Cutting The Rate Of HIVE Inflation Ahead Schedule Would Be Harmful
I've seen people express the opinion that the base layer inflation should be cut down from the current roughly 8 percent to about 5 percent, which is what the average rate of inflation of most other coins is said to be (by someone who supported that idea). I think it is a very bad idea to lower it so that it would get there any faster than it will according to the current issuance schedule in effect since the early days.
I'm against that idea for the following reasons:
A) Token price is not a relevant measure of a project in terms of success at getting funding
Market cap is, which is the product of the total supply and token price. Stop fixating on the token price.
B) Hive has a Delegated-Proof-of-Stake consensus model which is particularly prone to centralization and corruption
Why? Because of the high witness rewards and their ability to be staked instead of having to be sold to cover operating costs. 10% of the total inflation pool is reserved for witness rewards out of which 20 consensus witnesses get about 95% (1/21 blocks is confirmed by a non-consensus witness). That's twenty individuals out of thousands. And now there's the DAO that gets 10% of the pool. Guess who effectively controls the DAO at least in absence of a concerted effort to attain a particular outcome by smaller stakeholders? A small group of large stakeholders, most of whom are consensus witnesses. When have you seen significant changes in the witness rankings? Despite there being several well-known and competent people currently outside the top 20?
Hive is very cheap to run compared to most other blockchains. That is by design. The price to pay for the high throughput gained through cheap transactions is the tendency towards of centralization inherent in the protocol. That is why there must remain a diverse range of sources of inflation being allocated to multiple groups of interested parties.
Just because you have a second layer token that is about to get off ground and you feel that cutting down the content rewards (what other source of inflation would be cut) would be likely to increase interest in your token and possibly increase the value of your own Hive Power is no reason to throw out the baby with the bathwater by lowering the total inflation rate from eight to five percent per year.
C) Speculators are attracted to HIVE because of its volatility
If you dream about HIVE becoming a store-of-value type of asset and you think the way to do it is to lower the inflation, it is time for you to stop dreaming. I'm pretty sure it wouldn't even do much to raise the token price. That's because speculators are attracted to HIVE mostly because of its great volatility. They don't care about some pesky percentage point or a few of difference in annual inflation when the token (its predecessor) is proven to be capable of moving up more than 100x under the right market conditions.
The true store of value in crypto, Bitcoin, is a store of value because it is expensive to mine. Secondly, and most importantly, its inflation schedule is extremely resistant to change because it has no governance. Remember how difficult it was for SegWit to find acceptance back in 2017? That is a feature, not a bug. Bitcoin will fork if a sufficiently large minority of node operators and miners decide they're not happy with Bitcoin Core. There is a very high level of confidence among investors that the Bitcoin inflation rate will never be touched.
In contrast, the rules of Hive can and have been frequently altered. It has a relatively fast base layer inflation rate because the HIVE token is meant to fuel activity and not sit in wallets passively appreciating. The main design goal of all Graphene blockchains was high throughput at the expense of security - and thus capacity to store value.
I would also like to comment on the idea that blogging no good as a use case of Hive. Traffic on the blogging front ends still make up a very large proportion of the total along with Splinterlands. Over 18,000 posts were made on Friday 28 August. How is that insignificant? Alienate the bloggers and you will alienate a very large chunk of the user base. Do you really think that's something this platform can afford to do right now?
