Proposal #117: Global supply and inflation snapshot after about a month

It has been about a month since the start of Proposal #117, so I thought a new snapshot would be in order to see how it's going. Here are my main observations.

1. The proposal has reduced inflation, but not as much as I had expected when it launched; because
2. The proposal seems to have triggered an uptick in SBD Conversion activity, which is offsetting the STEEM burning; so
3. As with proposal #116, the main accomplishment so far seems to be a reduction in the SBD supply, and a corresponding decrease in the haircut price; also
4. A side-effect of this proposal is that, under the current circumstances, use of Steem's built in post promotion mechanism may be able to reduce inflation, for the first time in recent memory.

In sum, the proposal is currently burning about 4,992 SBDs and 4,992 SBDs worth of STEEM (roughly 37K) per day. So, let's move on to the visuals, and close out with some additional discussion.

Global Properties

The downtrend in SBD supply is easy to see at this scale. As previously explained, however, this does not reduce inflation when the STEEM price is below the haircut price. Instead, the value of the burned SBDs is redistributed to the SBDs that remain.

As anticipated, the change in the STEEM supply is too small to see at this scale, so for STEEM supply information, we must look at the next visual.

Observed inflation vs. expected inflation

This visual updates daily, and it is available here.

It shows us that before the proposal, observed inflation was running slightly higher than the blockchain's expected rate, and that it's running slightly below the expected rate after the proposal. Over 30 days, the expected rate was 5.68% and the observed rate was 5.23%, which reflects a reduction of about 8%.

It also shows us that the SBD supply has been reduced by about 262K SBDs vs. expectations over the last 30 days - 8,727 SBDs per day.

Internal, external, and nominal value of the SPS Wallet

Two main observations here:

1. The SPS wallet has dropped from about 4.20 million in December to about 3.93 million now.
2. The internal and external values are still running together, which supports my opinion that the SBD price on exchanges is following a sliding peg which is set by the 3 1/2 day average of STEEM's price divided by the haircut price.

SBD Conversion Activity

180 Days

It seems clear (to me) that proposal #117 has triggered a wave of SBD conversions. Thus, most of the STEEM that we're burning is just being recreated when the SBDs that were sold by the proposal account get converted back to STEEM. The net effect is an increase in burned SBDs and a decrease in burned STEEM.

IMO, this is likely because there is not enough SBD liquidity in the market, so the people who are selling STEEM into the proposal are replenishing the STEEM in their wallets through the use of SBD conversions.

And that leads to my theory that boot-strapping post promotion now can reduce inflation. If people start buying SBDs in order to promote their posts, that would reduce the need for conversions, and the proposal's burned STEEM would stay burned.

14 Days

This is zoomed in to the last 14 days so the labels are readable. Basically, any time we see a peak in the top half of the visual, we can expect a corresponding peak about 3 ¹/₂ days later on the bottom. If the peak on top is above 4,992, then we would expect SBD conversions to create more STEEM in 3 ¹/2 days than what the proposal burns.

Interesting side note

The 7.6 STEEM per SBDs that we see above comes from actual market transactions. It matches the 7.6 STEEM per SBDs that we see here, which is derived from global property values (collateralized steem / SBD supply). It's always nice when you see numbers matching from two different methods, and this lends additional support to the idea that SBD pricing tends to follow a sliding peg.

Discussion

The bottom line is this. Proposal #117 was intended to reduce inflation, and it has done so by about 8% over 30 days. However, a larger reduction would probably be possible if a healthier market existed for the sale of SBDs.

The only short (immediate) term way that I know to create such a market would be for stakeholders to start buying SBDs for post promotion.

The only short (immediate) term way that I know to get people buying SBDs for post promotion is for curators to start supporting posts that have been promoted.

To that end, my auto-voter has started seeding the Promoted feed. I invite curators to join me in supporting the posts that appear in that feed.