STEEM POWER Lease Rates Analysis – March 2018
Any shrewd investor knows what their Return On Investment (ROI) is, or at least they know what ROI they are looking for whenever they make a new investment. On the STEEM platform we have a market for STEEM POWER (SP) Delegation and that type of investment is no different. If you’re Delegating out your SP for a financial return then you should know what sort of return you’re getting. The most common measure for ROI on investments here is the Annual Percentage Rate (APR) even though I think it is not a good measure due to the constant fluctuations in the market. It can also make a huge difference if you’re getting paid up front, paid as you go, or paid at the end of the Lease duration due to the potential for compounding your investment.
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I started looking more closely at this recently because there has been an absence of SP available on the Lease market in recent months which I believe is due to the high STEEM DOLLAR (SBD) price. Many of the Businesses here on STEEM take payment in STEEM for leased SP and that ratio can be pretty stable, regardless of what the STEEM price is. However, the high SBD price has meant that each Upvote is worth more in STEEM terms due to the SBD component being worth more than 50% of the Upvote value. As a result we have had a “Gold Rush” effect on the SP Delegation market over the last couple of months where people started charging, and paying, much higher rates. I have a theory that we will see the SP Lease market come back to a more reasonable rate as the SBD price normalises closer to $1 but don’t take my word for it. Let’s have a look at some numbers.
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We’ll start with MinnowBooster. At the time of writing this we see at the top of the market there is a handful of SP Lease Bids that are quoted at about 26-31% APR for SP Lease sellers that have not been filled yet. Due to the fact that MinnowBooster takes a 10% cut of the actual lease price and also factors in the 7 day cooldown for the Delegation as part of the price (which the buyer must pay for) the actual buyers for these Leases at the top of the market are offering to pay an effective APR of about 35-44%.
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To my knowledge there is no other open exchange market for SP Delegation Leases but there is plenty of other action in this space. A number of users make private off-market deals and cut out the middle-man, which is smart business if you can trust that the user who is providing the Delegation or paying the Lease not to pull a swift one. I guess you could say that paying the MinnowBooster rate at least gives you a counterparty that can hold funds in escrow and they might give you some recourse if there is an issue. Personally I only ever like to do business with someone I know and trust, but it’s a risk/reward proposition for many and there are savings to be had.
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The other big market for getting an ROI on SP Delegations is via the Bid Bots. Of course the higher SBD price has exacerbated the explosion in the Bid Bot market, but many of the Bid Bots are profit sharing with users who Delegate SP to them as this extra SP makes them more valuable to bidders. So it’s worth having a look to see what sort of ROI these Bid Bots are returning for SP Delegators to see how competitive those returns are. The calculations here are a little bit trickier because often the Bid Bots are paid in SBD and they pay out their Dividends in SBD, so to calculate the ROI in terms of STEEM you need to have a look at the STEEM/SBD price ratio and the best place to see this at any instant is on the internal market. You can find the historical STEEM/SBD price ratio via Steem Supply which is a site set up by @dragosroua For the last 2 weeks this has fluctuated either side of 1.00 so to simplify the math I am going to average it out at 1.00 which I think is fair.
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There are a LOT of Bid Bots on the market and the data here could get pretty cumbersome so I am just going to have a look at 2 of the bigger Bid Bots on the market that are paying dividends. They are @smartsteem and @postpromoter. The average daily earning in liquid STEEM from Delegating 1,000 SP to these bid bots over the last 2 weeks is approximately :-
| Bid Bot | Average Daily Dividend | Annual Percentage Rate |
|---|---|---|
| SmartSteem | 0.693 STEEM | 25.29% |
| PostPromoter | 0.636 STEEM | 23.22% |
So here we can see that the Dividend returns on SP Leased to some of these big Bid Bots is very comparable to the ROI on the MinnowBooster exchange. The extra benefit of the Bid Bots is that they are “Set and Forget” as a more passive investment that does not need to be continually renewed like the short term leases on the MinnowBooster site, so perhaps it is fair that the APR on MinnowBooster is a little bit higher than the Bid Bots.
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All said and done, I think I’ve got a fair idea of where the market rate for SP Delegation Leases currently stands so I can now monitor it alongside the SBD price to see if my theory is correct that the APR on SP Leases is proportional to the SBD price. This is probably good reference material for anyone who has strong connections, a high reputation and is looking to negotiate an SP Lease off-market. As luck would have it, that’s exactly what I am doing.
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I am involved in a big community initiative that is trying to secure a good SP Lease rate to benefit members of this community. We will be trying to negotiate and finalise these SP Leases over the coming days and this is one of those great opportunities for investors to secure a higher APR than both the Bid Bots AND MinnowBooster as well as support a great community initiative that will actually add value to the STEEM platform. It’s a potential Win for Investors, a Win for this Community and a Win for the STEEM platform overall. I’d call that a Win, Win, Win scenario.
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If you know someone or are interested in Leasing SP to us and you’re trustworthy with a good Reputation, please look me up on Discord so that we can negotiate. We will consider leasing blocks of SP from 5,000 to 50,000 and we can offer additional promotional benefits to respectable Witnesses who want to get involved with community building initiatives and are trying to build their public profiles.
http://www.vsgeorge.com.au
https://www.opale-parachutes.com
https://www.minnowbooster.net
http://www.centercityteam.com
https://www.kaggle.com
http://www.activeendurance.com
https://www.esmt.org
This is helpful analysis bugged. While I'd like the returns I'm wary of leasing out SP cos of what the delegatee will start upvoting.
This is a great point. Thanks @choogirl you might have given me an idea for a follow up post on editorial standards :)
I know that some of the Bid Bots are maintaining blacklists and there are some basic frameworks being built to ensure some sort of post quality. With MinnowBooster I think your only recourse would be to cancel the lease and pull the delegation. When it comes to the community I'm involved in, we do have a couple of crackpots and sometimes the language is a bit loose (profanities etc) but it is a genuine community focused on building social networks, so while there is no editorial standards there are some community standards enforced via the membership process.
You may want to look at the comments here as well for some ideas.
https://steemit.com/abuse/@lexiconical/welcome-to-the-steemit-that-vote-buying-hath-wrought
Thanks for the heads up. Looks pretty hot in there.
Hey @buggedout! I just stopped my lease with @mattclarke for 10,000 SP so he might be looking to lease it back out for April. Thought I'd let you know just in case you were having trouble obtaining delegations. Cheers!
Thanks for the shout out and the consideration. I really appreciate that :)
I really need to read more posts before I make my content. I just did a similar post. Completely different, but the same topic. If i'd seen previously, i would have linked your post in.
It's all good mate. I read your post and I think you came at it from another angle, so they're complementary posts I reckon :)
It is very good to have you here helping the community. The article was very insightful. Thanks.
blocktrades also has a market for delegated steem power, but they usually don't have any available.
Ah, thanks. I forgot about that one. Last time I looked their APR was more like 46% and it doesn't look like it's been updated in a while.
Sir i want to take part in this would you please define conditions
I negotiate specifics via Discord not via the blockchain. Find me there.
I understood 5 words in that post. We're very lucky to have you, hehe.
Sorry if it's a little bit egg-head-ish. I was hoping it would be more readable than that.
Great post bugged,
Lots of information before work. I'll going to be thinking about this all day now, lol
Good! The more brainpower we have working on getting these leases the better I reckon :)
Grateful to have you do this for the community @buggedout Thank You
You're welcome. Hopefully this approach works :)
There is profit to be made from the big guys on here. It is a competitive market. Can I ask who we’ve got the 30,000 SP delegation from for the SSG bot. Tell me to mind my own if you wish just being nosey.
Negotiations are best conducted privately until they are finalised.
That’s polite for mind my own business. Lol.
Fair enough good luck on getting the leases up and running.
It's more of a courtesy to those who we might be negotiating with and also to prevent others from potentially gazumping or undermining us. It's just smart business. No offence intended :)