Below picture shows the growth of market cap of Steem (the base currency of steem blockchain) over the last one year period. A fantastic 10 times growth.

Steem is inflation based currency with 10% for first year, 9.5% for second year, 9% for third year and so on. And Steem is designed to support development of social media on blockchain - its user base also has increased now to 1 mn.

Below is my explaination for this dramatic growth of steem and what lies ahead.

What is Inflation

Inflation is defined as a sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change.

Read more: Inflation: What Is Inflation?

Actually what really happens is more fiat currency is printed so that the value of goods against currency increases causing a decrease of purchasing power of the currency.

It is done to motivate the currency holders/savers to exchange their currency for some other product or to engage in some economic activity so that they can grow their purchasing power over time. Anybody who simply holds their worth in fiat currency will over time lose most of their purchasing power/wealth.

Therefore, inflation actually a tool that helps force motivate the people to engage in doing some economic activity. Now depending upon the quality/type of economic activity a person undertakes will dictate whether his/her purchasing power will increase more or less in comparison to its fellow competitors. It is this choice of economic activity that a person, tribe, society, or country undertakes will make them wealthy or poor over time.

So in nutshell - inflation is a tool to redistribute the wealth/resources.

What is Network Effect

It is simple that more people join the network - more valuable it becomes.

Above picture shows how steemit (only one website out of many that offers services of steemblockchain) rank on alexa, which is a measure of how network strength, has grown over a year period for steem blockchain. A remarkable achievement.

Another direct measure is from @arcange report about users growth on steem blockchain, as shown below, is approaching now 1 mn.

Conclusion

Steem is a perfect blockchain that combines the powers of inflation and network effect to grow the economic value of itself and of those who have their stake in it by means of holding steems. Obviously the value of those steem holders, who take part in some activity that helps the steem blockchain e.g. witnesses, authors, and curators, will increase much more than those who simply hold the steem.

Having said that it is also important that large steem holders should stay away from taking rewards through authoring and curation so that more and more people join in to compete for those rewards and thereby generating necessary network effect. Because of that network effect the value of steem will go up which will reward large steem holders indirectly but handsomely.

Your comments will be much appreciated.