Each and every year 10% of the market capitalization of Steem is distributed
to users submitting, voting on, and discussing content.
Here's an example:
supply_of_steem x price_per_steem = market_cap
1st year: 100,000 x 1.0 = 100,000
2nd year: 200,000 x 0.5 = 100,000
In both cases 10% of new steem are payed as rewards. the $$ market-cap is the same, the $$ rewards are the same, and yet the price is 50% lower, because the supply has doubled. The amount of steem paid out in rewards is always increasing.
the nominal rate will rise from 800 STEEM per minute to the (time-varying,
supply-dependent) value needed to maintain a constant annualized growth rate of 10% for
the Contribution Incentives, and a constant annualized growth rate of 100% for the
combined effect of the Contribution Incentives and the Power Incentives. The overall effect
is a doubling of the STEEM supply each year
Quotes: White Paper
Like we've seen in the last couple weeks, the market-cap goes down, and so too the $$ rewards.
What if the price drops much more rapidly than the creation of new steem?