The fact that Steemit has offered to donate funds is great, but those funds will run out relatively quickly, and I am fairly certain that donations from the rest of the community won't come close to funding any real projects, at which point this system will be mostly dead. IMO it must be funded from inflation if it is to be sustainable past Steemit's donation.
Ultimately, rewards are viewed in USD terms, so the "bet" here is that if we put serious funding towards development/marketing/etc it will increase the market price of STEEM such that rewards are increased in USD terms.
I disagree. Here's why. We reward folks for posting, curating, and witnessing. That's what rewards go to. Those rewards are the inflation. Decreasing the rewards paid decreases the incentive to do those things. Author rewards particularly are already too low. Look at retention, and consider that reducing rewards to authors will make retention worse. Creators of content are the spigot from which ALL the value of Steem originates, and we're losing creators.
Further, I agree that donations won't work. @ned's generosity will get us going, but stable funding will be necessary to create value in Steem.
Votes are stake weighted. Capital gains are stake weighted. Increase in the price of Steem as a result of development funded via SPS will produce capital gains, and directly benefit stakeholders. This will not directly inure to those earning rewards, only indirectly when stake holders curate and pass on those gains to creators.
Stake receives the benefits, and should be the source of the funding. Tapping rewards will harm Steem, and put downwards pressure on price by making worse the problems we have with content quality (trending), and witnesses (many of whom barely, or do not, break even now) who we need to keep the blockchain secure. Decreasing incentive to witness is the last thing we should be doing.
I have said it better here. Please have a look and correct me if I'm wrong. If I'm not, let's not decrease rewards, but fund development directly from those that will benefit from it, without reducing incentive to produce other benefits essential to Steem.
Thanks!
Agreed