Reading the whitepaper (part I)

in #whitepaperlast year

My purpose is to figure out the economics mechanism of Steem. At first glance it doesn't look complex, however there are some details that make it harder to understand (at least for me). Probably some of you already know all of this stuff.

Below are each of the elements subject to analysis:

Allocation of new tokens

Of the new tokens that are generated, 75% go to fund the reward pool, which is split between authors and curators. Another 15% of the new tokens are awarded to holders of SP. The remaining 10% pays for the witnesses to power the blockchain.

This is clear to say that 75% of the new tokens created are splitted between authors and curators, 15% are for SP holders and the remaining 10% will go to Witnesses.

The question is: which tokens are created? STEEM or SBD? or Both? in which proportion are created?

It look likes that it depends on the market conditions:

A rapid change in the value of STEEM can dramatically change the debt-to-ownership ratio. The blockchain prevents the debt-to-ownership ratio from getting too high by reducing the amount of STEEM awarded through SBD conversions if the debt level were to exceed 10%. If the amount of SBD debt ever exceeds 10% of the total STEEM market cap, the blockchain will automatically reduce the amount of STEEM generated through conversions to a maximum of 10% of the market cap. This ensures that the blockchain will never have higher than a 10% debt-to-ownership ratio.

The percentage floors used to compute STEEM creation are based on the supply, including the STEEM value of all outstanding SBD and SP (as determined by the current rate / feed).

Destruction of tokens

It seems that steemit has some settings to allow STEEM destruction:

SBD operations:
The overall supply picture is complicated by the effect of SBD operations, which may result in large-scale creation or destruction of STEEM through feed rate following and SBD rewards, as discussed in the SBD section. Other, smaller-scale complicating effects also exist, including unclaimed incentives (e.g. block rewards for missed blocks), and abandoned accounts

Money destruction is a tool that Central Banks use to control the inflation by reducing monetary supply. This could be useful for SBD too.

That's all for today reading.

Feel free to share your comments! see you in the next post