RE: Inflation as a Platform Cost. Another Look at Stake
So getting back at this from an economic perspective.
I've left something out in this discussion though up until now. Let's talk about investors, which are serving to bootstrap this budding economy. They should be incentivized to do so, but how much? I also believe that they should be, but only an appropriate amount that can be supported by the rest of the platform. You know, exactly how stock valuations and dividends work in the wild.
You're working from a stable zero when what we actually have is a zero that's constantly moving backwards. Yes, there's a small amount of "interest" paid for staking, in the form of the increasing Steem/MVests rate, but it's not net interest, in fact it's net-negative. You're saying to people "buy into a currency with 8% annual inflation, and we'll give you 1% interest as a reward." Essentially this is buying an inflation-adjusted bond at a rate of -7%, which obviously nobody in the world is ever going to do.
Distributing the interest equally by stake essentially keeps everyone even vs. the continually-flowing current of the inflation rate, and it's the only way to do that. There isn't any extra money to pay out dividends or net-positive interest.
Bot owners really like to talk about "profit" from delegation to them, but that's dishonest; it isn't profit, it's loss. (Or would be absent @steemit not voting.) Delegators are losing more in the fundamental value of their currency than they are getting back by getting more coins.
For all its weird reputation, Steem is not actually a good place for passive investors at the moment and it probably never will be. When they passively invest they're creating small bits of value for active users, as our effective share of the inflation gets larger. Everyone who is delegating to a bot is making a -ev decision, and that ev accrues primarily to the middlemen and those of us who buy votes.
The -7% inflation adjusted bond is hard to think about as I'm flipping through web searches about things like TIPS (which I don't think matches this). Although maybe it's more like a non-inflation adjusted bond of a foreign currency that has high inflation but lower yield. So in this case, a bond for a currency that inflates by 8% but is paying out 1%. Ok nevermind, that's fine. But maybe this isn't a useful way to look at it....
If we want to make a comparison back to stocks, this is as if a company is continuously diluting their shares by issuing more and giving it to various parties. Generally this isn't seen favorably but if there's growth in the company it could be justified.
A passive investor would need to balance the continuous dilution of their shares with growth potential of the shares.
Under the latter framing, as I'm thinking about this out loud, an investor has the opportunity to get back quite a lot of the diverted stock by exercising stake powers and say self voting, but they cannot recoup all of them since 10% of the funds raised by dilution goes to witnesses.
I guess then, this is a long winded way of saying that you are right about it being a loss, and I really can't think of this as dividends at all. It's more like a partial dilution offset.
Okay... But now I see what you are saying when you say that self voting is fundamentally neutral (slightly negative, even) so this was very useful.
However, what's remaining is exactly the market valuation of this system. It's neutral from the perspective of stake / dilution %, but without signs of growth, we might all just be maintaining our % of nothing in particular. So... I guess my question is: Is neutral actually neutral?
Well, it's only sort of true in that sense, and maybe my original comment was misleading, because the inflation rate, the Steem/MVest rate, and the vote value all have different denominators. The inflation rate is based on total Steem supply, the Steem/MVest rate is based on total stake, and the vote value is based on total rshares used in rewards calculations.
@preparedwombat had a very good post about how the Steem/MVest system works yesterday.
For the voting sense, this means that a self-vote is worth considerably more than inflation because every Steem that's liquid, every account sitting at 100%, every vote on a declined-rewards post, and every downvote inflates the relative value of a vote against the inflation rate, whereas only the witness rewards and the "interest" deflate it.
Ah yes, the devil is in the details. I roughly know how that works, and it definitely is an important distinction. Earlier I was going down the rabbit hole about how that claimed rshares worked and even that's a little... Odd let's say.