I haven't seen such a post in a good while. Believe it or not, there are people on Hive who don't know they can earn rewards by curating content, for example.
Let's try to unveil some of the secrets.
A predetermined amount of HIVE is created every day (every block if we want to be precise) based on rules that are embedded at the core of the blockchain (and can only be changed through a hard fork).
@dalz even made a projection of how the HIVE inflation will evolve yearly for the next 100 years, if nothing changes. Here's his chart:
Note the sharp decline in the projected inflation till around 2036, and the slow increase thereafter in raw numbers.
Also note, from this year forward is projected inflation, not realized one. When reality meets projection, something like the negative inflation (deflation) we had in 2022 can happen or much higher than projected inflation we had in 2020 and 2021.
The way to adjust inflation is through conversions (HIVE -> HBD burns HIVE and creates HBD, HBD -> HIVE burns HBD and creates HIVE) or direct burning of HIVE (sending HIVE to @null or setting @null as a beneficiary of author rewards).
The inflation @dalz projected up there is the one based on HIVE. There is an additional inflationary component introduced by the HBD interest payments that isn't counted. Its effects can be observed and tracked in time, but projections can't be made because the amounts of HBD moving in or out of savings cannot be projected.
Warning signs can be observed by tracking the debt ratio. If it lowers, it's great! If it moves toward 30% (the haircut level), we should get ready for author rewards in HBD to slowly drift to HIVE and finally stop completely until the debt ratio returns below 30%. All rewards in HBD would stop at 30% debt ratio, including interest on HBD in savings. I'm not sure how DHF payments are handled in this situation. Normally, they are paid in HBD, the likely scenario is they would get paid in HIVE after that. Right now, at 8.9%, while it increased a bit due to the drop in the price of HIVE compared to HBD, it is under control.
How Is Hive Inflation Distributed?
Here's the breakdown:
- Reward Pool: 65%
- Staking rewards: 15%
- DHF: 10%
- Witnesses: 10%
Staking Rewards
I bet you didn't know about this one, did you? 😀 Well, if you've been on Hive for a long time, you probably know about it.
These rewards are self-explanatory. Own a HIVE stake (i.e. HIVE Power) and receive these rewards. They are currently offering around 3.18% APR (without doing anything else, like curating), but they are fluctuating.
In the past, there was a little app that one could use to watch how staking rewards accumulate (usually on a big account).
I don't think that app is around, but you can go to an account like... blocktrades, on the wallet page. Look at his HIVE Power. Now close your mouth. Wait for a few seconds. Hit refresh. Look again! Magic, huh? You can repeat a couple of times just for fun. Note that there is no transaction dropping these staking rewards every 3 seconds (or less often if they are too low). They just "show up" and accumulate in your HP.
It's easier to observe that within a couple of minutes on a huge account, but the same happens for any account holding HIVE Power.
DHF (Decentralized Hive Fund)
The DHF is quite... wealthy. The 10% it receives through inflation is not its only source of revenue. It was also funded with the former "ninja mine" from st**mit, which I think was around 80m HIVE that is now slowly being converted to HBD in the DHF. Beneficiary rewards to DHF are also a common occurrence.
The DHF is used to fund various Hive-related projects, usually development, infrastructure, or marketing. so far.
Have you ever checked the DHF proposals? There are different interfaces from where to see them, here's one of them.
Witness Rewards
It makes sense to incentivize people who secure the Hive blockchain and maintain the core and public infrastructure that allows the ecosystem to work. Many witnesses are also developers and have certain projects they work on for Hive. Others (fewer) are business owners on Hive, or community developers.
They receive witness rewards when they produce new blocks. Consensus witnesses (Top 20) produce more blocks than the rest of witnesses because they are part of every rotation, therefore they'll receive more rewards. Top 21 and below are called backup witnesses and they are being added as the 21st witness in every rotation, based on how high on the ranking they are. If they are higher, they will be in rotation more often than the witnesses at the bottom of the hierarchy.
Together with the DHF, they form the governance on Hive. Your owned HIVE Power allows you to influence governance decisions, on DHF proposals as we discussed above, and on witness ranking.
Reward Pool
Most users would be interested in the reward pool. It is the highest, percentage-wise, but also there is the most competition for those 65% because most users on Hive are interested in these rewards, provided they know about them.
There is a strong possibility that enough users don't know about them, especially if they came to Hive as gamers, not as content creators.
In the paragraph above I already used a common misconception: that you need to be a content creator to have a share of the reward pool.
That's false! There are large stakeholders, some of them coming much later and buying their stake, and who don't create content or rarely do. But they curate (meaning to vote on posts and comments).
That 65% of inflation that goes to the reward pool every day is split 50/50% between authors and curators. The author rewards themselves can be distributed in various ways depending on the options of the author.
It can be paid out fully as HP, split equally between HBD and HP, or with additional beneficiaries who receive a set portion of the author rewards. Two promoted beneficiaries of rewards are @hive.fund (DHF) or @null (author rewards are burned). Note that setting beneficiary to @null is different than declining rewards, which is another option authors have. Sending beneficiary rewards to @null only burns author rewards, but curators earn their share of rewards. Decline rewards means that any amount of rewards associated with a post, both for author and curators, are sent back to the reward pool at payout.
You may note that top earners on Hive earn much more from curation than from author rewards, and none of the top rewarded authors are in this top. That makes sense to some degree, because having top authors earning much more from inflation than currently means less for smaller authors, which will get demotivated. I don't think Hive can attract large influencers with author rewards, but there are ways to boost their gains, and, when they'll be created and improved on Hive, these content creators along with their communities may look at our ecosystem with different eyes.
For small-to-medium or first-time content creators, Hive can be incredible, if they have the patience to stick around until they start seeing some more consistent rewards.
But once again, do not disregard curation! Learn to use it right, don't waste your votes where chances are you won't receive any rewards (nor will the author you vote for), and ask where you don't understand.
And here are some useful remarks we seem to be making every time there is a slowdown of content creation on Hive.
The reward pool is more or less equal in size every day, on the short term. If, all of a sudden or gradually, the content creation drops in half (I gave a random ratio, but the drop in new content is visible lately on Hive), that means the remaining posts share a higher slice of the pool because the entire pool is distributed every time, with the exception of certain rewards being burned or declined.
It also means the curators must be looking for something to vote on to consume their voting power. Since there is less content, it's more likely they will find your posts, if you stay active.
If this period is also accompanied by a drop in the number of curators (although that is rarely the case, even if many votes are automated), the remaining curators decide how the reward pool is distributed.
Before I wrap up this section, I want to add a little interesting information regarding the distribution of author rewards between HBD and HP, with a 50/50% option selected. It's interesting that this is not truly 50/50%, as @demotruk remarked.
Looks like authors earn more HBD and less HP when HBD is over the peg and less HBD and more HP when HBD is below the peg. HBD is usually below the peg, even by a small fraction. Since curators rewards are paid entirely in HP, that means most of the times they receive a little above 50%. If author rewards are paid 100% in HP, then the 50/50% split between author and curators rewards holds at all times (at least I think so), but the author loses the flexibility of liquid rewards.
Posted Using InLeo Alpha
Thanks for bringing up the importance of curation rewards... Unfortunately, you are right that many Hivians have no idea that they can earn rewards by upvoting with their HivePower... IMO, manual curation, with personal HivePower is key for longevity and HIVE's survival... Without that, HIVE will become more and more centralized, and nobody wants to see a centralized social network...
if only we could figure out a good way to reward proven manual votes more than effortless autovotes/trails/bots.
The first step was to ban bots from Spliterlands... the next step was to ban them from HIVE... 😂
Unfortunately, I think that we don't have a consensus about this among those with the biggest stake... But, who knows... maybe one day...
it's just hard if not impossible to prove manual from auto/bots and potential AI tools in the near future
Absolutely! I don't get this. Manual curation is generally less time consuming than writing a decent post, and after a while (a certain HP), curation rewards become more relevant than author rewards anyway. So, it's just a matter of looking in perspective. Both for the benefit of Hive and yourself. Of course, that doesn't mean to not write any content anymore. If everyone would do that, there wouldn't be anything (worthy) to curate.
I get the point of a small upvote when you are a newbie, but I suppose we (older Hivians) have to show by example how important is to upvote and support fellow authors... It's not about the monetary value... It is about respect and appreciation, + the benefits of showing that... That's the way how to earn respect!
I know it's difficult at first, when next to a newcomer's vote there's no value (or it says zero) and older Hivers have at least some cents to spread around even with a split vote. But I've seen people who understand how this works and do what it takes, and people who will give up no matter how much you encourage them. Showing respect among fellow community members is important. As is helping new arrivals, especially if they ask (not everyone wants help). But without getting involved and taking small steps yourself, the community can't make them for you.
Agree... You can bring a horse to the water, but not make him drink... In conclusion, we have to do posts like this one that you did, for those who will listen... 😃
Is this the little app you were talking about? https://hive.codergeek.org/
Nice! Thanks for sharing it!
It's not rocket science, I mean most of what we think are difficult actually aren't. I didn't know about the 3% until I started reading up. I started noticing those little changes and I couldn't believe how it adds up. I read a post where a person mentioned that the 3% meant they earn about 3000 hive per year. It might look insignificant but it's astonishing.
That's half a dolphin per year only from staking rewards. Not bad, whoever that was!
https://hive.codergeek.org/ this is your 3% in action.
Thanks for this informative post, I learned a lot.
I didn't know there is a set amount of HIVE given out each day, I thought it's based on how many people vote (so if less people voted and let idle on 100% or something, it would create less).
If fewer people vote, the ones that curate decide where the reward pool goes.
Hi, @gadrian thanks for taking the time to come up with this. We need more of such posts circulating around as most Hiveans are not informed. Hive is so broad that it cannot be fit in a box and there is no detailed manual that guides new users. Most new users do what they feel is right or sometimes rely solely on the MO of their onboarders.
I agree. I was surprised not to find things I was researching about for posts like this one, especially anything recent. I know the inner workings of Hive is not everybody's cup of tea, but occasionally even the less informed want to know something and would like to find a reliable source of less common knowledge (especially among newcomers).
It's just a reminder on how things are done on Hive. It does make me wonder just how things will go in the future and we still don't know the entire effect of the HBD interest. I think that the debt ratio should solve it as it guarantees that there is enough Hive out there.
Yes, the haircut is a good failsafe, but I wonder how some people who never went through haircut periods before would take it, especially for interest on HBD in savings (which didn't exist before).
I was minding my business powering up but now that I've read this blog I'm going on beat mode with my HP hehehe, you're so right about this brother. Well detailed explanation man
A beat mode seems exactly what you need. 😄 Go for that HP!
Hehehehe, I'm going all out for it brother... let's gooooooooo
What is your overall view of Hive tokenomics? Can you gauge any long term trends from this?
I don't think one can offer a satisfactory answer that accounts for all variables. It would help to grow the userbase (owner base?) significantly with different types of people (users - managing their own assets and activities, contributors, developers, business builders, investors).
Well explained there. Numerous ways to make Hive work for you. Price is a little deflated at present. And hbd below the peg. It should improve soon.
If one believes the price of HIVE would go much higher this cycle, this is a great combination: the HP earned now will be worth much more later. Plus, HBD below peg means more HP than HBD to author rewards...
These kind of articles are the ones that should be on the front page of news section if we have one 😀. IMHO people are just lazy to read (whitepapers etc.) they look for numbers because it is easy to read. If you have time to write an article, upload pictures or whatnot you have time to read. Let me leave this one here "Intellectual Laziness". More power to you @gadrian!
Thanks! Yes, with so many options at their hands, reading is no longer something people prefer doing. That's a pity, because one can still find useful things by reading... instead of watching shorts.
Totally agree the attention span now is at 5 second shorts 😃.
You’re revealing a secret that Hive has a bright future
Let me keep stacking😁
It might have a bright future. We have to contribute to that.
I know all of those as I like to dig 😁
That great! I sometimes try to write with the newer people in mind. I don't always succeed, but hopefully they can get something useful out of it. Maybe even long-term Hivers can find a few... less known things.
Thanks for the great article, im trying to understand more hive really works
I hope this helps a bit then! 😉
This is a good read for people new to Hive. For those that don't have time or don't want to manually create, they can also follow curation trail so they don't waste their voting mana.
Sure, curation trails work, I follow a few myself and they are active if my voting mana nears 100%. Their drawback is the centralization of voting power (almost as bad as delegating HP to curation projects, from this point of view).
Very good article about where the inflation is directed on Hive.
Hmm
Hive has a long term plan
It’s looking like my mind is becoming at rest since Hive is a great platform that will last longer