Steem inflation overview at the end of 2024's second quarter

remlaps-lite (76)in #steemtalk • 5 months ago (edited)

Continuing my practice over the last several quarters, let's take a look at Steem's blockchain inflation as the quarter comes to a close. For previous quarters, see 2023/Q3, 2023/Q4, and 2024/Q1.

As you may recall, the blockchain reached its peak of "new STEEM per day" in Q4/2023 (~3 months ahead of projections), then became deflationary in Q1/2024 when the price of STEEM passed above the SBD print threshold and stayed there for a while. So now we see what happens in Q2/2024 when the price of STEEM returned to a value below the SBD print threshold.

As in the past, our first visuals cover the projection of future STEEM production.

1. We are definitely past the peak now, both in theory and in practice.

With the price of STEEM below the SBD print threshold, we are at an upper boundary, so - excluding the possibility of rule or parameter changes by the witnesses, it's all downhill from here until 2037 when the interest rate settles in at 0.95%.

Date	Block #	Inflation Rate	Supply	New Steem Per Day
2024-07-02 17:23:18.925150	86500000	0.063200	517288266	89568
2024-07-11 09:43:18.925150	86750000	0.063100	518065741	89561
2024-07-20 02:03:18.925150	87000000	0.063000	518843152	89553
2024-07-28 18:23:18.925150	87250000	0.062900	519620493	89545
2024-08-06 10:43:18.925150	87500000	0.062800	520397761	89536
2024-08-15 03:03:18.925150	87750000	0.062700	521174952	89527
2024-08-23 19:23:18.925150	88000000	0.062600	521952063	89518
2024-09-01 11:43:18.925150	88250000	0.062500	522729089	89508
2024-09-10 04:03:18.925150	88500000	0.062400	523506027	89498

The projected new STEEM per day is currently sitting near 89,568 and is expected to decline to 89,498 over the next couple of months. Of course, as we saw in Q1, if the price of STEEM crosses above the SBD print threshold again, that value will go significantly lower. At the end of Q1, this value was 87,538; at the end of last year, it was 89,885; and in last year's Q3 post it was 89,945. So, over the course of 3 quarters, the value declined by about ⁴/₁₀ of a percent.

2. Here are the projections for 1, 4, 8, 12, and 20 years.

Slowly, then suddenly.

3. And here are the projected values for interest rates, virtual supply, and new STEEM per day

As before, more than half of the STEEM that is projected to exist in 30 years already exists today.

4. New STEEM per day vs. New BTC per day

Last quarter I added a graph to show (roughly) how Steem inflation is expected to match up with the Bitcoin halvings

ok, that's it for the forward looking guess work. Now let's look at what happened.

5. Single quarter summary graph

These visualizations cover the last 90 days

Q1 was deflationary because of the rising price of STEEM. This quarter was extra-inflationary because the price of STEEM fell again. The APR for the virtual supply clocked in at a whopping 16.42%.
In the middle row, we can observe the fluctuations in STEEM production per block while the price was above the threshold, and the leveling off that happened when it dropped below again.
On average, the virtual STEEM supply grew by about 221K per day, more than double the amount of inflation alone.
With the price of STEEM back below the SBD print threshold, we're back at the upper boundary, and these sorts of increases cannot happen again next quarter.

6. All available data

Using all available data from steemdb.io, the start date is December 17, 2023. Here's what we see.

During a time when the blockchain APR dropped from 6.64% to 6.32%, the virtual supply inflation rate was 6.16%.
Daily STEEM production averaged about 84,410 as compared to projected values that ranged from 87,300 to 89,800.

7. Zooming in on daily supply changes in Q2

Reminder that the daily change for the virtual supply (red) is a different magnitude than the others, so that's graphed against the right-hand axis. Don't try to compare the red line with the other ones.

8. Zooming in on daily supply changes for all available data

Reminder that the daily change for the virtual supply (red) is a different magnitude than the others, so that's graphed against the right-hand axis. Don't try to compare the red line with the other ones.

9. Wrapping up

As always, I warn that these calculations represent my best understanding of the topic, but there is no authoritative documentation and they could be mistaken.

The dominant observation about inflation this quarter, and last quarter too, is that the changing price of STEEM overpowers all other factors when the price breaks above the SBD print threshold. In Q1, a rising price led to a deflationary blockchain, but in Q2 a falling price led to extraordinarily high inflation.

If the price of STEEM gets to a high enough value, I might expect the influence of price changes on the virtual supply to moderate, but I haven't yet been able to see that in practice. Gut feeling - I suspect it would need to be well above a dollar.

Looking forward, however, with the price of STEEM back below the SBD print threshold, other factors have more of an impact. In particular, it looks like token burning and missed blocks by witnesses are continuing to soak up about 5% of daily new STEEM production.

Bonus Trivia Section 😉

100 years ago in music

In June of 1924, Fred Waring's Pennsylvanians released Memory Lane.

In addition to being a Pennsylvanian, and a musician, Waring was also an inventor. His patented blender was used by Jonas Salk in the development of the Polio vaccine, and it led to the establishment of The Waring Corporation, which is now part of ConAir.