Inflation is a cost to the economic system. It dilutes the value of each token by issuing new tokens, and uses the tokens to redistribute funds. The cost comes from the market reaction to the supply increase.
Keep in mind that right now, in a year there will be 8% more Steem than current. That's a lot higher when compared to existing stable currency growth, and with the reasoning that there will be enough growth in the economy to support it.
By what metric are we going to be measuring this growth? In my view, and I believe in many economic analyses, it is about value transfer. The primary form in which this exists is that users create content, and others redirect rewards upon consuming it. But this is only meaningful if
- Rewards are a direct consequence of a real interaction.
- Reward values are consistent with the perceived value of interaction.
The voting system is meant to evaluate this, but it makes the interesting choice of trusting those with stake to do it. Of course this makes it highly dependent on the virtues of those with stake. Predictably, people have gone the route of being ignorant to this principle, shouting claims of "code is law" or "my stake, my money (or beating stick)". (Or with full understanding and greed).
But not everyone has, and I believe this is why we are all still here.
Measuring value transfer and allocating rewards appropriately makes the most sense for an attempt to set up a real alternative economic system. It's clear that incentives do not align with this goal. And this is why I am a fan of the proposal for true 1A1V (1 account, 1 vote) with an oracle to protect against abuse, as mentioned here.
The exciting part here is that oracles open up the possibility of changing stake based allocation to many systems imaginable, and we no longer have to trust stake-- it will be baked in by the individual SMT, and incentives can be made to align more closely with the true goal of measuring value.
But you know what, wouldn't it be nice if we could trust stake to do its job? People have been so focused on the money that they are blind to the larger picture of having a thriving economy. When people say not using VP as "throwing money away" because of the belief that the portion of the reward pool corresponding to the stake is earmarked for them, that goes against this vision, the long term prospects of the platform. Self voting, as much as people like to defend "just let me do what I damn please", is counter to this principle as well. And all sorts of questionable allocations of stake. I believe SMTs will make things better because of the ability to align incentives, but it really is a disappointment to see that our budding community cannot figure this out**.
**I should give our community credit where it is due though. Despite the current system being so raw, and not having any infrastructure, just look at what has organically popped up. Communities, curation groups.. games... dapps. It really makes me excited about the platform's future. Yes, despite having broken incentives, we have true value growing beneath the surface rubbish.
I've left something out in this discussion though up until now. Let's talk about investors, which are serving to bootstrap this budding economy. They should be incentivized to do so, but how much? I also believe that they should be, but only an appropriate amount that can be supported by the rest of the platform. You know, exactly how stock valuations and dividends work in the wild. You'll note that this is exactly why part of the inflation is earmarked for this purpose. Yes, it might not be enough, but that's what you get as a baseline. You get a bonus in being able to influence the direction of the platform, and what do you do with it? You act against the direction of economic growth. Thanks for nothing. (This isn't directed at anyone in particular, just general sentiment).
- EDIT: See comments for why this is really not a dividend at all, and rather a partial compensation from diluted stake. And see comments for why dividends are anyway not expected for new projects. Thanks for the discussion all!
You want investors to be rewarded more by default? Then take away from the reward pool and allocate more to the vesting pool. That might help. But don't do it now, because the rest of the system is broken as stake based value assignment is failing us (but not entirely, thankfully). And maybe do it in accordance with what @therealwolf suggests here, when 1a1v is in place.
This is all coming from the recent discussions I've had with @meno and @tcpolymath as well as wider sentiment, so I'll be curious to hear what they have to say. And of course anyone else is welcome to chime in. Cheers.
(Also missing from the discussion: value transfer coming from exchange of goods and services. But that will come with the adoption. And already exists in some form here.)
Edit: removed earlier self voting comment as not productive.