#steem

Steem 2020 - Reducing Inflation To Less Than 2% APR

With the first half of 2019 nearly behind us, I'd say it's time for us to take a look into the near future for Steem.

Steem Engine - SCOT & Nitrous

Recently, the team behind steem-engine launched their newest projects:

SCOT, which enables anyone to create their own steem-engine based SMT (aka Steem clone). Technically it's not a clone, but on the outside, it works very similarly.
Nitrous - a service that allows everyone to create their own hosted community website, like Steemit - no real technical knowledge needed.

Which essentially means: even without the real SMTs around, it's now possible to create your own little Steem & Steemit network.

What about SMTs?

Real SMTs are still crucial, as they will have the same security benefits Steem has. (SCOT tokens are less secure than Steem, no DPoS yet)

Nevertheless, SCOT is important, as it gives everyone a glimpse into what Steem will/could look like very soon: a platform (Steem) which is enabling many, many more platforms (SMTs) to exists.

What does this mean for Steem?

But what does this mean for Steem, when there are suddenly hundreds of tokens that are doing exactly the same thing Steem is doing (maybe better)? Besides bringing value to the underlying infrastructure (Steem), they are also making a few things redundant.

Is the currency distribution of Steem still required or even desirable, if an SMT could do the same thing, in addition to being much easier customizable? (curation-%, author-%, inflation, etc.)

Inflation / Currency Distribution | 👍 or 👎

One of the biggest turn-offs for people wanting to invest in Steem is the high inflation rate (currently ~8% APR, narrowing to 1% APR over the next 16 years), meaning the rate in which new tokens are being created/distributed.

For example: If there are 1000 tokens in existence and you own 100 of them, you essentially own 10%. However, if every year 1000 more tokens are added (via inflation), that is not being distributed to you percentage-wise, then in a year, you'd have lost 50% of your value.

Usually, this inflation is being redirected to stakeholders, those owning the tokens. In the case of Steem though, more than 50% of the inflation is going to people who not necessarily have a stake in Steem (authors) via voting. Stakeholders do get a small part of the inflation; 15%, but which is still not a lot.

However, it does shine a light on the problem of inflation. Would you rather have the majority of your stake in a currency like STEEM, which is losing a guaranteed amount of ~7.5% in 2020? Or, would you rather own BTC, which will have less than 2% inflation in 2020.

What if ...

So, what if we'd remove the inflation nearly completely?

We can't remove everything, as this blockchain is running via DPoS, which essentially means that witnesses are being paid to run the software to keep the blockchain secure. (and security is N°1 priority!)

I would also argue that stakeholders should have an incentive to keep Steem powered up (we could talk about removing the 13 weeks downtime, or making it more dynamic => higher downtime => more APR), meaning the interest for stakeholders is for our best interest as well.

But besides that, we could scrape away ~75% of the total inflation. Essentially, bringing the inflation rate down to under 2%. Which would be a phenomenal fundament for people to build their own tokens on.

But why?

Steem had the number one purpose after its launch of distributing the currency. And while this job wasn't done perfectly, the currency has been distributed pretty well. However, after nearly 4 years, we've reached a point where sub-tokens of Steem can be distributed as well, probably even better.

Will this mean that voting (& bid-bots) will be gone as we know it? Probably yes. But that's a good thing because it means that Steem is changing and improving.

In my opinion, Steem has to be a strong & solid fundament for people wanting to build their own tokens/communities/businesses on - and you need a some-what stable currency for that; one without much inflation.

Let me know your thoughts in the comments below.

Wolf

^{Do you believe that my work is valuable for Steem? Then please vote for me as witness.}

Comments · 27

@jrcornel(82)· 2572d
Not sure how I missed this post, but it looks like we are thinking along similar lines.

https://steemit.com/steem/@jrcornel/steem-what-if-we-turned-off-the-inflation

I think this is a really good idea and where we need to go if we want to make steem sustainable. It claims it wants to be a social media base layer where everything else is built upon it, well it's time to actually make it one then.

This idea would have my support and a lot of the people I talk to as well.

If we could get that inflation number to 1%, even better. ;)
@prameshtyagi(71)· 2574d
I don't know how i missed it. This is very good suggestion. No large pocket investor would invest in a project where returns are distributed to non-stakeholders.

Steem curse is its large inflation rate. That gives enough space to looters to loot from investors.

After holding for more than 2 years - investors have lost more than 80%. They have run out of patience now.
@nathanmars(75)· 2658d

Will this mean that voting (& bid-bots) will be gone as we know it? Probably yes

Can’t wait to eliminate them bit-bots to make STEEM great

Also In my opinion, Steem has to be a strong & solid fundament for people wanting to build their own tokens/communities/businesses on - and you need a some-what stable currency for that; one without much inflation
@mehta(77)· 2658d
@therealwolf Hello, I have seen that someone removed me from discord server of smartsteem. Can you help me to get the access to discord server? If i don't get the access then how i tell you about any unusual thing. Without informing me anyone has removed the server access of mine. I have seen then about some months ago you also blocked me for personal message. That i can understand. But this is not good. Waiting for your positive reply... or tell me other source for communication about smartmarket / smartsteem.
@steemitboard(66)· 2659d
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You made more than 16000 upvotes. Your next target is to reach 17000 upvotes.

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Vote for @Steemitboard as a witness to get one more award and increased upvotes!
@arcange(79)· 2660d
Congratulations @therealwolf! Your post was mentioned in the Steem Hit Parade in the following category:
- Comments - Ranked 7 with 55 comments
@tipu(68)· 2660d
🎁 Hi @therealwolf! You have received 0.1 STEEM tip from @davedickeyyall!
@davedickeyyall wrote lately about: Coffee N Chronic On #Themorningbowl Feel free to follow @davedickeyyall if you like it :)
Sending tips with @tipU - how to guide :)
@davedickeyyall(79)· 2660d
I didn't realize SCOT was temporary.. I gotta go check out what a "real SMT" is now.. !tip
@br0(54)· 2661d
Inflation of token mass is completely OK as long as steem userbase grows higher
@thecryptodrive(70)· 2661d
I think reducing inflation is merely a bandaid for a bigger problem, Steem should be growing fast enough and appreciating in value sufficiently to absorb the inflation, the problem is growth and market reach has stagnated. The DAO might be able to get development happening in the right places, hopefully and I would even say that inflation sources could provide a sustainable model for it so I wouldn’t be in favour of reducing inflation at this point, also I don’t believe SMT development has started and even if it has it will be a year or more before release and at which point I would recommend running SMT’s live for a further year before making any major economic changes. So the discussion of inflation reduction is perhaps 1-2 years too early.
@svamiva(61)· 2661d
Today the only way to print SBD is author rewards. I'm afraid that the idea get rid of rewards might imply get rid of SBD too.
@steem-plus(74)· 2661d
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@whatsup(76)· 2661d
This is why not having a vision is painful.

I like this idea as a consideration as it least it makes sense in the SMT vision world. As Steem would be an infrastructure token. Of course it would need to be implemented after SMTs were up and running and giving Devs and business owners a bit of time to add value.

However, why would we need to change curation rewards and add a flag pool if we went this route?

Why would serious business owners and devs come and build on a blockchain that can't even decide what it is, what we do and how to approach it?

By the way, at least this suggestion makes perfect sense based on where I think we are trying to get with SMTs. I think it may be too soon. However, I really like the reasoning behind it.

Steem - We love to play with our own stuff. It makes us feel like problem solvers.
@midlet(74)· 2661d
I think you might be overestimating how much people care about this as @taskmaster4450 was alluding to. I don't think the inflation of Steem is a big deterrent for investors and more importantly...USERS

Which brings me to my main point. I don't think we should be trying to tinker with the economics to attract investors. We should be looking at the applications built on Steem and working towards making them fully featured products that people want to use and CAN use without taking an online class first.

Steemit/Busy/Steempeak/Esteem/Steeve/etc are blogging platforms with a cryptocurrency reward system integrated. How can we make those the best at that, so that we can increase users and traffic --> Which will THEN be the metric which will get investors interested.

I don't think anyone on the outside of this system cares much about this at all. But I'm just speculating too so who knows. The lowest hanging fruit is, make these apps easy to use, fully featured things that are solving problems and creating value for regular people. That IMO is what will attract investors.
@organduo(73)· 2661d
How would this change affect author's and curator's rewards? If authors and curators would get more, then I see it as a good thing but if all of us would receive less, in my mind it's not good.

Posted using Partiko Android
@flaxz(75)· 2661d
Ok, maybe this is a good idea @therealwolf, but not until we have SMTs and SMT projects that have been able to mature and can take over from basic Steem, if we do this before we just start the whole thing over from scratch without even having anything to replace it with, that would be even worse than high inflation, much worse.
@taskmaster4450(86)· 2661d

One of the biggest turn-offs for people wanting to invest in Steem is the high inflation rate..

I think this is a presumption that is not valid and is far from being proven. The fact that Steem is not well known could have a lot more to do with the lack of investment than the inflation rate.

You are trying to draw conclusions about what markets do which is impossible. They are their own animal. And it is very dangerous for one to initiate fundamental changes in the ecosystem based upon market action.

Would you rather have the majority of your stake in a currency like STEEM, which is losing a guaranteed amount of ~7.5% in 2020? Or, would you rather own BTC, which will have less than 2% inflation in 2020.

Once again, you are saying the barometer people are using in buying these tokens is the inflation rate. It might be in a few instances but most buyers do not know what the inflation rate is. Do you think most Ethereum buyers realize the inflation rate there is potentially unlimited? Yet it is a top 5 token.

In you scenario, if one thought BTC was going to 100X and STEEM 500X, which do you think would be preferred? Do you think the inflation rate would even matter in that instance?
@vikisecrets(80)· 2661d
Most STEEM inflation does not come from author rewards, but from Steem Dollars being converted to STEEM in a bear market.
@marki99(62)· 2662d
The problem is not the inflation, and it will go down anyways. If you want a better steem price, then we should get people to invest.
@molometer(72)· 2662d

Usually, this inflation is being redirected to stakeholders, those owning the tokens.

This above means that in theory ones stake increases to counteract the loss of value over time. As I understand it?

In the case of Steem though, more than 50% of the inflation is going to people who not necessarily have a stake in Steem (authors) via voting.

Can this statement above be correct because in order to post (authors) on steemit etc.

A user must have some steem vested and resource credits? Unless I am missing something?

Stakeholders do get a small part of the inflation; 15%, but which is still not a lot.

Is 15% enough to counter the inflation?

You are right in respect that all the fiat based economic systems try to reduce inflation to single figures in order to maintain a currency's buying power. One way is by controlling interest rates or allowing mass unemployment. (See Phillips Curve)

It hasn't worked out that way for many reasons one of which was the printing of trillions of dollars/pounds (quantitative easing) and pumping said funds into one market in particular - housing.

This has destroyed the housing market and created huge inflation that isn't shown in the cpi index.

In 2017 the broken peg on SBD's was a wake up call.

Creating new tokens whilst a good idea if they have an MVP with a good use case isn't going to help if there value is tied to the steem price unless the new tokens mirror the inflation rate of steem.

Steem is inherently unstable. SBD's were supposed to be the stable token?

Interesting post. It is a good debate to have before the June hardfork where who knows what is going to change.

On that point. The current (old chestnut) curation rewards debate is ongoing with some people calling for 50/50 or 60/40 split between authors and curators.

Basically the same split as with other centralised content platforms except on those platforms the author gets ad revenue and affiliate sales options. Which authors don't get on the steem Dapps.

If we reduce author rewards we will lose authors. The good authors that is.

As a vested author myself I can't help but think this whole curation chat is just another distraction.

Want to know a good authors think?

No man but a blockhead ever wrote except for money. Samuel Johnson (1709 - 1748)

source

Timewise based on past history It will be well over a year before this could be incorporated.

If agreed upon first of course?
@exyle(80)· 2662d
My first instinct is telling me we should keep the inflation for the reasons of RC distribution.

The SCOT or SMT token won't be doing what STEEM is doing. STEEM dictates how much Rc's you can use on the network and neither SMT or SCOT tokens can provide that.

I think it's wise to keep that distribution going even though people might not know they are earning a little bit of STEEM on top of their SMT or SCOT token.

RC pools can help new users operate on Steem without having RC's but I think through earning STEEM in the background on top of their SMT or SCOT token they will we able to become independent of these pools and that is very beneficial for the user as well as the pool.

Example:

Let's say you are a new user and get 1000RC's from the pool and start posting and doing your thing. Once you reached a 1000RC's on your own account you are cut off from the pool and on your own. Now the pool can use the RC's to help someone else.

I'll think about it more but this is my first thought. I have to go to a party now. I'll check later tonight.
@maxdevalue(69)· 2662d
Problem identified and discussed is half solved!

There’s solution for everything under the sun, especially those made by humans.

Steem is promising, let’s direct it the best path. Thanks @therealwolf for those ideas that could help Steem Ecosystem.

Posted using Partiko iOS
@deanliu(83)· 2662d
If I understand your point correctly, okay, it sounds really convincing and refreshing.... But in reality, the communities that have been built on Steem so far might suffer the risk of discontinuity, which would be a risky move for Steem since one of our strength is community.

Or I misunderstood?

Posted using Partiko Android
@joshman(74)· 2662d
I'm still trying to get my head around what benefit having tokens on STEEM provides, especially the current iteration of 'SMT workaround' tokens. So far I have no interest in what these tokens represent, and I certainly wouldn't trade my STEEM for them. If I could earn them organically and trade them for STEEM I would though. But that also means someone is giving me STEEM for this token. I can't relate to that at all if my goal is to retain and power up STEEM. Perhaps later I'll have an a-ha moment if I find a DApp I can't live without. But so far I'm not seeing it.
@amico(67)· 2662d
I find it absolutely interesting to see these important changes in the functioning of the Steem ecosystem: I find that it greatly expands one's awareness in life and in the real world... isn't it?

A huge hug @amico
@accelerator(68)· 2662d

In the case of Steem though, more than 50% of the inflation is going to people who not necessarily have a stake in Steem (authors) via voting. Stakeholders do get a small part of the inflation; 15%, but which is still not a lot.

Sorry, but everyone has to have staked STEEM in order to be rewarded: authors, commenters, upvoters (curators) and even passive investors. Nobody can be rewarded in those four categories without having a stake. The active stakeholders, known as vested, are in the first three categories; the "interest" goes to everyone, be they vested stakes or not.

Funnily, witnesses do not have to be vested but they are paid in SP which automatically is vested.

However, you are right in the overall analysis that inflation is very high. However, because so much STEEM is not vested the real interest rate on an upvote is some 21% APR - a lot more than the approx 8.5% coin-creation rate.

Lowering the coin-creation rate will not change the differentially higher upvote interest-rate unless there is also a substantial increase in activity. And that activity must be rshares-generating activity, not just transfers and JSON activity.

That is the problem I see. That all these new tokens may (possibly) increase demand for the underlying STEEM but the admins of such tokens need to think hard about how to use the Steem blockchain to give value to those tokens especially if the activity on their websites or dapps do not register as rshares-generating activity.

The solution: dapp owners need to think hard how to give their tokens STEEM value.

{edited for clarity!}
@cflclosers(72)· 2662d
I think this is an amazing idea. I'm not really technical and don't have a full understanding of how these things work but I do trust your knowledge as I have followed and read your posts for years. I think what you are saying and the conviction you say it with make a lot of sense.