You flag some crap content and that just moves reward to another crap content, doesn't it ?
So, first thing I would expect to be implemented (if you really want to bring some sense into this game) is the flagged reward to be actually burned, not just redistributed.
>You make the assumption that no one is creating good content
No, I just make the assumption that crap content is overwhelming here. So if I bother to flag some post and take away 20 cents, maybe 2 cents would go to some good content and something like 18 cents to the same crap.
That's just not efficient.