Hive Rewards Distribution System: Good, Bad & Entitlement

in LeoFinance9 months ago (edited)

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A few days ago @bluemist started a conversation on the topic of State of Entitlement encouraging us to talk about this topic and share our thoughts. I find this topic to be interesting and I believe it will remain to be an on-going topic of discussions on Hive for years to come. Many are attracted to Hive due to the rewards it gives to its participants and due to the nature of humanity we do feel entitled for rewards for one reason or the other. Most often the question of entitlement is raised because of the upvotes, downvotes, and impact of these actions on users' rewards.

Hive rewards are not only in the form of author and curator rewards. Hive also grants rewards to witnesses for producing blocks, to community approved projects via Hive Development Fund, interests to stakeholders, etc. All of these rewards come out of the total Hive inflation.

One of the main questions is Where does Hive money/rewards come from?. Simple answer to that is that Hive blockchain produces/prints the Hive coins and they are distributed according to the protocol. However, more precise answer would be that money come out on stakeholders' holdings as an inflation.

Currently, I think the inflation rate of Hive is just under 8% (updated), and decreases every year. The inflation is calculated based on the total supply of Hive. That is where the Hive rewards come from. 10% is rewarded to witnesses for producing blocks, 15% goes to stakeholders and interest on Hive Power, 10% goes to Hive Development Fund aka Hive DAO, and 65% goes to rewards distribution based on social content to authors and curators. Those content and engagement rewards of 65% are split among authors and curators 50/50. Correct me if I am wrong with my numbers.

Being a Delegated Proof Of Stake (DPOS) protocol, the Hive blockchain heavily relies on the stakes and stakeholders in distributing rewards to authors by means of upvotes and downvotes, setting the course of governance, approving/disapproving DAO proposals, and making changes to the protocol. In essence, stakeholders can decide to change the proportions of the rewards distribution mentioned above, or even remove them completely. In this post, I would like to focus on the rewards to the authors and curators.

Consider, there is a group of 10 people who own a company that has 1000 shares and evenly distributed among members. This group decides to bring a 11th member and issue 100 more shares for this member for free, which is 10% of the total. In its surface it would be a bad idea for members to do so, because it will decrease the percentage of their holdings in the company from 10% to about 9%. But if the addition of this member increases the value of the company, that would be a brilliant decision by the initial 10 members. Even with less shares in the company their net worth would be much higher.

Similarly, stakeholders would lose shares in the Hive ecosystem due to the inflation they agreed to have. This inflation creates rewards to authors for the content they produce and participation in the economy. The idea is that creative authors will bring more value to the platform and increase the value of the network with their contributions. Hence, it is worth creating an inflation and sharing the platform with these content creators.

Because the inflation has a direct impact to the financial state of the stakeholders, it makes perfect sense that they are the one who decide what is good or bad for the platform and distribute rewards accordingly. Being a stakeholder/investor is a risky business. While there is a potential of high gains, there is also great risk of loss. Everybody who participates in the Hive economy is an investor regardless of how they obtained their Hive coins of Hive Power. If you have one Hive in the account, it has value in the market. And any holder of Hive can either convert Hive to fiat or bitcoin or invest in the platform and use it as Hive Power.

Investors/stakeholders are important in two ways: one - by affecting the monetary value of Hive coins, two - inflation is based on their holdings. The behavior of investors in the market by selling and buying Hive decided the market value and its value in Fiat. Higher the price of Hive, higher are the rewards for authors/curators. Since rewards are calculated in HBD, which is equivalent of USD, higher Hive prices mean higher rewards for authors. Just like in any other market the price of Hive is decided based on supply and demand. Since new prints of Hive relies on the inflation based on current supply of Hive, every single Hive holder make it possible for rewards to happen.

In the real world, for fiat money to hold its value we require interest on our deposit. Alternatively if we take out a business or personal loan we need to pay interest. Even futures and options contracts have interest in the equation for future pricing. Interest on fiat is what somewhat tries to retain its value. $1000 of today many not have the same buying power next year. And that is mainly due to the inflation, and printing of more fiat. Similarly, inflation in Hive if price was stagnant would decrease its value for the investors. That is why it makes sense that investors are the ones who decides how rewards are distributed as they are the ones who are taking the most risk.

However, Hive is not an ordinary blockchain. It is a social blockchain, and participants are actively involved in the social engagement. This makes it possible for any participant to have influence on the platform even without significant stakes. Human interactions, sharing of knowledge, and networking is powerful. We influence each other everyday. So, Hive being a DPOS based protocol, doesn't mean that stakeholders are the sole decision makers. Quite often we find large stakeholders consulting everybody in the community in making their decisions. After all every participant is financially and socially invested in the success of the platform.

Entitlement is a human nature. Every single human being demonstrates their ego one way or the other. Especially, in the online space it is easy to judge others and be critical of things. As one of the motivational speakers and teachers of psychology, Dale Carnegie said - "We love those who love us". This is true in online space and real life.

Upvotes and downvotes are only the mechanisms to determine the rewards that should be assigned to certain posts/comments. For the reasons described above, stakeholder have the rights to take actions of upvotes and downvotes as they deem fit. Often times, we authors forget or do not know that reward amounts that show up under our posts are only tentative rewards. They become our rewards once they are paid out. Hive blockchain gives 7 days to stakeholders to vote either with up or down. This should not be taken as a personal favor or attack, but rather for what it is - a time for stakeholders to take action as they fit best.

Downvotes are usually the topic of drama. Of course we humans, don't like downvotes for several reasons.

One, downvotes mean disapproval of what we did. And usually we think we are doing something awesome. Which probably is true, but doesn't mean it is awesome for others.

Second, we take it as a personal attack. We were earning this much, and this mean user comes in and makes us earn less. They must not like us. It can be true or false. But it shouldn't matter. It is ok to seek an explanation as nobody likes confrontations and negativity.

Third, downvotes are something new. They something we haven't seen elsewhere before. For those who haven't encountered that, it is easy to jump into conclusions of one and two. For this reason it would be ideal those who know to be aware of those who don't fully understand the protocol and mindful of their actions.

At the end of the day people disagree on various topics everyday everywhere. That is a human nature. It is also a decentralization. Best approach, in my opinion, would be to expect nothing from anybody and accept rewards as pleasant surprises.

Overall, rewards distribution system is a great idea. It allows funding participation and growing of the economy, and also by distributing coins increase the decentralization furthers. If done right with collaboration and cooperation it will be a huge step forward in bring Web3 to ordinary users of the web and at the same time increasing the value of stakeholders' assets.

Hive is da Best!

Update: Total Hive inflation rate currently is ~8%. You can read a more detailed post on the inflation rate here.

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Voting is such a volatile subject on #Hive Everything from "My posts don't earn enough!" (Guilty as charged) to "There's a conspiracy to wipe out my stake in Hive" I have seen one individual use his voting power to attack anyone who has said anything positive about Steemit in the past so that no matter what that victim posts immediately they're downvoted. My good friend @steevc is downvoted on every single post he releases, I presume by the same individual?

In an ideal world, it's a good concept to let people vote on stuff. Sadly, not everyone is touchy-feely nice.

"If you don't have enough power or Crypto to upvote me; reshare me instead. Reshares are worth their weight in gold!"

Don't forget, you can upvote peoples comments too!

Oh, is that why Deinproblem has down-dooted me? I liked steemit when I first joined steem!?

Bah, and here I thought I finally made it. I thought I earned my first dude who randomly downdoots me for insignificant sums of money because he doesn't like me.

My disappointment is immeasurable and my day is ruined.

lol. Deinproblem downvotes many. But those downvotes are meaningless, and don't lower the rewards at all. I think I get those downvotes on every post, or used to. I don't pay attention.

I actually like the deinproblem's downvote activities. Kinda creates emotional immunity to the downvotes in general.

Dunno? I suppose there are lots of reasons? I was just stunned when I asked the Witness why he was downvoting them and somehow the Witness had twisted the logic to say that because his victim said nice things in the past about Steemit then they deserved to be victimized downvoted on anything they produced from now on which kinda stunned me on a couple of levels tbh.

"If you don't have enough power or Crypto to upvote me; reshare me instead. Reshares are worth their weight in gold!"

Don't forget, you can upvote peoples comments too!

Most of the downvotes I get are insignificant and from someone who I helped deal with a couple of years ago. That is just part of the system. There are those who are really nasty with their downvotes and aim to wipe out rewards of people they don't like. That can drive good people away and the community ought to help out there.

I keep saying that this is the wild west and anything goes.

Part of the reason I want to see Hive grow is to decrease the effect any individual can have by spreading the vote more.

If/when SMTs happen, we can experiment more with different models. They would give power for sub-communities to decide how rewards are distributed in are more meaningful way.

Core rewards pool still works fine. There is always room for improvement. Requires participation, engagement, and networking to collaborate on improvements. After all most investors/stakeholders would care more about increasing the value of their holdings.

I think the key is the Users. Improve user experience, bring in masses, everybody is happy.

I see people saying they want the rewards system to change because it does not suit their needs, but there has to be some compromise. I don't think it's too bad. We do need big accounts to help in getting rewards where they are deserved and not just to the 'usual suspects'.

Users are definitely key. It is supposed to be a social platform after all.


The starting point should be that nobody really deserves anything. Whatever people get as rewards is just a nice bonus.

But I do understand where you are coming from. We are building something amazing for people, it requires attention to users and creating a user friendly environment and great user experience. I do believe that is the key for success. If this is solved, stakeholders will be super rich. Win for users, win for stakeholders.

But what you are asking requires objective curation and a lot of work. In a protocol level, anybody can upvote/downvote as they wish. Nothing wrong with that. But we also have a social level that we can network and convince large stakeholders divert their influence certain way. It requires campaigning, networking, and convincing. Usually it is not difficult because end result of successful platform is a net gain for these stakeholders.

Curations projects like Curie, OCD, Curangel, tribes, etc has successfully done these things. But they come with a lot of effort.

I think we are in a good place and heading the right way. We can continue improving together. Great ideas will get support needed. Just need people to do the work.

I 100% agree with you that user focused vision is the right path for Hive.

I do not take my rewards for granted, but I am lucky that people consider me worthy of their votes. If Hive thrives then we all do well, but greed is an issue and we have to be open about that. People will try to game the system and we get to decide if we let them.

I have mixed feelings about some of the curation projects. Powerful accounts have a lot of influence on where rewards go, for good or bad.

It is all a big experiment that I am happy to be part of.


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Thank you for your engagement on this post, you have recieved ENGAGE tokens.

I understand the sentiment. We are emotional beings, and emotions react first. Downvotes are not natural for us, so we perceive them as a personal attack at times. However, attack or not, downvotes are justified even with zero reasons, even with intent to hurt someones rewards. As I claimed in the post rewards pool wouldn't exist if it wasn't for the stakeholders small or big. As such every stakeholder have a right to cast their votes as they feel.

Sooner users understand that no reward is actually reward until it is paid out after 7 days, better will be for everybody. But it is not an easy task convey this message, due it being something we are not used to. Even after we understand the core protocol concepts, we still take downvotes personally. Just a human nature. I don't have solution for that. All I can say is, this is a game. We lose sometimes, we win sometimes.

I think what gets people's backs up more is there is a financial implication to it. I suspect if the Crypto rewards were not there nobody would care but then again nobody would be using Hive probably. LOL

"If you don't have enough power or Crypto to upvote me; reshare me instead. Reshares are worth their weight in gold!"

Don't forget, you can upvote peoples comments too!

You are right, rewards system is one of the key selling features of Hive. If no rewards maybe there wouldn't be as many people using or none at all. But at the same time the idea of owning the platform is appealing to many. There are many experiments still going on with games, with tribes. Who knows what will come next. Great opportunities here. We just need to keep talking and see if we can make something that attracts masses.

I wonder are there other ways to do it. I was writing about something different yesterday and rambled onto an idea for building out a site with a different distribution. Just in theory anyway.

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Very cool and detailed post! In theory the rewards distribution system is good, but there are some major caveats.

In general I think it is largely overlooked that it is rather profitable to become a Hive investor:

But of course there are risks... but considering that other coins don't give you interest on your investment it can be a good option for an investor

Thank You. The cool thing about Hive is that anybody can develop Apps that don't really rely on the core reward pool. Like buttons, etc, anything is possible. Tribes for example showed a great implementation pool of Hive without relying on the core rewards pool.

Hive is still a risky investment. At one time my wallet was worth $80000 with four times less the amount of coins. More investors we have that believe in the project and its success is better. For this it is also important for any user to understand that investors get the decide how rewards are distributed. It is all fair. At the same time Hive is an open network for anybody to participate and gain influence.

For this it is also important for any user to understand that investors get the decide how rewards are distributed.

One caveat with this, however, is that it becomes pretty difficult to distribute rewards once they become significant. For example, if my upvotes are 20 Hive+ with one vote, should I upvote content for that much (It basically puts it on the front page)? And if I spread out the vote, distributing rewards becomes a full time job (not everybody has that much time).

Sure, I can delegate it as well. But I think it is quite clear that tokens aren't distributed enough and are too centralized (but PoB only works with decentralization)

Nicely explained all the details. I was having this discussion with some fellows in neoxian city. Godd to my basics revised. Thanks.

I completely agree.
Thanks for the vote on comments. I would like to share an opinion, it's better to vote someone post than comments. As you you post rewards are not linear anymore so some vote value is lost if tgere are few votes especially on comments. Also voting on others post give them a sense of appreciation.
Thanks again.

Thank you. Neoxian City is one of the best communities we have.

I think its quite good system, it could always be proved properly.
But one problem is just downvoting people who you don't like or don't agree with, thats a bit of censorship.
Instead of that dv being used on abusing people, properly never gonna get fixed xD

The point of my post was that the reason of downvoting doesn't really matter. Downvotes are proportional to the stakes the downvoters have. By investing in Hive/HP these users get the right to participate in distributing the rewards.

And these rewards come out of the inflation on the Hive/HP they have. This being a DPOS protocol, the stakeholders can decide anytime to remove rewards all together if they find no value in it.

The beauty is that most see the great value in people, communities, and the Hive community overall.

Ohh. I think the reason matter, its basic human commication.
If I fuck up and get a downvote I would like to know why I got that, so I can access if I agree and therefor can change. Instead of judt being in the dark and contiune to fk up :)

I understand what you mean. Whenever downvote occurs, it is natural for us to try to find out why, especially when there is no reason we can think of.

It happened to me several times when I got downvotes from a couple of people. I asked them the reason, they wouldn't even respond. Sometimes people say why.

It would be nice to get reasons. But if we don't get them, it should really matter either. Whatever the reasons are won't change who we are, and should really affect us emotionally.

I would just accept is as rewards disagreement, and leave it be.

Whatever the reasons are won't change who we are, and should really affect us emotionally.

Maybe not who we are. But if you tell someone his is spamming the shit out of the blockchain, he might reconsider if he/she got told :)
Some are don't care at all ofcouse :D

and yes, it can just be rewards disagreement :D

Hive earned can be decided majorly by the sentiment of people who owns the stake
This is the same thing I reiterated on the topic of entitlement, I feel it's in our nature to complain about a system such as hive being unfair. I don't earn huge but then I'm an investor and a stakeholder as well and I mostly reward people with my stake anyway I deem fit because when it comes to money inequality is something that will always thrive.
You're awesome, this was a fantastic write.

Thank You @josedicuss! I agree. Nothing wrong with complaining. There is always room for improvement, and by discussing issues we can do so. That's how we got EIP done.

Not a single idea presented here made me disagree. This message needs to get across to all users on the platform.

Thank you @adamada!

Nice observation and good thoughts. Yeah, you are correct about these downvotes.

At the end of the day people disagree on various topics everyday everywhere. That is a human nature. It is also a decentralization. Best approach, in my opinion, would be to expect nothing from anybody and accept rewards as pleasant surprises.

It's better not to expect so it wouldn't be that painful. 😁

Thank you @mrnightmare89!

Valuable insight and great explanation. 'Tis interesting how we humans react to perceived attacks against us, fight or flight, disinterest, I don't care about the downvote, etc.etc. The downvote is really new to me that I don't know how to react to it. Thanks for sharing your take about it and the whole HIVE reward system in general. Awesome post @geekgirl. :)

Thank you Juan!

You're welcome @geekgirl. 👍

It seems to me that you are doing a serious job here, I will be attentive to your content. To participate in this bluemist initiative, I tried to understand a little bit about how Hive works, I think very few of us do because we see it only as a social network where we have the option to receive rewards and since most of us don't invest money, we obviously see it all in a lighter way. I agree that people with more investment should have more influence, because they will try to keep their money safe.
I thank you for the example of the ten partners to explain inflation, it's a topic that is difficult for me to understand, but at least I know where we content creators come in the game, although I still don't understand much about the value we add. Until now I have assumed that our content and interactions on the web allow the generation of new blocks or something like that and that this in turn generates more currency and that as more publications exist the benefit is greater, but I feel that I am wrong, because at the same time, if that were the case people would have a more valuable role than I perceive; also, the quality of the content would not be so important.
I like the potential of Hive and I like how demanding it can be and that to be valued the content requires a minimum of effort, I feel a certain exclusivity in being here, since I am not attracted to traditional social networks, unless it is to look for something specific that solves a problem for me.
Regarding the negative vote, which I see has caused a stir, I disagree with its deliberate use, I think it should have specific purposes such as penalties for faults and correction of rewards, but I already know your point of view and respect it. The most beautiful thing about life is that each of us is unique and that absolute truth does not exist, so we are all right.
I used the DeepL translator for this comment, if there is any error I apologize.

I agree with most of your points. While some of us can't invest with large amounts of money, our participation brings ton of value as well. As more people put in more time and effort on Hive vs traditional social networks, it increases the value of Hive as real people are engaging in real interactions, connecting, and networking with each other. Play games, exchanging ideas, trading things. All of these real human interactions have a great value on the internet. That is why Google, Youtube, Facebook, Twitter, etc are highly valued companies.

Until now I have assumed that our content and interactions on the web allow the generation of new blocks or something like that and that this in turn generates more currency and that as more publications exist the benefit is greater.

You are not completely wrong. That is how blocks are created, all blockchain activities are put into blocks and block producers create blocks and blockchain keep moving. Our real interactions make these blocks meaningful. Otherwise witnesses would be producing empty blocks.

Thank you for you comment.

Thanks to you for your answer, the picture has become much clearer to me, my first interaction with the blockhain and cryptomode world has been steemit / hive and I'm trying to understand a little bit about how it works. This publication really helped me a lot about the inflation issue, which I didn't understand at all, and now your answer has helped me to know where the chain of all the movements we users make is.
Have a beautiful day.

I think that too much focus is on rewards via inflation and no one talks about the coins in circulation already, you could transfer to users you like, you can tip (and destroy a portion of the coins in the process), hopefully, we'll see content subscriptions and paywall content in the future. I'd also like to see account and resource credit markets so communities can buy as much accounts and RC's they need for all their community to transact, giving more control to communities to do what they want

I think the more ways to distribute the faster the coins in circulation move around and the more productivity happening.

I also like that with tribes, for example, add revenue gets put back into the token

I absolutely agree! One of the most overlooked aspects of Hive is its wallet. It provides easy to use, secure, fast, and fee-less transfer capabilities. Using the Hive coin in everyday life transactions would be great. We are yet to see widespread implementation of this. Hopefully, somebody will come up with interesting Apps or implementations. HiveTips on Twitter is one of the great implementations too.

I totally agree with this. Users who get downvotes do get worked up over their decreased earnings. It should be understood that the upvotes and downvotes are more like businesss decisions rather than personal attacks.

This should be spread across all communities to somehow bend that heightened sense of entitlement on users. Thank you for this @geekgirl!

Thank you @romeskie!

Nicely written post @geekgirl on all of the details most anyone would need (should want) to know to understand the foundational topic of earning “rewards” on our Hive blockchain.

Whatever anyone might think about those details, this pretty well sums it up:

”Best approach, in my opinion, would be to expect nothing from anybody and accept rewards as pleasant surprises.”

Now … If only our human nature would get out of the way and this perspective would “rule the day” here on the Hive blockchain. I can’t speak for you, of course. This Hive blogger is not going to “hold his breath” waiting for that. As it would likely prove to be fatal … 😉

P.S. ”In the real world, for fiat money to hold its value we require interest on our deposit.” Should be the case, yes. In our crazy “new normal,” post-COVID world? I believe we can expect the “insanity” of ZIRP and NIRP to increase …


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Thank you @roleerob!

👍 😉

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Very great rundown of how the Hive distribution works! A lot of facts that I didn't even know before and I've been on Hive for awhile now lol. With a Inflation rate of 10%, I hope that we can see that percentage go down at some point, that's high in my view.

I was wrong about 10%. It looks like the current inflation rate is about 8%, and it keeps going down. Here is a post that talks about inflation rate in more details.

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