f I am not misremembering, the number of free downvotes each account has is approximately 2 (per 24 hrs). So only 200% worth of downvotes can be given out before it starts affecting VP, therefore, curation rewards.

My understanding is that the level of free downvotes is set at 25% (or 2.5 full downvotes per 24h for free). That's based on my memory and the comments of other witnesses recently (I haven't check the code lately).

Is it because free downvotes exist? I don't think so. Even before free downvotes, even though it could be less than now, people did use the downvote feature.

The psychological effect will be present whether the downvotes are free or not, but people who understand how the system works 'may' be more bothered by the free downvotes since they know that the downvoter has actually financially gained as a result of the downvote. This is because, as Hive Alive's Untrending report now shows, around 4-8% of the rewards pool is returned to authors through downvoting overall - which therefore then gets paid to everyone making posts.. and this means that the downvoter will gain a boost on their own posts as a result of the downvoting. Not such an issue if downvoting is done for justifiable reasons that secure the chain - but definitely an issue with ideological downvoting.

My suggestion to consider lowering the rate of free downvotes, perhaps to 1 free downvote per day, is untested, but would result in downvoters being forced to be less ideological in their actions.

But again, it revolves back to the "frontend" aspect of things.

As long as rewards are being adjusted by the downvoting, the issue is not just a front end one. The back end is directly affected by the downvoting, which directly effects the core economics of the entire platform.

when Hive becomes more "modular" it is possible that L1 will not be the social/posting aspect any longer. To be honest, even today, someone can create their own sidechain token and award it however they'd like, ignoring downvotes altogether.

Yes, layer 2 tokens already exist for this purpose, such as VYB, but creating layer 2 tokens is expensive and only addresses the issue if enough people choose to buy into the token and leave core Hive behind. This is not a simple task to pull off for a variety of reasons.

For the moment, the majority of action and stake is in layer 1 Hive and so the issue needs to be addressed on layer 1. In future it may be that layer 1 becomes a 'governance' token only, but we are not there yet.

To return back to the removal and/or adjustment to free downvotes; It won't stop people from downvoting. But it might affect the fight against obvious spammers, plagiarists as well as reward pool abusers. So it is a case of "lose-lose" in my opinion.

I think your conclusion here is premature, given that we don't have data with which to assess the impact of an adjustment of free downvote rates. The aim in reducing the level of free downvotes is not to stop all downvoting, but to force downvoters to be more judicious and careful in their downvoting. At present, single account holders have ample downvote power to target scammers, spammers and plagiarisers, while also zeroing accounts of people who aren't any of those.. and STILL have downvote power left over - this leaves them free to basically dominate whoever they want, generating more profit for themselves in the process.

I can run analysis on the downvote data to produce useful calculations on how reductions in the free downvote pool might affect the rewards pool, but I haven't got to that yet. I personally don't know what a better level than 2.5 full downvotes per 24h will be, but I find it absurd to think that we have arrived at the absolute best figure by complete chance - even though it has never been experimented with publicly at different levels.

A perfect system would be dynamic, adjusting how many free downvotes are available per 24h based on community feedback. There could be reports on bad downvotes for example, that might lower the rate. All of this could be experimented with.

Regarding governance and potential "takeover" attacks; Hive is definitely stronger than Steem.

For sure.