This is the first post in a series about the Steem reward system. Please read my disclaimer. Scroll down to the "Conclusion" section of this post for a TLDR version.
The goals of this series are to:
- Describe the nuts and bolts of how the reward algorithm works
- Describe some of the big economic ideas of how the reward system provides a reasonable incentive structure
- Make a few concrete suggestions for future hardforks to tweak the algorithms when improvements are possible
If you're interested in finding out exactly how a click on the "upvote" button, or the passage of time, translates into changes in pending payouts, follow this series!
As discussed in the whitepaper, content and curation rewards are 1 STEEM per block, or 3.875% per year, whichever is greater. The current implementation rolls both content and curation rewards into a single accumulator called total_reward_fund_steem(available with the cli_wallet command info, the get_dynamic_global_properties RPC, or at the steemd.com alternate UI).
So total_reward_fund_steem is the total reward available for all posts as of the current block. As of this writing (block 1872548 on 2016-05-29), total_reward_fund_steem is 3,748,054 STEEM. This is distributed according to a post's V-shares [1] (which are called rshares2in the code). There are currently about 176,134,568 septillion [2] V-shares in existence, so one septillion V-shares is worth approximately 0.0213 STEEM. As described in the "Allocation and Supply" section of the whitepaper, Steem are added to total_reward_fund_steem every block. When a post is paid, its V-shares and rewards are simultaneously removed from the pool, resulting in no net change of the current Steem per V-share.
Conclusion
Here are some points to take away from this post:
- Each upvote "prints" V-shares, causing the upvoted post to get an increased percentage of
total_reward_fund_steemand slightly decreasing all other posts' percentage. - The network "prints" a little bit of STEEM every block [3] and adds it to the reward without regard for the number of V-shares that have been issued, slightly increasing each post's payout every block.
- The
total_reward_fund_steemon July 4 will be worth well over $2 million at STEEM's current prices, meaning that if we only have 1000 actively posting users, it is entirely reasonble to expect each user will on average [4] get at least $2000 worth of STEEM.
[1] The reason I want to stop calling them rshares2 and start calling them V-shares will be revealed in a later post in this series.
[2] One septillion is 10^24 = 1,000,000,000,000,000,000,000,000.
[3] As discussed in the whitepaper, for every 1 STEEM printed to pay post rewards, 9 STEEM are printed to be divided among all holders of Steem Power, meaning that users who make a long-term commitment to the network by holding SP are protected to some extent from the inflationary effects of the "printing press".
[4] The payout per user will be unequal; there will be many users who get much less than $2000, or even nothing at all. This hypothetical situation is further based on the totally unrealistic assumption that the price of STEEM will remain the same over time. Remember my disclaimer.
Is it only my feeling that a 3.875% reward per year for content & curation could be a little bit higher (and reduce instead witness rewards?) I think content creators and curators are/will be the heart of this project and deserves a bigger % overall...No?
Content providers get 3.875%, curators get another 3.875%.
Thank you for posting. QUESTION: should steemit let us steemers advertise using steem? Be sure to tell everyone you know to come vote here at: https://steemit.com/steemit/@kingtylervvs/if-steemit-ever-does-decide-to-advertise-there-is-only-1-way-it-could-work-in-my-opinion-debate
This is a democratic community decision.
Upvote the #steemengine for in house steemit poster ads!
What's got me confused is what exactly is the effect of a downvote? I downvoted a post, and my downvote was the only vote (up or down) it had received. When the UI refreshed, I was still the only vote, but his payout had gone from 0 to ~50 cents. How can a downvote give the poster rewards? I checked it on steemd.com too to make sure I was the only vote, and I was.
I haven't bothered to read the code yet to figure out what exactly a downvote does.
Hmm, I don't get it myself, I have a post that peaked at $7609, it is now under $7000. However my over post that peaked at about $1400 has lost about $70 so how is that possible, that one loses over 10% and the other less than 5%?
It's quite depressing to see my top post just plummet, at this rate it will be 0 by the time the 4th comes.
The price is based on the voters steam power at the moment. If the person who voted for you votes for other people then their individual vote is woth a little less. The more a person votes, the less each vote is worth during that day. That's why the price will changes.
The real reason is in the post:
By the way, although I think this post is very good, in order to encourage new users and/or articles/blogs which are not about Steem/blockchain, I won't up-vote it (which will decrease other posts' percentage of total reward). Sorry.
So, your curator reward is lost.
No, from a strategic voter's point of view, I'll save up my voting power so can use it elsewhere, and hopefully will earn more reward.
Isn't the exchange rate a factor too? It has been declined quite a bit recently.
Yes it is.
Can I ask a potentially silly question? My Steam Power seems to be increasing gradually by itself. Why is this/by what mechanism is this happening?
New SP is constantly printed to you. For every STEEM and SBD created, 9 times more is created and given to SP holders, which should protect them from those who have liquid steem. Read more from the white paper or search the forum for SBD, SP, and STEEM, especially @dan's posts.
I want to read now Part 2:
Part 2: https://steemit.com/theoretical/@theoretical/the-steem-reward-system-part-2-v-shares-from-r-shares
I believe there were some changes in distribution algorithm. Is this article up to date?
Good post theoretical, I will start following you. Keep em coming.