Some time ago, I put together a chart that imagined Steem's blockchain inflation as 4 distinct "eras" (assuming no rule/parameter changes from the witnesses). Here it is:
There are no numbers because it's the shape of the curve that matters. The specific thresholds are affected by the price of STEEM and the amount of burn activity, but the shape tells us what we need to know about the upper boundary of daily inflation. It might go lower, but it won't go higher (under existing rules/parameters). In this model:
Today, I want to focus on the 3rd era (and a little bit on the 2nd).
Point 1: In 2026, the blockchain inflation rate is expected to be around 51/2%.
Point 2: In 2037, the blockchain inflation rate levels off at 0.95%.
Point 3: I did some "back of the envelope" calculations about Bitcoin's inflation rates and came up with this table:
Point 4: Broadly speaking, STEEM's price declined during the first era and stayed flat during the second, matching the behavior of daily inflation.
So, given all of that, if we believe that inflation (i.e. scarcity) has an effect on the price of Bitcoin, then there's an argument that it also affects the price of STEEM. Thus, in the table above, I looked for reference-years in the halving cycle to see where rates were similar to Steem's 3rd era. It turns out that those years span the 2nd and 3rd halvings, 2016-2024.
So, what happened during those years? Rounding, Bitcoin went up by a factor of more than 13 from 2016 to 2020 and by a factor of 5 from 2020-2024 for a total above 65x the original price (actually 96X without rounding).
So, based on these observations, what can we guess about the future of STEEM?
One other note is this: If the price of STEEM rises above the haircut threshold (currently $0.26) and stays there, then the number of new STEEM per day will go down even faster than this projection. The higher the price goes (above that threshold), the scarcer rewards become and the more difficult it becomes to earn them. This would suggest that prices might adjust faster.
Obviously, it's a wild oversimplification to say that "Bitcoin did this, so STEEM will too". However, I think it's important to understand that we have never seen STEEM's daily inflation behave in the way it will from 2026 to 2037 (and to a lesser extent, starting now). My guess is that the entire ecosystem will see some sort of realignments, similar to the miner shakeouts and usage uptakes that we see in Bitcoin, and it's only a year or two away, so it makes sense for investors and developers to start thinking about that now.
Finally, the grouping that I did into 4 distinct eras was arbitrary. In the months after I created that graph, I've started thinking of it as 3 eras: 2016 to November, 2023 - when new STEEM per day peaked; November, 2023-2037; and 2037 forward. Under that 3-era model, we're already a year into the disinflationary era.
Caveat lector: I slapped the spreadsheet together in just a few minutes, so mistakes are certainly possible. Take all of this with a grain of salt. Also, even if the numbers are right, this is not intended as a prediction or a forecast. I'm just thinking about general patterns. Others can and should draw their own conclusions.
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