There has been some talk recently about the Steem inflation pool, and some solutions moving forward. @whatsup made a great post talking about Steem as a utility token versus Steem as a reward token, which created some great discussion. There are some who see that the inflation rate (reward pool) is keeping the price pressure on, and others think that reducing the inflation rate would discourage new users as it would further reduce their rewards. Lets take a closer look at both arguments.

The case for reducing (or removing) the inflation rate/reward pool

An important note is that not all of the inflation rate is allocated to rewards - some is allocated to holders of Steem Power. Lets focus on the reward pool in this argument. The aim of reducing the inflation rate would be to keep the ammount of Steem tokens at a more manageable level, and to stop some of the bleeding in price due to an oversupply of tokens. Simple economic theory says that if supply is greater than demand then price will fall - and this is what is happening with Steem. Part of this is to do with the sell off from Steemit Inc to pay wages, but reducing the inflation rate would make the number of new Steem being created at a more manageable level.

This would make it even harder to earn Steem, as less would be being created each day. However, with SMTS coming (hopefully!), and also tribes, there are a number of ways to earn on the blockchain now and so there is less reliance to earn Steem as the primary source.

In this way (over time), as mentioned in the comments sections of @whatsup post Steem will move towards more of a "utility token" - a driver of Steem for resource credits and not the main way to earn.

The case for keeping the inflation rate/reward pool

Probably the biggest argument for keeping the reward pool the same is that it encourages new users to create content on Steem, as they will be rewarded in Steem tokens. By reducing the reward pool it will make it even harder than it already is to get started on Steem.

Also, if the reward pool is removed completely, there will be far less incentive to hold large amounts of SP, and this could lead massive selling pressure and further reduction in the price of Steem even further.

SP will always be needed for new users as a means of Resource Credits, and if they cant be earnt then they will have to be paid for. This will be a massive downside, as at the moment Steem is a "freemium" site - anyone can use it for free but you can also buy more stake and have more benefits. One solution to this could be that Steemit Inc could offer incentives to SP holders to allocate to a "pool" that will be delegated to new users of Steem so they can start transacting right away.

Burn Steem - an alternative to managing the inflation rate

One other option that has been discussed recently is for users (probably Steemit Inc) to burn some Steem tokens and thus release some of the selling pressure. Burning tokens essentially means taking them out of circulation and reducing the overall supply. This could also be done by having a benefactor account such as @null and burning a certain ammount of Steem from posts.

Although this is a possibility, I think it would require a shift of mindset and also the dedication of alot of users. In the long run it could work but it would lead to an exodus of users...

There are pros and cons of reducing, removing or keeping the reward pool and some healthy discussion is the best thing moving forward so we are all on a similar page