Steem inflation review for Q1/2025: Upbit's February SBD delisting triggered an inflation tsunami

As the first quarter of 2025 winds to a close, it's time to take another look at the current blockchain inflation information. I have been looking forward to this post, because we had some surprise events during the quarter - it was really sort of fascinating. But, I've also been apprehensive about it because I have to report that my previous claims of a November, 2023 peak in new STEEM per day were all wrong. I never like owning up to a mistake😉.

In all of my previous posts, I tried to include the caveat that the forward-looking numbers could be impacted by factors that I was unaware of. This quarter, one of those unanticipated factors came to light. So, let's look at how the delisting of SBDs on upbit and the subsequent SBD conversion activity affected inflation.

1. Here's what would be expected for the next few months, based on current values (subject to change from known and unknown factors):

Date	Block #	Inflation Rate	Supply	New Steem Per Day
2025-03-29 17:19:46	94250000	0.060100	563181955	92732
2025-04-07 09:39:46	94500000	0.060000	563986826	92710
2025-04-16 01:59:46	94750000	0.059900	564791505	92687
2025-04-24 18:19:46	95000000	0.059800	565595986	92664
2025-05-03 10:39:46	95250000	0.059700	566400267	92641
2025-05-12 02:59:46	95500000	0.059600	567204342	92617
2025-05-20 19:19:46	95750000	0.059500	568008208	92593
2025-05-29 11:39:46	96000000	0.059400	568811860	92568
2025-06-07 03:59:46	96250000	0.059300	569615295	92542

Note that the new STEEM per day value of 92,732 is up by about 4% from 88,823 in last quarter's post and it's also above the November 2023 value of 89,913 that I previously thought was going to be a multidecade peak.

This is despite the fact that the blockchain's inflation rate has dropped from a rate above 6¹/₂% to a rate near 6%.

More about that later, in the section where we look at the values from this quarter. The short version is that converting SBDs to STEEM lowers the blockchain's median price parameter, which means that each remaining SBD is worth more STEEM in conversion value. That increase boosts the virtual supply and, in turn, the new STEEM per day. As we'll see, there was a substantial amount of conversion activity.

2. And here's what the full visualizations of expected new STEEM per day look like (also subject to change from known and unknown factors):

With today's numbers, we'd expect to get back to Q4/2024 daily STEEM production levels in May, 2027.

3. Looking forward, here are the currently projected values for 1, 4, 8, and 12 years (subject to change from known and unknown factors).

Date	Block #	Inflation Rate	Supply	New Steem Per Day	Total Change in daily STEEM production	Total Change Pct
2025-03-29 17:19:46	94250000	0.0601	563181955	92732	0	0.00%
2026-03-29 07:19:46	104750000	0.0559	596772849	91396	-1336	-1.44%
2029-04-04 17:39:46	136500000	0.0432	693114547	82034	-10698	-11.54%
2033-04-02 01:39:46	178500000	0.0264	796507364	57610	-35122	-37.87%
2037-03-30 09:39:46	220500000	0.0096	855900545	22511	-70221	-75.72%

4. Here's a forward looking visual with projections for daily new STEEM, expected virtual supply, and the blockchain inflation rate. New for this quarter, I added upper and lower boundaries, so we can see the possible rates of production if/when the price of STEEM crosses above the SBD print threshold again.

For now, we remain stuck at the upper boundary.

5. Now let's look backwards in time using data from SteemDB

Here's where things get interesting. Note the bottom-right visual, which has the ratio of STEEM / SBD. This came out of nowhere - for most of the time that I've been watching this, the ratio was pegged a bit below 4 (as we see on the left side of the visual), but it suddenly became the main driver for inflation during the quarter.

Note also the "Collateralized STEEM" value in the top-left visual. That shows the elimination of debt when SBDs were converted from collateralized STEEM into actual STEEM. During the quarter, the SBD supply dropped from about 13.9 million to about 9.8 million. This eliminated a corresponding portion ( 29% ) of collateralized debt. With 5.1 million SBDs held by the SPS wallet, 52% of the blockchain's remaining debt is currently owed to the SPS.

5.1 Q3/2024

During the quarter, the blockchain inflation rate dropped from 6.11% to 6.01% and the annualized observed inflation rate after factoring in SBD conversions was a whopping 22.88%. Daily observed STEEM creation averaged 333,833 STEEM per day, which is more than 3¹/₂ times the projected value.

5.2 All Available Data

From September of 2024 until today, the blockchain inflation rate dropped from 6.25% to 6.01%. After factoring in SBD conversions, the annualized inflation rate was 13.55%. The average daily STEEM production was 193,896 - which is more than twice the projected value.

Cautionary note

It's important to remember that these projections can all change, depending upon known and unknown factors. Known factors:

1. Burning STEEM and/or SBD can reduce inflation
2. If the STEEM price goes above the SBD print threshold, that will reduce inflation
3. Witnesses can decide to start paying interest on SBDs, which would increase inflation.
4. If the STEEM price goes above the SBD print threshold, additional price movements can either increase or decrease inflation - depending upon direction of change.
5. Missed blocks by witnesses can reduce inflation
6. Witnesses can change any settings they choose in a hard fork, which could have any conceivable result.
7. SBD conversions increase inflation - as described above. This might change if the price of STEEM crosses above the SBD print threshold. I haven't thought through that scenario.
8. There may be other factors that I'm presently forgetting or not yet aware of.

Conclusion

All in all, it was a fascinating quarter to observe. Until now, my assumption about SBD conversions was that they were inflation-neutral. This quarter disproved that assumption. By lowering the SBD print threshold, each remaining SBD becomes more valuable in terms of STEEM, therefore SBD conversions actually serve to increase inflation in a way that I hadn't anticipated in previous reports.

Since many SBD conversions are continuing - albeit more slowly, it's even possible that daily STEEM production has not yet peaked. We'll have to wait and see what next quarter brings.

Caveat Lector: Any/all of these reports may contain mistakes, so be suitably skeptical.

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Thank you for your time and attention.

As a general rule, I up-vote comments that demonstrate "proof of reading".

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^{Steve Palmer is an IT professional with three decades of professional experience in data communications and information systems. He holds a bachelor's degree in mathematics, a master's degree in computer science, and a master's degree in information systems and technology management. He has been awarded 3 US patents.}

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