem Dollars quicker than other users are Powering Up.
Contribution Rewards on Steemit
Currently, Steem Power Holders Receive 90% of all new Steem created, the other 10% go towards various Contribution Rewards. Steem Supply is set to increase by 312.23% over the next 12 months, before settling down to around 100% in 15months time. You can find more information in this here
So, how much are Steem Power Holders being Diluted..
Here is a small extract from the Whitepaper..
Creating new STEEM to pay an incentive to a particular user or group has a negative effect on every other user’s balance in terms of their percentage of the STEEM supply. If exactly 90% of the STEEM supply is held in SP, then the negative effect of Contribution Incentives on SP holders’ balances is exactly balanced by the positive effect of Power Incentives; SP holders get more STEEM (in nominal terms) but their percentage of the chain (in terms of fraction of the total supply) is unchanged.
If less (more) than 90% of the STEEM supply is held as SP, the two effects still point in opposite directions, but the positive (negative) effect becomes greater and the sum of these two effects will tend to pull the SP balance toward 90%. This “pull” does not mean that the SP value must hold at 90% over the long term, because incentive recipients will (and in some cases must) put their STEEM in SP, which means the “pull” towards 90% is not the only force on the percentage of STEEM supply held as SP.
What does this mean…
Why Steem Power will tend to 90% of Steem Supply…
What I initially didn’t consider is that, the 90% is not a relative figure. Steem Power holders receive 90% of Gross New Steem Created. So, if 90% of Steem is held in Steem Power, then these users will experience Zero Dilution, as they will be receiving 90% of the new Steem that is created.
It doesn’t end there…
IF there is less than 90% of Steem held in Steem Power, Steem Power Holders would experience Accretion. Essentially, Steem Power holders would receive a real return on their holdings. This would incentives Steem holders to power up, alongside the fact that Steem Power holder would be naturally acurring Steem Control as time passes.
For instance if 80% of Steem was held in Steem Power, those users would be sharing 90% of the new Steem being created.
WHEN there is more than 90% of Steem Powered Up (like there is now), the Steem Power holders are experiencing dilution. This is because Steem power holders are sharing 90% of the new steem created, amongst more than 90% of the Steem in circulation. This provides an incentive for users to Power Down, as they are losing Steem Control in real terms over time. This is one of the reasons we see many users Powering Down at the moment.
The Push and Pull Factor - Summary
Both of the above scenario’s push and pull the ‘% Steem Power to Steem’ towards 90%, because this is the equilibrium at which no gain or loss is incurred in real terms from holding Steem Power. There are of coarse other factors at play here, but like the Steem Dollar, I expect to see ‘% Steem Power to Steem Supply’ in and around the 'equilibrium' (90%) once the Steem Economic System has had time to mature.
Let me know what you think...