The part of the discussed Hard Fork 21 that I really like is the Steem Proposal System.  This is something that came up a number of months back.  Since that time, a lot of work was put into it to create something that enables Steem to help fund itself.

For those unaware, the proposal system is a way to fund development on the Steem blockchain.  The discussion centered around two ways to do this: donations and through the inflation.

From the start, many thought the donation route would not work.  It simply is not going to be properly funded long term.  Hence, the inflation rate makes more sense.

Here is where the transformation, in my view, to crytoeconomics gets lost.  Inflation is a bad thing in the present system because it is used against us.  Inflation enables to run up debts since it is paid back in monies that are worth less in the future.  That is why many call it just another tax.  It effectively reduces the purchasing power of the average person. 

It also favors the one issuing the debt (read banks) because the likelihood of payment increases.  Their risk model completely changes if deflation is on the table.

With cryptoeconomics, we see something totally different.  Inflation is the mechanism used to incentivize activity.  This is how the entire system operates.  Using Steem as an example. payouts from the blockchain are in the form of newly minted money.  It was never owned before.  The money comes from the inflation rate, which is presently around 8.5% (it might be a little lower).  Over time, this will keep decreasing.

![image.png](https://ipfs.busy.org/ipfs/QmRsE5y9CsuU1cZ9aGcHea6TFKRaJeZVNaAg5acXPDg9gx)
<center>[Source](http://www.nelsonmandelabay.gov.za/Business.aspx?pageID=216)</center>

The idea is to keep "printing" new STEEM to provide incentive to post, comment, and upvote.

This is not the only thing that Steem is dependent upon.  If Steem is going to be a top blockchain, it needs to move passed the "we are a blogging" mentality.  Other applications are going to be required to do this.  Hence, it is in the ecosystem's best interest to provide incentive to developers to create new projects.

In my mind, this is a perfectly viable use of the inflation rate.  In fact, now is the ideal time, while the rate is still high.  As the rate decreases in coming year, the amount of STEEM available for this is going to decrease.  Of course, the hope is that, by that time, the network effect is in place and people will be creating things naturally.

The fascinating part about cryptoeconomics is that it is a completely different system.  This might seem like I am stating the obvious but it goes much deeper than that.  A lot of the knowledge or models used, are no longer valid.  Ideas that were applicable in traditional economics are out the window.  We are seeing a move towards an idea of collectivism that is not like socialism or communism.  For those who are into volunteerism, this is the epitome of it.  Nobody is forced to remain here or participate.  

Everyone is on Steem because of his or her own free will.

When this is viewed as a cooperative, it takes on different meaning.  Anyone holding Steem Power benefits from all that takes place on here.

Let us use DMania as an example.  Here is an application that is no longer used (from what I can see).  It was very popular when I started here.  Let us look at it from a basic level.  One could saw DMania was a failed experiment.  If it had been funded through the inflation rate, the ecosystem would have suffered the losses while the individuals were, in effect, subsidized.

Is that really the case?  Here is a simple question: how many Steemians have SP in their accounts today that was earned two years ago by using DMania?  How many were able to delegate that SP out to others while also earning two years worth of inflation payout?  How many upvotes were given with that SP helping other accounts to grow a little bit more?

On another level, how many discussions took place about DMania that helped us to forge an idea about what we are?  Some were opposed to it while other thought it perfectly fine.  While there was probably no agreement reached, the discussion helped us to bring things into the open.

Finally, on a third level, how many other ideas were sprung from that?  Will others take it and run with it in the future?  Perhaps there is a way to build upon the idea to create something even greater.

With open source, there truly are no failures.  While many say it is true in life because we are presented a lesson, here we have another layer.  With this, the code is left behind.  That can provide a tremendous short-cut to people who follow.

One final point to this is that some feel it is akin to a tax.  I do not see it that way.  Nobody is forced to pay 10% (let's say) out of their earnings.  This is a change in how the inflation rate is distributed.  We have that already.  Is there a Witness tax that is taken out of each person's earnings to pay those running the blockchain?  Of course not.  Nor is there a "tax" to pay curators.

One could say "yes but if the change goes into effect, I will have a reduction in earnings."  Okay, fair enough.  The problem with that mindset is that, then, everything that is not going to the author (as an example) is a tax.  This mindset believes that his or her group is entitled to 100% of the inflation.  We could make the same case for Witnesses if they were affected.  A Witness could claim it is a tax against his or her earnings.  Well, under that mindset, so is paying authors.

Getting back to the topic, I believe an across the board funding out of the inflation rate to provide incentive for development is a sound idea.  This is no different then providing incentive for authors to post content.  

It is also the fantastic part of cryptoeconomics: we have the ability to offer incentive to what we want created.

And we all know, development at this stage of the game is vital.

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