Is SBD back in the Reward System? - Understanding the Determinants

The return of SBD back in the reward system on Steemit seems to be the freshest news we have seen in recent days on the platform. While existing users are happy about SBD, some new users are curious about what the whole thing is all about.

_{Free Image from FreePik}

But, how did this asset (SBD) make its way back into the rewards? As existing or new users, you deserve to know a little about what's going on such that you equip yourself with the knowledge of how the Steem blockchain works. So, I've got a piece to share with you today.

Steem Backed Dollar (SBD) stopped printing in early May 2022. At that time, many users who joined the platform around 2020 through early 2022 had not experienced such before and that created a lot of confusion as regards the disappearance of SBD in users' rewards.

Basically, the debt ratio at a point would determine how users receive their authors' reward to keep things balanced on the Steem blockchain. Remember, author rewards can be received in STEEM, SBD, or STEEM Power depending on the author's reward setting and the debt ratio at a point in time.

I've got a piece for you as regards the debt ratio if you haven't seen it before, it's an article I created during the heat of the SBD's disappearance in May 2022-
Debt Ratio's Impact on the Authors' Rewards on Steem- Understanding the Current Situation. Now that you have read a little about the debt ratio, let's proceed.

The debt ratio over time largely depends on the market capitalization of STEEM and that of the SBD. We can't talk about market capitalization without the supply and price of an asset because it's a product of both (supply and price).

Many users asked me when SBD would be back and I have always emphasized, price. The price of STEEM has a huge role to play in elevating its market cap and giving it weight to achieve a reduced debt ratio. So, what has happened in the last one and a half years?

• SBD stopped printing (limiting its supply during the period).

• STEEM continually prints (increased supply).

• Increased STEEM's market price.

In fact, the three points above being fulfilled is all the STEEM blockchain needs to achieve a reduced debt ratio and we will use that in our calculation later. Over the period, SBD suffered a decrease in market price.

The SBD/USD chart above shows that SBD touched a low it has previously seen in 2 years (Dec 2020 - Nov 2022). Quite interesting, while many of us weren't paying attention, SBD hit 1.17 USD and was almost back to maintain a 1:1 parity with the USD.

That said, the supply of SBD remained unchanged over the period while STEEM supply and price have expanded. So let's calculate our debt ratio to determine how an author who sets his/her reward to 50%SBD/50%SP receives a post reward at payout.

• Debt Ratio = SBD's Market Capitalization / STEEM's Market Capitalization.

So, we need to know the Virtual supply and Price of STEEM, the product gives us the market cap.

_{https://steemdb.io/}

From the image above, we can see that the virtual supply of STEEM is 493517639.597 and the supply of SBD is 12575749.776. And STEEM was trading at 0.2769 USD at the point I was creating this content.

_{https://coinmarketcap.com/currencies/steem/}

Such that,

• STEEM market cap = 493517639.597 * $0.2769 = $136655034.40.

• SBD market cap = 12575749.776 * $1 = $12575749.776. Note: the STEEM blockchain considers SBD to be $1 at all times because it's a stablecoin pegged to the USD on the ratio of 1:1. We will talk more about the broken peg subsequently.

Now, the debt ratio equals,

Debt ratio = $12575749.776/$493517639.597 = ~0.092 - - - 9.2%.

And to achieve SBD printing again, the debt ratio must be less than 10%. And at <=9% SBD printing is back at 100%. The debt ratio is within 9% - 10% now, which implies author rewards are being received in STEEM, SBD and SP.

By exploring the Steemdb.io tool, it can be seen that SBD printing rate is at 87%. Reason why you can still see some STEEM on your rewards.

_{https://steemdb.io/}

You can always check the website I included above to see the current SBD printing rate and maybe work things out on your own to get more familiar with the STEEM blockchain. I have written a simple JavaScript function (steemDebtRatio) to calculate the debt ratio at any point in time, you can use your Chrome developer tool to run it whenever you want, although you have to manually input the virtual supply and price of STEEM and the SBD supply, via a prompt.

var x = prompt("Enter the SBD supply");
var y = prompt("Enter the STEEM virtual supply");
var z = prompt("Enter the STEEM market price");

function steemDebtRatio (x,y,z) {
return (x / (y * z) * 100) + "%";
}

steemDebtRatio(x,y,z);

Where are we now? Over the last few days, we have seen a quick switch in the SBD printing rate from attaining 100% and slipping below again. A few things to note:

• SBD is printing again which eliminates its stagnation of many months.

• The continuous supply of SBD affects the debt ratio if it's assumed that the price of STEEM remains at a level.

To achieve a more stable debt ratio below 9%, STEEM's price is a huge factor. The higher it goes, the more stable the debt ratio is achieved as there is an increased STEEM market cap and a reduction in the printing of STEEM as a reward.

Well, we can't deny the fact that SBD printing for rewards is not satisfying the initial intention of stopping the excess supply of STEEM on the blockchain, because with SBD, excesses of STEEM are still created due to SBD not maintaining its parity to USD. But, SBD tends to benefit authors more as seen over the years, that's crazy, you know?

In conclusion, the debt ratio determines how the author reward is paid out on the STEEM blockchain over some time and it is a concept you need to understand such that you don't get confused about the rewards payout subsequently. I hope you have learned something today. Drop a comment about what you have learned from this today. Thanks for reading.