The STEEM economy has a deficit problem whereas the value of STEEM gets siphoned away due to the excessive inflation. It is a problem that keeps the STEEM price going down, unless there is excessive demand for STEEM, which doesn't appear to come, if this reward mechanism is in place.

It looks like this:

This is the fundamental problem, when a whale or any SP holder votes, he only gets back 25% of his power, and spends at least 37.5% of it.

So it worst case scenario this is a deficit of -12.5%, at every single vote. Now of course if people choose "100% SP payment", then this effect is delayed, and of course SBD is also delaying it a little bit if the currency will get widely accepted.

However the ratio is still bad for SP holders, since I doubt they even get the 25%, because there is the 20 minute vote limit, and of course I think there is an order weight, but I am not sure about this, whereas those that vote first get more Curation reward than those that vote later, so it's a time-order-weight on voting. But I am not sure about this.

So bottom line: Voter gets maximum 25%, where author gets minimum 37.5%, so the deficit is there

Side Effects

• It makes the STEEM price go down, as you can see: https://poloniex.com/exchange#btc_steem.
• It makes Whales, less likely to vote, because if they do vote they lose -12.5% instantly, but if they don't they still lose because they don't get the Curation reward that would protect them against inflation.
• It is a direct wealth redistribution mechanism from SP holders to Authors.
• It incentivizes curators to become authors, and it spoils this passive income mechanism.

Solution

My solution to this problem is to simply change the ratio to 49-51%. So Curators get 49%, and authors get 51%. This way inflation will be reduced significantly, since it won't incentivize authors to spam or write endlessly. It actually levels the playing field, so both curators and authors start with the similar chances.

• So instead of 25% Curator and 75% Author, we will have 49% Curator and 51% Author, where the 51% is either full SP, or it's split 25.5% SBD and 25.5% STEEM, like now.

It also incentivizes people to Power Up, and buy more STEEM, since now Curation will cover 99% of the deficit, and curators would still need to write a few articles from time to time to keep up with inflation.

Authors will also be incentivized to get paid in 100% STEEM if they want to stay ahead of the curve, so the deficit on both sides will be lowered. Furthermore, this should also make the STEEM price go up, since the demand for STEEM will be much higher if the inflation is eliminated.

There will be only 1% decay from Curation, which will incentivize Curators to write a few articles from time to time, but it will be much more fair, than a 12.5% deficit. So authors will still have the upper hand, but they wont cause that much inflation anymore.

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