Powerup Statistics #21 - Sep 14th - Sep 27th + Addressing STEEM Inflation and why SBD is $0,62.

in #exyle10 months ago

Every two weeks or so I like to compare the current power-up statistics and see how we stand.

Here they are:


14 September 2019


STEEMAmount
STEEMPOWER201,5 million
LIQUID STEEM123,8 million
SBD7,6 million

Virtual Supply ≈ 361,451,227 STEEM


27 September 2019


STEEMAmount
STEEMPOWER204,6 million (+3,1 million)
LIQUID STEEM121,8 million (-2,0 million)
SBD7,6 million (0 million)

Virtual Supply ≈ 362,637,255 STEEM


YES! It was clear it was going to happen this report but it's nice to see it in numbers anyway!

For the first time in a long time, the amount of Liquid Steem has gone down over a two week period by an impressive 2 million STEEM!

What helps a lot is Steemit Inc. not powering down twice in this two-week report (they normally power down 326k a week).

But I also feel that #newsteem has a lot to do with it.

Let's hope we can keep this momentum going!


Addressing STEEM Inflation


There is this constant idea going around that STEEM inflation is +20% or more.

It is indeed true that STEEM inflation has been higher than it should be but that's because of an anomaly it's not a constant.

The anomaly is the SBD.

In the extreme bull market of 2017, there was an extraordinary amount of SBD printed (think millions).

Half of the payout of posts are normally in SBD and in the bull market payouts went to very high levels.

So a $500 post under $4 dollar STEEM would result in a payout of: 62,5 STEEM + 250 SBD.


As you know there is a function in the blockchain that can convert an SBD to $1 worth of STEEM over a 3,5 day period.

Example:


IF STEEM is 50 cents then an SBD can be converted into 2 STEEM.

IF STEEM is 25 cents then an SBD can be converted into 4 STEEM.

If STEEM is 4 dollars then an SBD can be converted into 0,25 STEEM.

IF STEEM is 4 dollars and you want to convert 250 SBD to STEEM that would give you: 62,5 STEEM.


What has happened to cause higher inflation?

Well. All those SBD's that were printed under $4 STEEM were not converted to STEEM. They were kept.

And then....the price of STEEM started to drop. Lower and lower and lower.

Now all those SBD's could be converted for way more STEEM then at the moment they were created.

And that happened. Millions of SBD were converted to STEEM while the price of STEEM dropped.

And of course this increased inflation.

Luckily for us, there is a failsafe in the blockchain that prevents this process from running out of control.

If the price of STEEM drops too much the price at which you can convert get's stuck.


Screenshot 2019-09-27 at 09.42.04.png


Currently, if you want to convert an SBD to STEEM it will take the price of 21 cents instead of 13 cents market value.

So when you want to convert an SBD you will get $1/$0,21 = 4,76 STEEM.

AND NOT!! $1/$0,13 = 7,69STEEM.

That also explains why SBD is trading for $0,62 currently and not $1.

4,76 STEEM = $0,62.


So what now?


In my last reports, STEEM inflation has returned to normal (~8-9% a year).

Why? That's because nobody is converting SBD's at the moment because it's not worth it.

But still, 7,6 million SBD's are left.

SBD conversion will start up again if we reach the 21 cents area again.

So it's not over yet.

But all of this is a result of the extreme bull market of 2017 and the SBD's that were printed and has nothing to do with STEEM's standard inflation.

I think the original idea of the SBD did not take into account the extreme price rises of 20 cents to 8 dollars and back again when it was thought off.

Without these extreme swings, it would work very well as a stable coin worth $1.

I hope this information was useful.

Next report in two weeks!



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@exyle,
I wish STEEMIT INC might not power down next month too! I think it's the major impact so far on power ups!
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Cheers~

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It was a new information to me. Is it possible to completely take away SBD part from steem in the upcoming hard Fork? The very existence of two different coins itself is quite confusing for newcomers.

And a small suggestion.. would you put 'full stop' to mark decimals instead of 'comma'? They are confusing.

Agree with this if you could go back in time to when the Blockchain started and avoid minting it. But some people hold it now and you can't obliterate it out of existence can you? Or if you issued STEEM for SBD held now, what is the fairest price to force people to part with the SBD.

Yeah, I get it. Now we can't do anything as it has become an unavoidable part of the system.

For years this has been suggested and the answer is no, SBD was created to be sort off pegged currency so that businesses created in Steem can have a sort-off stabled currency to work with but right now its not the case!

And be prepared for a lot more complexity when SMTs come out because these tokens will work like Steem and you'll be able to power up/power down/delegate these as well and there's gonna be hundreds of them!

That kind of complexity does nothing more than turning newcomers down. Steem will be full of geeks.

@exyle, This is extremely useful and detailed explanation. And it also suggests that we are yet not out of danger of higher inflation because as as soon as Steem price reaches 0.21 - we will end up printing more Steems.

But the scary part is we have yet not come up with any mechanism -not to be in similar trap after the next bull run, if and when that happens.

Good jhob friedns

If I recall correctly, our witnesses agreed to raise the ratio of the market cap of SBD and the market cap of STEEM (of the virtual supply or the supply of STEEM itself?) called the SBD Debt Ratio from 5% to 9% at which point the printing of SBD will start to decrease linearly until it reaches 10% when it stops completely.

If Steem goes even higher during the next bull run than it did during the previous one, then SBD will be printed in even more extreme numbers than they were in early 2018. The purpose of this measure was probably to keep SBD from pumping as madly as it did in December 2017 (peaked at a whopping 14 USD). But that it does have the side effect of creating even more SBD than before.

I think the main problem was SBD spiking over 1$ which caused a lot of these issues. And not the steem price itself spiking.

Read the post again. It was precisely the rocketing of the price of STEEM that caused the problems @exyle is talking about. That's because the quantity SBD in circulation increased tremendously (remember, all liquid rewards are normally paid out in SBD). SBD is Steem Backed Dollar as the name suggests. The exact mechanism of backing it uses is the process of conversion into STEEM whereby new STEEM worth exactly 1 USD is printed for every 1 SBD burned. When the price of STEEM is very low, particularly large amounts of STEEM is generated in the conversion process, which exacerbates the problem until the SBD Debt Ratio goes above 10%, in which case the conversion no longer yields 1 USD worth of STEEM for every SBD converted (=burned).

The price of SBD spiking had absolutely nothing directly to do with these problems. To a small degree, it played a part in causing STEEM to spike. But that part was not too big because the market cap of SBD was never too large and because the price spike of SBD was very short-lived.

True, the problem is if Steem spikes up, SBD print rates go up, and when the Steem price then goes down again, the sbd price will stay at 1$ and will then pressure the Steem price. I got it wrong.

Thank you for this detailed analysis. There are so many things I was yet to glean about and printing and it's prices.

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Hmmm. Interesting. I wondered what was going on with SBDs because I seeem to remember that when there was a big gap previously people were writing posts about buying SBD and converting it. But nobody has mentioned it much this time.

That must have been a different situation, presumably when the value of Steem was high.

Exactly. I was one of those. In an effort to get sbd to it's peg, people have to convert it regularly. Right now, there's no advantage to that (unless you think steem is going to dive further, but then why not just hang on to your fiat? If you think steem is going up, well, and should rise with it, too. But then why not just buy Steem? I suppose it's a hedge between the two possibilities. If steem drops, sbd will drop, too, but not as much. If steem rises, sbd will rise, too, but not as much.)

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It's all very mysterious to me. I've read so many posts about this stuff over the time I've been here but it's still are clear as mud! 😂

Ask and I shall answer!

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oh wow that was pretty awesome update after such a long time :D

I traded some SBD the other day because I saw one of the markets had it jumping up to $1.06 for an hour or so. I didn't get the price I was expecting to get though. It is okay, I don't really mind. I just powered it all up anyway. Nice review and great info!

Mark @exyle I am Still Glad my Money has been more in Steemmonsters than in Steem. At Least I did not Lose as Big on the Way Down with STEEM Price............

Simple, easy to understand post. I was wondering about the price if SBD. I was one of those that had a few and as the price of steem slowly dropped sold and converted to Steem, and then powered it up. Have a sip of !BEER for making this easy to understand for me.

View or trade BEER at steem-engine.



Hey @exyle, here is a bit BEER for you. Enjoy it!

Thanks for a clear explanation of the SBD situation. : )

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