Impact of Hard Fork 19 on Reward Distribution

I’m sure most on this platform are aware that a significant change to the reward structure will come into effect very shortly (in a few hours!). I wanted to describe how one of the changes under HF 19 is likely to affect reward distribution, both for whales and minnows using a very simple example.

The change I want to explore is the move to linear from a quadratic payout formula. For those who don’t know what I am referring to the current reward structure allocates the total reward fund in proportion to the quantity of Vshares that is allocated to their upvote. The number of Vshares is directly related to the number of RShares (which is based on voter’s Steem Power effectively). The existing relationship between Vshares and Rshares is:

Vshares = Rshares × Rshares (or Rshares squared)

So if your upvote accounts for 10 Rshares, your corresponding Vshares will be 100.

In a few hours, this relationship will change significantly such that Vshares will equal Rshares i.e.

Vhares = Rshares

So what does this mean for the distribution of rewards. Will minnows get more or less of the reward bucket post HF 19? This depends on a lot of factors but assuming the voting behaviour of whales and minnows remains unchanged (which is the million dollar question right now) it would seem the rewards will shift more towards minnows. But will the shift be significant or immaterial?

Let’s have a look at this using a very simplistic Steemit world. So, for illustration purposes, I am going to analyse the reward distribution over a single day and make a number of very simplistic assumptions:

• Imagine Steemit has only 10 users - 9 minnows and a single whale. The 9 minnows each hold 2% of the voting power and the Whale holds the rest – 82%.
• There are only 2 posts in the day I’m analysing
• Each post received 5 upvotes but only one post receives an upvote from the whale
• The Total Author Reward fund is $100
• The payout window is 1 day
• Each account only votes once i.e. 10 votes in the day
• The Rshare pool for the day is 100 units

The results are shown below:

The first table shows the allocation of rshares, vshares and the rewards across the 10 votes both PRE and POST-Hard Fork 19.

The second table shows the allocation of the rewards across the 2 posts both PRE and POST-Hard Fork 19.

The two pie charts just depict the allocation of rewards across the two posts pre and post hard fork 19.

So, what does all of this tell us?

From this very simplistic scenario, the rewards for posts voted for exclusively by minnows will get relatively more of the reward pot than before. I think we all knew this but I’m more interested in the materiality of the change which will depend on many factors such as how voting behaviour changes across minnows and whales.

My personal feeling is that, all else being equal, the change will result in a bigger shift in the reward distribution than a lot of people seem to think.

All will be revealed shortly.

Thank you for reading.