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No ..

I described the reasoning in the post. The only reason I suggest having flags burn the rewards instead of redistributing them is because it gives whales an incentive to flag posts.

They would still make more money for theirselves if they self voted their own content, obviously. But if they give a shit about their investment they might be willing to flag abusers if they know the rewards aren't just going to end up in a different abusers hands.

Nothing stops a user from having 10000 accounts and sending votes to each. If you flag one, in effect each of their other accounts will earn more money. If you burn the flag rewards instead, it makes the abuser make less profit directly, and indirectly it increases the value of Steem.

There is no inherent issue with the inflation of Steem.