Steem Inflation: What It Is and How It Works
Steem is a blockchain-based social media platform that allows users to create, publish and reward content and communities with Smart Media Tokens (SMTs). Steem is also an inflationary cryptocurrency, which means that its total supply is not fixed, but increases over time.
How Steem Inflation Works
According to the Steem white paper, Steem started creating new tokens at a yearly inflation rate of 9.5% in December 2016. The inflation rate decreases at a rate of 0.01% every 250,000 blocks, or about 0.5% per year. The inflation rate will eventually reach 0.95% and remain there indefinitely.
The new tokens created by inflation are distributed as follows:
75% of inflation goes to the “Proof of Brain” social consensus algorithm, which rewards content creators and curators for their contributions to the platform.
15% of inflation goes to stakeholders, who hold Steem Power (SP) or vest their Steem tokens for at least 13 weeks. SP holders receive interest on their stake and influence the distribution of rewards on the platform.
10% of inflation goes to block producers, who are elected by SP holders to validate transactions and secure the network.
The following chart shows the distribution of inflation over time:
Source: https://steemit.com/steemit/@timcliff/steem-inflation-chart-updated-with-new-rates
Why Steem Inflation Matters
Steem inflation has several benefits for the platform and its users:
It creates a dynamic and sustainable economy that incentivizes participation and growth.
It rewards users for creating and curating valuable content and communities, which enhances the quality and diversity of the platform.
It encourages users to hold SP or vest their Steem tokens, which increases their stake and influence on the platform.
It compensates block producers for their work and ensures the security and reliability of the network.
Steem inflation also has some challenges and trade-offs:
It dilutes the value of existing tokens over time, which may discourage some investors and speculators.
It creates a complex and variable reward system that may confuse some users and affect their behavior.
It requires constant adjustment and fine-tuning to balance the supply and demand of tokens and maintain a healthy economy.
Conclusion
Steem inflation is a key feature of the platform that aims to create a vibrant and rewarding social media experience for users. By understanding how it works and why it matters, you can make better decisions on how to use and benefit from Steem.
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