You have a strong point why the downvote/flag option should be encouraged and used however I have noticed that once any user flags a post probably for low quality content, it usually brings a flag war as some of the victims of such flagging will invite all his/her friends, get higher steem delegation and flag such user steadily even without any reason till that user's reputation is completely down. Unless there is a better way of reorientating the steemit community on the good sides of downvotes, if not flagging breeds hatred and segregation.
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If flags/downvotes are uncommon as they are today, then they become a big deal when they occur. If they are a regular/normal thing, then a lot of the drama should disappear. There will still always be cases of retaliation, but hopefully they will be isolated incidents that can be dealt with on a case by case basis.
Your opinion is very correct.
which is why we need to have a public daily list of rewards and flags per user to double check if such things happen