If 1/10 of the supply is being wiped every 3 years then we have a problem cuz SP tokens will only be backed by 0.1 steem.
This seems like a misreading of some aspect of the economics involved. What are you basing this off of?
Whitepaper says : In order to compensate for the ever increasing precision, the STEEM network performs a 10:1 “reverse split” every 32,000,000 blocks (about 3 years).
When they reached about 5b coins which is about 32 000 000 blocks the split will occur. After that SP tokens will be backed by 0.1 steem since 1/10 have been wiped.
There are no 'SP tokens' it is a virtual unit that is derived by multiplying the number of VESTS tokens (largely a hidden token in the system from the perspective of end users) by the exchange rate. When the reverse split happens the exchange rate will be reduced by a factor of 10 to compensate. Nothing will change about SP ownership except the position of the decimal. 1 Steem will still be convertible to 1 SP (and vice versa, allowing for the two-year delay).
I need clarification here.
If SP tokens are steem tokens why are they not also being reduced 10:1 ? Say after 32 000 000 blocks 5b steem were created. Out of those 5b steem 4b are held as SP tokens and 1b are held as steem token.
If you only reduce steem tokens then you would burn 9/10 of 1b. There would still be 4b steem tokens in circulation held in SP tokens.
Now if you burn all the tokens as mentionned in the whitepaper ( 5b of them) you also need to burn the SP tokens..
SP will observe the same reverse stock split as Steem.
You keep mentioning SP tokens, but that is confused. No such token exists. Your SP balance is the product of your VESTS tokens times the exchange rate. When 90% of the Steem in the vesting fund is destroyed, the exchange rate will adjust accordingly, and so will your SP.