This post might be considered technical, even though it has been simplified
The Steem supply grows at a rate of about 800 per minute. Per year that means: 800*60*24*365.25 = 420'768'000 STEEM creation. Only 2016 will have a lot less because Steem creation started at april the 18th. This will be about 124'416'000 less Steem for the first year. The exact figures might vary. This year might end somewhere at 280 million total Steem supply. That means in the year 2017 there will be about 700 million Steem available. But also there will be Steem that get 'burned', like done through promotion for example. Send into void through the @null address.
Most of the Steem created is distributed towards the Steem Power holders. And that is you, if you have an account that holds Steem Power, of course. From the Steem created every minute 90% percent goes to the Steem Power holders. This means 720 Steem will become inVESTed back into the system, while 80 Steem will become available for the reward system, every minute. The VEST part is important in the word inVESTed, but I'll get back to that in another follow up post. The main thing is to understand that most of the created Steem becomes a long term investment for the Steem Power shareholders. It is distributed relatively to the amount of Steem Power an account is holding. In effect this means, holding Steem Power, will grow your Steem Power, every minute.
Most Steem created will become Steem Power
From the 10%, or 80, Steem that become available for the reward system every minute only a part will really become Steem or Steem Backed Dollar. Meaning is becomes liquid; It becomes available to sell, to pay or transfer. But, this only accounts for a maximum of 50% of the reward pool created every minute. That means about 40 Steem will become liquid, directly useable, after the payour has been done. If effect this will only raise the amount of the, liquid, Steem supply at about 40 per minute. Because the other half is been payed in Steem Power. You see that when you post as the [Default (50% / 50%)] choice.
But there is also the full 100% Power Up. That means the payout is going to be put into Steem Power for your account and becomes a long term inVESTment. In effect this will lower the speed at which there is liquid Steem put on the market. Over a period of a year this could result in more that a hundred million lower growth of liquid available Steem, thus also Steem Backed Dollar. Decline Payout is a total different approach as this means a post only gets votes and no share from the available reward pool. Bottom line is that the amount of Steem that becomes directly available for payments, transfers or trade does not exactly grow at 80 Steem per minute. It does not even get to exact 40 growth per minute, because much of it gets a Power Up into Steem Power.
The effect of a Power Down
So the exact growth of direct available Steem, also as Steem Backed Dollar, is probably less then 40 Steem per minute by direct blockchain (Graphene technology) creation. Because curation also gets payed out in Steem Power, even lowering the amount of Steem becoming directly available for use. But this can change as soon as accounts start to Power Down their Steem Power they hold. This causes creation of liquid Steem, that can be transfered into Steem Backed Dollar, sold for other Crypto Currencies or send to other accounts. And that will take a while, also to make sure the Steem Market does not get flooded. Because that could be considered a so called 'dump' of Steem, which will crash the market price, because there is too much offered in a short amount of time.
Steem needs to be as scarse as possible to be able to hold it's intrensic value. But also things like 'trust', 'attention' and 'competition' are factors that will determine if a token is considered worth to invest into. Still, when a lot of accounts start their 'Power Down' sequence, the market will get a lot of tradeable Steem available. This proces takes 104 weeks to finish, starting a week from when it was innitiated. Over this two year period the available Steem Power will be made available as liquid Steem. This is done in 104 equal divided parts, one every week, based on the Steem Power in holding at the moment the Power Down was innitiated.
While this is done, the Steem Power still will grow, so even at the end of the Power Down there will still be Steem Power left. That is because every minute 720 Steem of the 800 created will get divided amongst Steem Power holders, as Steem Power. So over the 104 week period of Power Down the Steem Power will still grow relative to the amount of Steem Power that is held at the moment of distribution.
When a lot of accounts decide to Power Down that means more Steem will become available on the market. The total of Steem supply will rise, so it would need a bigger demand to be able to keep the price stable. Or even a huge demand for Steem to make the price go up. And when accounts with a low Steem Power amount start to Power Down it will not have such a big impact on the price of Steem. But it will be different when a lot of big Steem Power holders will innitiate the Power Down sequence. This will add to the Steem allready created every week. And that might put some presure on the price of Steem.
A massive powering down will make a difference
If you have a a few hundred thousand to millions of Steem Power a weekly Power Down can create a nice, extra, income. Even when an account starts a Power Down with 'only' 200.000 Steem Power, it will still be about a 1400 US Dollar income, montly, at the current Steem market price. And if you want to know what a Power Down could get you per 4 weeks just divide your Steem Power over 200K and multiply by 1400. Taking into accoun that the price per Steem is about 0.18 USD at time of writing.
At some point this Steem needs to be sold. Maybe for Bitcoin and then for fiat money. This means it will be offered on the market. And when you want to monetize your Steem could mean you are willing to go down in the price you want to accept. Some exchanges even offer tools to sell at the 'right' moment. So when a lot of Steem Power holding accounts decide to Power Down and it covers a huge amount of total Steem that will be put on the market, than the price will drop. Except when demand is bigger than the amount of Steem that gets put on the market. For whatever reason, as long as demand for Steem is higher than the amount available on the market, the price will rise, as Steem becomes scarse.
Power Up is still better, but no guarantee for the price of Steem
The demand for Steem depends on many things. Flooding the market, by Powering Down, with more Steem ,than is created by the blockchain per minute, might put a pressure on the price of Steem. But that is only a part of the proces. SteemIt as a Social Media platform needs attention to attract those who want to buy into Steem. Or to be able to sell advertisment space in Steem, that could rise the price of Steem also. And something that creates something fuzzy like 'trust', could create a higher demand for Steem. But also such things as practicle stuff, like a mobile wallet, that can be payed with in real stores.
Still, it is difficult to deny the effect of a massive weekly Power Down. That could flood the market with 1.7 million Steem per week. Then it would need a lot of demand on the market to counter that. So it is still important, from that point of view, to Power Up. And for accounts that are sub 10.000 Steem Power there is not much gain in Powering Down. Specially not when big Steem Power owners are flooding the market with Steem.
In conclusion this means for many accounts that are below 10.000 Steem Power it is still best to Power Up. And when posting to make the 'Default' payout choice. Still we need to see how the complete picture will lead to a more or less stable price after a while. Somewhere end of october, first weeks of november 2016, this could get more evident. But remember, this is as much my gues as it could be yours.
I hope this post was of any use to you. And if you want to respond, feel free to reply.
Sources that might be of interest:
- The Whitepaper: https://steem.io/SteemWhitePaper.pdf
- SteemWhales: http://steemwhales.com/?p=1&s=power
This is a 50-50 payout post