A committed community is the bedrock of a stable currency. Steem creates economic incentives for 90% of STEEM to be locked up and vesting for at least one year at all times. Users are required to hold vesting STEEM in order to transact and vote.
Anytime less than 90% of STEEM is vesting, the network gradually transfers value from liquid STEEM to vesting STEEM via interest payments. All else being equal, any deviation from 90% vesting will corrected by about 50% per year through interest payments. Interest is paid by the creation of new STEEM so accounts holding liquid STEEM never see their balance decrease.
In addition to earning interest, vesting STEEM is also protected from most dilution any time less than 90% of STEEM is vesting. While the number of STEEM may always be increasing, the percent of total STEEM held by vesting STEEM holders usually remains flat or grows. Given a constant market capitalization, the value of an account holding vesting STEEM will increase unless more than 90% of all STEEM is vesting.
The combination of dilution protection and earning interest make vesting STEEM the first “high yield”, “dividend-paying”, “deflationary” crypto-asset.
Note: if more than 90% of STEEM is vesting then there will be a negative inflation-adjusted interest rate on vesting STEEM
Resitrictions on Vesting STEEM (VESTS)
Vesting STEEM is non-transferrable and non-divisible. It can only be converted back to STEEM via 104 equal weekly installments.