Hi Everyone,

This post contains a video, which follows up on and supports a previous post of mine, in which I discuss the rewards pool. The link to the written post can be found at the end of this post. The link to the video can be accessed using the link below.

To watch the video, click on the YouTube link below

Quick summary of the video

The video can be essentially divided into four parts. These parts are as follows.

What is the rewards pool and how does it function?
The advantages of the rewards pool
The disadvantages of the rewards pool
My verdict of the rewards pool

What is the rewards pool and how does it function?

The rewards pool is created from the newly created supply of Steem. Before entering the rewards pool, approximately 10% of the new supply of Steem funds witnesses and 15% supports interest on Steem Power. The remaining 75% is to be distributed between content creators, curators and applications. The curators determine how the rewards pool is distributed using votes. An upvote rewards the content creator with approximately 75% of the vote and the curator with 25% of the vote. If the content creator used an application with a beneficiary requirement, a percentage of the content creator’s rewards are distributed to the application.

The value of an upvote is based on Steem power and voting power of the curator. The more Steem power an account has, the larger the upvote that can be given. As more votes are given out, the voting power of the account falls. Lower voting power reduces the size of the vote. Voting power is replenished at a rate of 20% over 24 hours. If an account runs its voting power down to zero, it will take 5 days to be fully replenished to 100%.

The advantages of the rewards pool

In my opinion, the advantages of the rewards pool can be summarized as follows:

Does not require direct payment from own stake.
Consistently increasing rewards pool ensures constant flow of activity on the platform.
Provides a great source of funding for projects.
Provides a voice for the voiceless.
Builds a strong sense of community.

The disadvantages of the rewards pool

In my opinion, the disadvantages of the rewards pool can be summarized as follows:

Dilution of stake
The existence of multiple prisoner’s dilemmas.
Negative externalities are produced from acting out of self-interest.
The full cost of negative externalities are close to impossible to value.
The platform attracts those with short-run goals of making money quickly.
Those with minimal stake have minimal influence.

My opinions on the rewards pool

I believe the rewards pool is one of greatest strengths of Steem. It has so much potential in so many ways. It encourages activity and it greatly facilitates the distribution of Steem. The rewards pool has several problems as I have highlighted in the video but all these problems can be fixed. I have written several posts with workable solutions. These posts are available at the end of this post.

Feedback

I hope you enjoyed the video. Feel free to ask any questions or express any opinion regarding the content of the video.

Written version of this post

The economic implications of the existence of the rewards pool

My other posts relevant to the rewards pool and/or Steem economics

Steem explained by an economist

Steem explained by an economist (Video Version)

Bid Bots and the possible economic implications

Changing the way voting works to improve fairness and rewards – My little fantasy

How do we prevent market failure caused by over delegation of Steem Power to bid-bots?

Advice to Potential Investors in Steem

Is the Steem ecosystem in disequilibrium? (Part 1 – Witnesses)

Is the Steem ecosystem in disequilibrium? (Part 2 – Content Creators and Curators)

Is the Steem ecosystem in disequilibrium? (Part 3 – Applications and Services)

Is the Steem ecosystem in disequilibrium? (Part 4 – Passive Income)

Is the Steem ecosystem in disequilibrium? (Part 5 – Combination of solutions)

Proposed changes to the Steem rewards and curation algorithms

If you want to read any of my other posts, you can click on the links below. These links will lead you to posts containing my collection of works. These posts will be updated frequently.