Rewards Pool

INLEO operates on a distribution model of "Engage to Earn". Our userbase engages with content - both short-form "Threads" and long-form "Posts" - and earns crypto in the form of LEO for doing so.

Where Do the Rewards Come From?

Whenever describing INLEO, this is the first question that pops up. Where are these rewards derived from and how sustainable are they?

LEO has a unique model of distribution in the crypto space. Since there are zero fees on the Hive blockchain (where INLEO is built), we are able conduct distributions at a very micro level. The smallest denomination of LEO is 0.001 LEO which is currently (November 2023) worth $0.000035.

The Rewards Pool is a daily pool of LEO tokens that are created through inflation. The inflation rate of LEO is currently ~6,000 LEO per day or 2,190,000 LEO per year. This inflation rate slowly drops each year on a programmatic block schedule. It is set to reach a total max supply of 50M LEO in the year 2056 (roughly 32 years from now).

As the pool approaches this date, the rewards pool model will flip from being inflation-based to being buyback-based. A smart contract will collect a percentage of the various revenue mechanisms on INLEO and use that revenue to purchase LEO and place it into a new rewards pool. We call this the SIRP (System Income Rewards Pool). Effectively, the share of the rewards pool that comes from inflation consistently decreases as the rewards pool that comes from real revenue increases. The SIRP begins distributing rewards in 2033 (when the inflation rate of LEO drops below 4%).

How Are Rewards Distributed?

Rewards are distributed through "Upvotes" which are the equivalent of a "Like button" on platforms like Facebook or X. When you upvote a creator, you are distributing a percentage of the daily rewards pool to the Thread or Blog Post that you upvoted.

The amount of the rewards pool that you can dictate comes from how much LEO POWER you have staked. The more LEO POWER you have staked, the larger your upvote is. For example, let's say you have 1M LEO POWER staked and the rewards pool is 6,000 LEO per day. Also assume there is a total of 10M LEO staked. You have 10% of the total LEO POWER staked which means you can dictate the flow of 10% of the rewards pool (600 LEO per day) with your upvotes. The "Curation" section dives into more details on how exactly upvotes work and how many you get per day.

When you upvote someone, they get 50% of the upvote value and you get 50% of the upvote value. This separation in rewards is called the "Author / Curator" split. The author of the post gets half and the curator of the post gets half. The curve is linear, so if you give someone an upvote worth 6 LEO, you will retain 3 LEO and they will get 3 LEO from the rewards pool.

Following again from our example, you have 10% of the LEO POWER staked and 6,000 LEO per day is the rewards pool. If you upvote someone with a full upvote, then you dictate 1/10th of your total voting power for the day to that post/thread. Your 1/10th upvote is worth 60 LEO. So you retain 30 LEO as a curation reward and the recipient creator receives 30 LEO for their work.

Downvotes

Downvotes allow users to take away rewards from a particular Post or Thread. This is a community moderation mechanism to protect the system from abuse. Downvotes are typically few and far between. They are essentially the inverse of an upvote. The more LEO POWER a user has staked, the more LEO they can remove from the rewards of a post/thread. Using a downvote replaces one of your own upvotes for that day, so the incentive to downvote is if you are a stakeholder and see abuse happening and want to fight against it for the good of your stake in the platform.

Incentive Structure

There is interesting game theory to the incentive structure of upvoting. When an upvote is cast, the author gets 50% and the curator gets 50% of the value of that upvote. One would beg the question: why not just upvote yourself? Then you retain 100% of every vote. A mechanism exists for the community to self-govern this through "downvotes". Self-voting is frowned upon by the community at large, so anyone found self-voting typically gets their vote value removed (downvoting is basically an anti-upvote, removing the rewards that an upvote is distributing to a particular piece of content).

The other piece of game theory is surrounding who to upvote. Since this is a stake-based system, your incentive as a large stakeholder is to upvote people who you believe will increase the value of your own stake. That means you are disincentivized to upvote people who abuse the platform or who are plagiarizing content or any other activity that is extracting value from the ecosystem and not actively engaged in building the value of LEO. You are also positively incentivized to upvote people who are creating content that is driving views, engagement and other net-positive actions on the platform.