This plan wasn't very well thought out.
Short term reward manipulation aside this plan is actually going to increase the problem it is attempting to address even though that problem might not even exist to begin with.
For some reason the premise here is that rewards are too high in value and that this is incentivizing abuse. On face value that premise is absurd and no analysis supporting it has been shown but I will continue to use the premise to highlight how bad the plan is.
The solution to reduce the immediate payouts is to lower the current amount of funds going out and also burns them thereby taking them out of circulation and limiting the supply.
You are now burning supply which will increase prices as long as demand remains steady. If the prices go up then the value of rewards goes up and you've accomplished absolutely nothing. The incentive to abuse remains according to the premise.
You are in effect trying to hobble the market differentiating value proposition that you see as incentivizing abuse but is also the biggest reason for success, new user signups, user engagement and market demand. It is what incentivizes the whole platform.
This is a perfect example of throwing the baby out with the bath water.
This is simply mathematically wrong as I've addressed elsewhere. Hypothetically if voters decided to allocate the entire reward pool to burning, then the value of rewards would not go up. Now would they go up at 99%? At 90%? I'm pretty sure the answer at these levels is no, and it may well be no at every level.
What I believe is that there is a certain amount of rewards that are useful for that purpose. The system design is for about 9% per year of market cap to be getting paid in the form of rewards, which might well be reasonably balanced in terms of new value being added vs. expense (and if it isn't then the system is poorly designed). But what is actually happening given the overvaluation of SBD is that something like 50% of market cap is being paid out per year. It isn't plausible in my view that so much new value is being added by the rewarding process, meaning this excess is just being wasted.
Returning a portion of that excess to stakeholders hardly 'hobbles' anything, in fact with any reasonable expectation of how much might be burned, the reward pool will still likely be much larger than it is supposed to be, just a little less so, with a bit of that windfall directed to helping the price of STEEM (which, let's be frank, has horribly underperformed the cryptocurrency market during one of the biggest bull markets the world has ever seen in any asset category).
Secondarily this should have at least a small effect on reducing the overvaluation of SBD, which helps get at the problem of absurd rewards from the other direction as well.
" then the value of rewards would not go up."
The displayed reward level may not increase but the market value for which those rewards would be trading on would indeed go up if you reduce the supply.
" But what is actually happening given the overvaluation of SBD is that something like 50% of market cap is being paid out per year"
On a blockchain level that is not true at all. That is uncontrollable free market prices that should come down over time with sustained sell pressure from an increasing SBD supply. You are fighting against that by burning supply. This burn project literally helps prop up the high price of SBD.
The formula for production of Steem and SBD is still printing at the intended rate. As long as people chase the high SBD price by buying up Steem and increasing it's price then the rate at which SBD is printed will increase.
Burning the supply doesn't help alleviate the free market over valuation of SBD.
"Returning a portion of that excess to stakeholders hardly 'hobbles' anything"
If that is true then it also achieves nothing. You can't have your cake and eat it too. You can't say this is lowering payouts only for abusers, it lower payouts for everyone.
If your premise is that high paying posts attracts abuse you have also recognize it attracts legitimate use as well. High paying posts are a fantastic marketing tool and lowering them across the board would indeed be hobbling that.
"this should have at least a small effect on reducing the overvaluation of SBD"
Burning supply does not decrease market prices if demand remains static. I see nothing that addresses overall demand so this would increase the overvaluation of SBD.
Your goals aren't in question you seem to be trying to achieve something in a decentralized fashion that is completely fair. I just disagree on how it will work out.
You missed the point on this. If all rewards are being burned, then rewards paid out for self-voting schemes and other abuses is certainly not increased!
In order for rewards paid out (and not burned) to increase on net, the STEEM price would have to increase by proportionately more than the amount burned. For example, if 50% is burned then the STEEM price would have to double just to maintain the same payouts (much less increase). If 75% is burned then price would have to increase by 4x. I find all of this reasonably unlikely given that STEEM has a market cap of roughly a billion dollars and something less than one million dollars per day is being paid out. There will likely be an effect on price, but not disproportionate with the amount burned.
Also, since you mentioned market value, the market value of SBD plays a role and this initiative seeks to (most likely slightly) reduce SBD value by 1) dumping 100% of the SBD rewards directly onto the market, and 2) increasing the supply of SBD by increasing the STEEM price.
Remember, rewards are paid out both in SBD and STEEM/SP, so both market values matter. So if the initiative increases the STEEM price while decreasing the SBD price, that may have no (or very small) net effect on the overall market value of rewards.
My premise (and FWIW it isn't really mine but mostly originates with other stakeholders who have expressed it, though I mostly agree) is that the rewards are outsize from what added value the Steem community can actually, realistically contribute to the platform, in terms of attracting users, creating content that promote itself, building brand value, etc. There are other limiting factors besides money, notably time, community size, and good ideas. (To say this another way "throwing money at a problem" is often extremely wasteful.) By contrast, abuse has no such limiting factors and is easily scaleable to absorb whatever extra money speculators throw at it. This also has the negative secondary effect of making abuse more frequent and pervasive which actually damages community morale and brand value.