Working toward a perpetual income

Living in Finland where prices are higher than most places in the world, Steem is a long way from being able to provide an income stream of significance, but I consider that can change very quickly in crypto land and at some point, the lows will not be that low.

While I consider that most projects currently out there are going to fail, I feel that Steem is among those that have a better than average chance at success, even though it will get increasingly less likely to be pumped to the moon the longer it lasts. I think Steem is on of the slow burner cryptos that actually provides use case and as such, will continually build collateral on the chain to push the price up, more than down.

This of course seems to go against where we are today as once we hit January 3rd 2018, it has all been down hill price-wise. However, people forget where we are on the timeline of the industry, the start. The highest volatility will happen at the early phases as there is nothing to create a base, nor a ceiling and therefore it can bounce high and low on even slight market movements. However, as the entire industry matures, the value starts to add stable lines and the market loses the large percentage swings.

Even bitcoin has become more stable. In 2017, Bitcoin went from about 1000 dollars up to 20,000 dollars, a gain of 2000% or 20x. Then it spent the next year falling away all the way back to 3500, a drop of about 85% or, 6x. Still much more volatile than any traditional market, but not as volatile as it was. If Bitcoin was to repeat the show and for example go 10x up to 100,000, what would you expect it to drop down to? Would it ever see 10,000 again - or would the new floor by 5x down at 20,000?

It is all speculation.

But, if I look at Steem being a stream of potential income (it already is a potential trickle, I just don't use it), what kinds of prices would make a difference? Well living in Finland, higher than 14 cents. Currently and without trying, I am able to earn on my stake about 120 STEEM a week through curation, which has a value of about 16 dollars at the moment. That buys me 1.5 work cafeteria lunches - it doesn't go far. But at 50 cents, that buys the week's lunch, at a dollar dinner too, at 2 dollars all of the groceries for my family.

What is interesting to me in this is that in order to have value, I don't need to sell the seed capital (Steem Power) to have access to it. Of course, it could all go to zero and that would mean that no matter what amount of Steem I can get, it is not going to buy food for me. Yet, because I have that Steem Power that can gather STEEM to it, it will gather around about the same amount (relative to voting stake, pool size etc) forever. And since I am growing my stake now instead of spending it, it will increasingly have percentage draw on the pool so it will earn more later, relative to the others amounts of stake drawing and the inflation pool size.

As the inflation rate continues to drop, the pool size starts to shrink and in 15 years from now, there is only going to be twice the amount of Steem in total. The inflation pool will generate about 6 million new Steem a year, whereas currently there is about 26 million that will be created in the next year. We can already see how seriously people take the competition on the pool and what lengths some will go to in order to earn some STEEM from it, I do not see that competition decreasing.

In fact, with the Smart Media Token arrival now on the near horizon and chasing the heels of the community functions that are currently in testing, it could be that the competition on the pool increases rapidly. I wonder what would happen if for example a relatively prominent person bought 5 million Steem, would it start others to jump on the bandwagon? That first 5 million can be bought off the markets for probably 800 thousand dollars US, what about the second 5 million, and the third?

Because, just like a large sell can trigger an avalanche, a large buy can trigger a run up the mountain and that can happen rapidly. Once people start buying, and the higher the price of the buy, the less likely thy are going to sell for a loss and that means that the liquidity for sale dries up earlier, and a new floor is reached.

When there is interest and demand for earning, opportunity to earn without selling and applications that allow for interactive consumption that also can provide return on investment, more will take some level of loss in order to make some level of coin volume gain under the expectation that the value of each coin will increase in price later. This creates increased stabilization in the lower reaches that is attractive as a floor and still offers an uncertain ceiling that is attractive to invest into, attractive to take some risk on.

What is going to be interesting is that we of Steem who have been here are apparently among the ones who have the least insight into the potential of the future and we will see this in the coming bullrun. There will be many who will see a price of 50 cents and sell, a dollar and sell even more, 4 dollars and blow their load of Steeming hot STEEM.

What they forget is that someone is buying it and those who bought at a dollar might hold it to go to 8 and if it drops back from there, they will sell above their buy price, but be unwilling to sell below the dollar mark. What this means is that someone who sold 100 Steem at a dollar, might never be able to buy the same amount of Steem back at the same price. If the new floor is 1.20, the most they can get is 83 Steem, and that is in the unlikely event that they have not spent any of their profits - although they might have used their profits to make more than they 20% difference too - Still unlikely as they are in a bull market and Steem generally lags.

Then what needs to be considered are the people who are buying that Steem from them at the dollar. Are they all speculators? With SMTs and communities that should hopefully support experience developers and applications, they might be buying in order to hold and support their Steem journey, provide Resource Credits to their users, give a foundation to their app. There doesn't have to be many of these types of groups in order to skim Steem off the markets and sink it into stake, reducing liquidity further.

And because they are looking to build a community of some sort that can provide value to users, this can increase the demand for Steem from their user base too, and they are going to sink, 5, 10, 50 Steem into stake also in order to secure their access to the community. More liquidity gone and while people will be willing to sell, eventually the price is going to inch up and those same people will never earn back - perhaps they will rely on the community to provide more to them?

What are the chances of most who earn Steem on their content now still being able to earn Steem once there is a high degree of competition on the pool, and they have proven themselves as a Steem seller? increasingly, those who have chosen to sell instead of support will be cut out of the earning on content rounds, and without stake themselves, they won't earn much of much at all. Unfair? I don't think so, it is part of the Game of STEEMs. Actions have consequences, good and bad.

so, in this hypothetical world where Steem price goes to 1.20 as the new floor price, my 120 STEEMs are now worth 144 dollars a week, which is a trip and a half to the grocery store, a nice dinner out with my wife, the winter clothes my daughter needs or almost, my mortgage repayments. Weekly. Does that seem significant?

And then, when the price doubles, someone in Finland could do the same with half as much, if it doubles again, a quarter. However, most people don't live in Finland, Sweden or Switzerland - they live in cheaper countries and they need even less to do the same. What this means is that demand to have stake that can bring in relatively passive revenue streams could increase dramatically, and with each push, the floor raises, while the stability grows meaning the next round will not be quite as volatile as the last.

If Steem survives and thrives, five years from now, ten years from now - what will the price be and how much stake is required to earn a meal a day through curation? Of course, for this to happen the ecosystem has to advance, it has to grow, onboard users and offer real value in content and experience to them so that they are willing to not only buy Steem to stake, but also pay to subscribe to Steem applications in the same way people do for Netflix or Spotify now.

What is different from the subscription models for example for Netflix is what I mentioned yesterday about centralization, they need the profits to continue. The Steem blockchain doesn't and many of the users are willing to be here even if thy are at a financial loss. This means that they are still putting demand and competition on the pool and, they still have their Steem sink in their Steem stake.

Now, back to the title of the post. In January it will have 3 years for me on the Steem blockchain and I have no idea how many thousands of hours I have spent creating and how many thousands more I have spent in chats, reading and learning, but will it be worth it for the chance at the perpetual income it could provide? Hell yes.

Not only that, I see this investment as having an additional value mechanism that most traditional investments will never provide - With the current 50% curation that provides me 120 Steem, around another 120 are going to members of the community - more if you count the Steem-Engine tokens and future SMTs that will arrive. That means while I get value, I am also providing value for others and in so doing, generating value on Steem for the users and the applications that those users will utilize and enjoy.

While that 120 Steem might not be worth much in Finland at these prices, it is worth something somewhere, and as the price increases, the value I distribute will be more effective in more locations. A few cents here and there could turn into a dollar here and there, which could turn into 2 dollars here and there.

That might be significant one day - but it doesn't come from nothing.

Taraz
[ a Steem original ]