Are we better off when the value of Steem is high or low? What about having the SBD pegged at $1 USD or allowing it's value to float on the open market?

I have often asked myself these questions, and today I decided to crunch some numbers to find out. I find it quite confusing (STILL, after almost a year) trying to sort out in my own mind between SBD, Steem or Steem Power and how these relate to the USD. I found that a table helped me to visualize what was actually going on.

For the real newbies: Steem and Steem Power (SP) convert 1:1. They are basically the same thing, except Steem is liquid (easily moved or spent) while Steem Power (SP) is locked in and gives voting power.

In order to keep things simple, I am totally ignoring curation and its associated rewards. I am also using a fixed PAY-OUT of $2.00 because when using the 50-50 payout it splits nicely into giving $1 to each of SBD and SP.

From the above table, one can easily see from line 6 that if we did NOT use the 50-50 payout at this time (with Steem currently sitting at around $4), a $2 pay-out would be converted to just 0.5 SP (It costs $4 to buy 1 SP, so $2 only buys a half of one SP).

Line 5 shows that by splitting your rewards, a $2 payout {column B} will give you 1 SBD (because it is erroneously assumed that the SBD is pegged at $1 USD) and $1 WORTH of SP (which in this case is 1/4 SP) {column C}. Now if you were to convert your earnings to SP {column D}, you would end up with 1 SP (1 SBD at $4 = 1 SP at $4) and 0.25 SP, for a total of {column E} 1.25 SP.

With the SBD currently at around $5, you actually get a bit MORE SP when you sell your SBD for Steem and then power up into SP.

Line 6 also demonstrates what would happen to your payouts if the SBD was in fact pegged to the USD as has been proposed. Without the benefit of allowing the value of the SBD to rise up with the value of Steem, it would cost 4 times more SBD's to purchase SP and it would be equivalent to taking your pay-out as 100% SP.

Line 3 of the table is there to orient oneself with what is being shown by using both Steem and the SBD at a value of $1 USD. Column B shows a pay-out of $2 and column C shows that same pay-out broken down into 1 SBD and 1 SP. This is the way one would receive their payment if they chose the 50-50 split. In order to power up, you would need to convert (column D) your SBD into Steem and then 'move' the Steem to SP. Column E shows you the total amount of SP earned after the conversion.

Lines 8 and 9 are similar to lines 5 and 6, except that in this case the value of Steem is assumed to be $10 instead of $4. Allowing the value of SBD's to match the value of Steem keeps total earnings comparatively high (line 8) while we can clearly see that a rise in the value of Steem while keeping the SBD pegged at $1 USD (line 9) would hurt potential growth a lot!

Although the above clearly indicates that a rising value of Steem is harmful to growth, let's not forget that as the value of Steem increases, so do the pay-out amounts. When I had roughly 400 SP and Steem was worth approximately $1, my votes generated 4 cents (or 1 cent per hundred SP). I'm now at roughly 670 SP and my votes yield 20 cents (or 2.985 cents per hundred SP) while Steem is roughly $4.50. So with Steem worth 4.5 times as much as it was before, one would expect my votes to yield 4.5 times as much as before, or 4.5 cents per 100 SP. However, we can see that (line 13) this is clearly not the case. Again, the rising value of Steem hurts growth. It is very clear that the more Steem goes up in value, the harder it will be to earn Steem Power. This would apply to both the little fish and the whales because it is universal to how rewards are calculated.

Just for fun, I added line 16 to see what it was like to be one of the very early adopters who were earning SP when Steem was worth 10 cents and the SBD was worth $1. Ignoring the fact that there was far less competition to receiving eyeballs and votes and that the reward pool was divided by way fewer people, they were lucky enough to earn SP at roughly 16 times what we can do now.

In conclusion, I would say that it is great for people who are selling Steem to have a high Steem value because they will gain from the appreciation of their asset. Those who have already accummulated enough Steem and are simply cashing in will want to see a high Steem value. Those who are not yet finished accummulating Steem would likely want to see the value of Steem rise and fall so that they can buy when the price is low and at the same time earn more as well; then sell when the price goes up and benefit from the difference between the price paid and the price received. The thousands who are desperately trying to earn Steem should be hoping that the price of Steem goes down so that they can accumulate more before the value increases (as it undoubtedly will). Everyone who is already here should be thankful they got in early because it will only get harder and harder to accumulate Steem as the price rises.

So which is better? A high value of Steem or a low value? I guess it depends on who you ask and where they are at!

I sincerely thank you for your interest!