I want to clear up a common misunderstanding.
Some people believe that the interest gained on SP balances is compound interest. That leads to over-the-top claims, such as the one we see here:
https://steemit.com/steemit/@anonymint/it-s-so-easy-to-become-a-millionaire-with-steem
Starting with just a $400 initial investment and generating only a meager $2 (½ STEEM) in daily blogging rewards, the total value of your STEEM POWER could be worth more than $1 million within 5 years!
This is the power of compound interest, as exemplified by the following chart.
But that's simply FALSE.
The fact is, SP growth is NOT compound interest. The principal never changes, unless you add to it through participation in the site. I've said this in various comments, so I'm just going to copy a few of those to save time...
There is no such thing as Steem Power (SP) in the back end. When you power up, your STEEM is converted to VESTs. When you power down, your VESTs are converted back into STEEM. 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.
There is a big difference between what is happening to your Steem Power balance and what would happen to your credit card balance if you missed a few payments. There will not be exponential growth of the money supply and the attendant hyper-inflation that would bring. It's not going to happen!
