So with all of the fuss about curation recently and the ongoing drama about maximizing curation rewards I wanted to know: How bad is "bad curation"?
First of all, what is "bad curation"?
Hive currently splits the rewards of a post 50/50 which means that 50% of the rewards go to the author (author rewards) and 50% go to the curators for that post (curation rewards). In this, there are at least two factors which affect curation rewards: the rewards curve as well as the curation window. The first one dictates how much rewards should be given to the post according to its payout (posts with only very small payouts get penalized and posts above a certain threshold (about 20 Hive) get more rewards allocated to them). This is a topic of itself and while I think we as a community should perhaps reconsider the way this currently works, I want to focus on the second point: the curation window.
The curation window is a 5 min time period beginning at the creation of a post in which curation rewards linearly increase from 0% to 100%. If a curator upvotes a post before this period ends, his or her curation rewards will be partially sent back to the general rewards pool. Only after 5 min an author would get his or her full curation rewards. However, there is a catch: the users who upvotes first also gets higher curation rewards. Therefore, curation is most profitable if one is the first to cast a vote and it is being done right after the curation window ends. This has resulted in most users trying to maximize their curation rewards by using autovotes to get into this "sweet spot".
So "bad curation" happens when one votes before the curation window ends (although it might still be worth it if a post's payout is high and beats the reward curve) and/or when one's vote is one of the last ones to upvote a post. Unfortunately the curation window has led most users to vote at the 5 min mark which means that if one votes at 10 min or even after a day one's curation rewards fall dramatically. But in this post I wanted to know: How much do they drop and is it a "disaster" when one's vote is being cast at the end?
To answer this question we have to look at what kind of return one can expect from curation on Hive. Often this is being measured as the APR (Annual Percentage Return) or ROI (Return on Investment) i.e., the return on your investment in a year measured in percent. A common figure thrown around on Hive is about 10-15%. This means that if you have a 1000 Hive, you will get about 100-150 Hive after one year. On a side note, I feel that a lot of people actually don't know about compound interest and if you are interested in how such an annual return can turn into a 400% or even 600% return over a certain period of time, I suggest you have a look here.
To be more exact, you should be getting about 13%-15% of APR if you try to maximize curation (which means to factor in the curation window as well as the age of a post when voting). This is obviously pretty good if one thinks of the interest rates one gets at banks which are close to zero currently. Obviosly there is a great deal of risk involved in cryptos so this comparison might not be optimal.
If we look at hivestats.io which is a great tool for statistics on Hive, my APR is generally between 11%-14%. So yes, you guessed it, I am using hive.vote to maximize my curation as well. But I try to support as many smaller accounts as possible and I also do some manual curation which I think is a net positive for the platform.
So what actually happens when one does "bad curation"?
Let's have a look at an account that does not obey the second rule of "good curation": voting as early as possible after the curation window ends. @shaka is a great example in this regard as this user hosts the @lmac art collage community contest (which is really fun by the way) and upvotes his own curation trail with a time lag of up to 5 min. This means that most votes come in before he votes, resulting in "bad curation". So what is his APR? It sits somewhere between 7%-8%. That's actually not too bad...
So why do many users (and it seems especially some whales) complain about this "low" APR resulting from "bad curation"? The major reason is probably Hive's inflation: There is about 8% inflation (as new tokens are constantly being created) which means that if you have an APR of about 8% that your stake in Hive (Hive power or vests) does not increase over time. It's just barely on par with inflation.
There are two things I'd like to point out here, however. First, it still means that you have an APR of about 8%. That's good! For this reason alone, I don't understand the complaining (or perhaps I am missing something). The second thing is that @grampo in his post points out that there is currently only about 4% inflation (as a lot of Hive is not powered up). This means that your APR is actually still bigger than inflation - which means that you would be growing your stake in Hive by about 4% in a year. That's also pretty good!
So why then do people get so obsessed with maximizing their curation (yes I am guilty as charged as well)? If my analysis is correct (and please tell me it is it) it shows to myself and perhaps to others that "bad curation" is actually not very bad at all... It's rather quite decent. Moreover, in terms of absolute returns, once one passes 50k HP we are speaking of about 200-300 Hive/month. With the price of Hive having a high probability of going to 1$+ again, that is a really good return on investment!
I think the next step for our community as @theycallmedan pointed out as well is getting rid of the curation window. This would lead to a much more organic interaction on the platform as manual curation would play a much larger part in the curation process (I would still argue that autovotes actually serve a function as well, something that I want to explorer in a future post).
So what do you think... will this insight change user behavior?
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