The past several months have brought us a great learning experience in Steem.
It is time for the community to take a hard look at its technology’s underlying economic structure to see if we can improve things to make the community more attractive so that it can fulfill its mission of becoming the largest and most empowering network possible.
Many people have expressed concerns about the inflation rate of STEEM. Steem was designed to encourage people to hold long-term by penalizing those who would hold for shorter periods of time. The vast majority of the inflation in Steem is purely an accounting artifact of the Steem Power, but this accounting artifact has real world psychological impact of continuously falling prices.
There is one class of user which the Steem protocol ruthlessly punishes and that is the short-term speculator. Anyone with a shorter investment horizon than 2-years is unable to participate in the Steem Platform which is discouraging people from bringing capital and increasing liquidity.
The long-term divesting schedule of Steem Power means the network is less efficient when it comes to price discovery.
We would like feedback on upgrading the network to support a new token production model that we believe is more attractive to more people.
Summary of Proposed Changes
This would include the following:
Set a fixed instantaneous annual creation rate of 9.5% from all sources (except Steem Dollars conversion)
- Allocate 75% of the created Steem to the Reward Fund.
- Allocate 15% of the created Steem to the Vesting Fund as interest on Steem Power.
- Allocate 10% of the created Steem to the Witnesses.
Witness rewards would be rebalanced such that the top 19 would earn 1/29th of the witness rewards, the runner up witnesses -would share 5/29th, and the miners would share 5/29th.
Witnesses and miners would be paid in STEEM rather than Steem Power. All votes for witnesses would expire after 3 months, this would remove the incumbent advantage and require people to continuously evaluate and vote for witnesses.
To support more equal opportunity mining the mining algorithm would be updated to use Equihash (similar to zcash).
Reducing the Steem Power holding period to a minimum of three months.
Lastly, under the new inflation rate there is no longer a need to perform a reverse split every 3 years. This would greatly simplify the life of exchanges.
Pro & Cons
All changes to the protocol impact how individuals perceive the value of Steem. Under the proposed changes Steem Power holders may gain significant liquidity and reduce their long-term risk exposure, both of these things could add value to Steem Power. The STEEM token may become much more appealing to hold when the inflation rate is imperceptible impact on the daily volatility. Those who wish to exit the platform would be able to leave faster through powering down than they could by abusing their voting power. Greater liquidity means faster price discovery and greater market confidence in the price and market cap. Steem can now transfer from weak hands to strong hands.
In the short term these changes could cause the market to reprice Steem based upon the relative value of the short term increase in supply relative to the benefits of reduced inflation.
Author/curation rewards in terms of STEEM would be reduced by this change in the short term, but would be much higher in the long term. Witness pay would be reduced in the short-term, but would be the same as the long-term plan. More witnesses would be able to be involved even if they are not in the top 19, this could increase diversity and competition in the witness pool.
Currently Steem Power holders are earning a slight negative inflation adjusted return on investment. Under the new model the market could discover a new equilibrium between holding VESTS vs STEEM which may result in Steem Power having a positive inflation adjusted return on investment.
Please provide your feedback below and reply with your support for or against these changes.
This would serve as a poll of steem holders and give us an idea of where the community stands.
- Ned & Dan