A lot of People seem to get the wrong idea that STEEM POWER accumulates based on Compound Interest, This is not True at all!
STEEM POWER DOESN'T ACCUMULATE BASED ON COMPOUND INTERESTS
This would mean that you'll grow STEEM POWER based on this assumptions
STEEM POWER is essentially STEEM converted to VESTs. Your VESTED STEEM can be converted back into STEEM within a 2 Period. STEEM is the cryptocurrency, while STEEM POWER is STEEM that's been set aside for the purposes of the community. Powering up STEEM moves it to be used for the community, and powering down STEEM POWER moves it out of the community to just Cryptocurrency Form.
Wait a Minute! Why do I see changes to my STEEM POWER ?
The conversion rate changes over time, though... so that balance appears to be growing. It's showing you how much STEEM your VESTs are worth.
The STEEM POWER in your wallet is called VESTs behind the scenes. That number doesn't change unless you receive rewards from posting, commenting, voting, or powering up/down. The change in number that you see is a reflection of the change in the conversion rate between VESTs and STEEM.
STEEM POWER doesn't really exist. It's just an abstraction. The amount of VESTs that are represented by the STEEM POWER figure stays constant aside from increases due to participation and interaction with the community. The difference is subtle, but it basically means that the growth doesn't resemble compound interest so much as inflation.
STEEM POWER (SP) – STEEM can be instantly converted to STEEM POWER. It is a long-term investment and can only be converted back to STEEM via 104 weekly payments. This long-term commitment gives the owner two advantages:
-The user can participate on the platform by voting or posting articles/comments. This is rewarded by more STEEM POWER (SP) and STEEM DOLLARS (SMD). How much everyone gets, depends on his STEEM POWER and the voting algorithm. There seems to be Compound Interest Principle associated with STEEM POWER , because the more you possess of these Influence Token the greater the Reward which accumulates.
-The inflation is not 100% anymore like with STEEM, but only ~10% per year because for every 1 STEEM that is generated as Reward, 9 new STEEM are distributed among STEEM POWER holders. If the platform grows faster than the inflation, investors make a win, otherwise they’ll be losing money.
For Every 1 STEEM generated as Reward , 9 new STEEM Are Distrubted to STEEM POWER Holders
What was the Hype all about ?
To be Honest with you , most of the Hype that you'll be reading about Steemit paying any sort of Interests is complete rubbish because People have not yet read the White Paper or Believe other's without checking for themselves
Steemit Pays does pay Interests on STEEM DOLLARS
STEEM DOLLAR (SMD) – represents a number of STEEM tokens having a value of ~1 USD. It can be used to trade goods/services with the stability of the USD. SMD pays holders interest (currently 10% per year). The interest rate is set by the same people who publish the price feed so that it can adapt to changing market conditions.
This interest rate ensures that SBD can be safely held with minimal opportunity cost. The actual interest rate can be changed by consensus of the active miners. This gives STEEM the flexibility to adjust the interest rate to be appropriate for Market conditions.
There is a lot of Misconception going around regarding Compound Interest of STEEM POWER !
All that said, SP is still pretty lucrative because you'll be entitled for greater Wealth Accumulation. It's just not the magic bullet some people have misunderstood it to be. Simple interest is a term that normally applies to loan payments and it refers to paying the interest payment in full before the amount of the unpaid interest payment is added to the principle to accrue more interest in a compounded manner.
STEEM POWER DOESNT ACCUMULATE BASED ON COMPOUND OR SIMPLE INTEREST
What are so many User claiming STEEM POWER pays Compound Interests! Well , before you decide to get all angry remember that you'll have an increase in the rewards you get for participating. The more STEEM POWER you have and the more you contribute ( Posting & Curating ) the more you'll be rewarded , this too many is the Compound Effect .
You'll see a lot Steemit User arguing over Compound Interest
In my book if I get more rewards and that in turn gives me even greater awards, I call that Compounding. You can call it whatever you want, that doesn't change the fact that anybody that engages with the community in anyway will get compounding. Now if you want to talk about Vests and how they don't compound for anybody that is totally inactive in the community, I could see how that case doesn't compound, but who cares about that special case for something that can't be exchanged?
If we contemplate the value of VESTS measured in STEEM units, then clearly we can see that when 9 new STEEM POWER are created for every 1 new STEEM (and given that STEEM POWER are 1:1 convertible to STEEM and the new STEEM POWER are distributed to existing SP holders), then clearly we can see that (the value that) VESTS (represents) have been transferred from STEEM holders to STEEM POWER holders. And that interest payment compounds the next time this done. That is not a fixed interest rate compounding. It is compounding due to saving your excess production and using it to invest in more production.
You can decide whether STEEM POWER actually pays Interests based on Compounding Principle ,but in Reality if you're not active in the Community your STEEM POWER will not accumulate based on Simple or Compound Interest , but there definitely is a Compounding Effect when it comes to Wealth Distribution on Steemit whenever you increase your STEEM POWER and you're actively contributing to the Steemit Community you will earn more over time
Watch This ! So You can Understand the Basic's Of Compound Interest
What Exactly is Compound Interest ?
Compound interest is interest paid on the initial principal as well as the accumulated interest on money you have borrowed or invested. Compound interest is like double chocolate topping for your savings. You earn Interest on the money you deposit, and on the Interest you have already earned - so you earn interest on interest. An online savings account paying monthly interest is an example of an account that earns compound interest.
Compound interest is different from simple interest. With simple interest, interest is paid at the end of a specified term, although if the term is more than 12 months, interest may be paid annually. A term deposit is an example of an account that earns simple interest.
Let's Calculate the Annual Compound Interest Formula
The formula for annual compound interest is A = P (1 + r/n) ^ nt:
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (the initial deposit or loan amount)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the number of years the money is invested or borrowed for
If you invested $10,000 for 5 years at 5% per year, with interest paid at the end of the term, you would earn $2,500 in simple interest after 5 years, $500 for each year. This would give you a total of $12,500 after 5 years.
If you invested $10,000 for 5 years at 5%, with interest calculated and added monthly, you would earn $2,834 in compound interest after 5 years, giving you a total of $12,834. Returns would be higher because you'd earn interest on the interest.
Why is it Important to Learn about Interests ?
Paying off a debt is not the same as building up liquid savings in a bank. It reflects something that only a very few economists have worried about over the past century: the prospect of debts rising faster than income, leading to financial crashes that transfer property from debtors to creditors, and indeed polarize society between what the Occupy Wall Street movement calls the 1% and the 99%.
Those who understand the power of Interests will able to use it to their advantage whereas someone with no understanding will suffer consequences of more financial Burden.
That's why I try my best to Explain to your what Compound and Simple Interests is all about !
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Please Correct me if i'm Wrong , contact me on Steemit @steemitguide so that i can made Adjustment and Correct Any Misunderstanding