Attention SBD Converters: Please Read - Important Information about SBD -> STEEM Conversions

23 days ago
71 in sbd

Users are advised to NOT convert SBD to STEEM at this time

Users should not convert convert SBD to STEEM using the 3.5 day conversion unless they have reviewed the market conditions carefully, and know what they are doing.

SBD is currently trading for more than $1 USD worth of Bitcoin / STEEM.

What that means is that you are better off using the internal Currency Market to trade your SBD for STEEM. You will get more STEEM per SBD this way, since SBD is trading for more than a dollar.

An alternate option (if you know what you are doing) is to use an exchange like BlockTrades, Poloniex, or Bittrex to trade the SBD for BTC.

Many witnesses are starting to adjust their price feeds to inflate the price of STEEM.

The intention of this is to temporally increase payouts / SBD generation, since they are currently artificially low due to the rewards pool changes in HF 18.

As more witnesses adopt a premium, the amount of STEEM that SBD conversions produce will decrease. It is possible/likely that under these conditions, SBD conversions will pay out less than $1 USD worth of STEEM.

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46
  ·  23 days ago

Why are witnesses setting the price? It's supposed to be dictated by the free market, otherwise we are not better than the fed...

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68
  ·  23 days ago

'In effect, feed producers are entrusted with the responsibility of setting monetary policy for the purpose of maintaining a stable peg to the USD' (Steem White Paper, p.14). SBD is not supposed to be priced by the free market. The purpose of the token is to have its price manipulated by both the autonomous mechanisms of the blockchain and witness inputs so as to maintain a stable value relationship with (the also manipulated) USD. That offers more utility to users who live in a fiat-dominated world. If and when such a world ceases to exist, then such manipulation will have no value, but for now it has great value. @timcliff's point about there being no value in treating arbitrary and aburpt supply changes due to obscure blockchain factors such as the change to a 30-day reward pool as being meaningful to 'free market' pricing is also a good one. Our job is to support the utility of SBD by maintaining the 1-1 peg (within reason). It is not to abandon the peg and defer to free market pricing.

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46
  ·  22 days ago

SBD is not supposed to be priced by the free market.

But it is.

@timcliff 's last response

When witnesses artificially inflate the price of STEEM via their price feed, it causes the amount of SBD rewards that are available for post rewards to go up.

So the purpose of the price feed is to produce more or less SBD in order to lower/increase SBD price if too high/low. Witnesses can influence the price but ultimately the free market decides what the price is.

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71
  ·  23 days ago

The purpose of SBD is to be a pegged asset. The free market should dictate the price of STEEM.

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46
  ·  23 days ago

SBD is also dictated by the free market.Did witnesses chose to pump SBD recently? Nope, it's the free market that did it.I don't see the point of the price feed

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71
  ·  23 days ago

The HF 18 conditions of reduced rewards are not a natural market condition.

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46
  ·  23 days ago

The HF 18 conditions of reduced rewards

What do you mean?

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71
  ·  23 days ago

Because of HF 18, the payouts are all artificially low right now because the 30 day rewards pool is being 'filled'.

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46
  ·  22 days ago

I don't see how this is relevant to witnesses setting price feed...

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71
  ·  22 days ago

When witnesses artificially inflate the price of STEEM via their price feed, it causes the amount of SBD rewards that are available for post rewards to go up.

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46
  ·  22 days ago

Because of this, witnesses often use a small 'price discount' to artificially lower the price of STEEM internal to the Steem blockchain

Do you mean that the price of steem on the internal market is based on witnesses price feed? If yes, then the price of STEEM is not dictated by the free market.

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71
  ·  22 days ago

No, the price on the internal market is based on whatever market participants are willing to buy/sell at.

The blockchain has it's own internal price, which is different than the internal market price. The blockchain price is used to determine the amount of STEEM that SBD conversions produce, as well as how much SBD to pay out for author rewards. This price is set by the witness price feeds.

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46
  ·  22 days ago

The blockchain price is used to determine the amount of STEEM that SBD conversions produce

The conversions between STEEM and SBD happen on the internal market and are based on the price of STEEM which would mean that the price of STEEM on internal market is set by witnesses. Are there other internal conversions that I'm not aware of?

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71
  ·  22 days ago

I think you are confused. There are two completely separate prices:

Price 1: The internal market price, set by the buying and selling of STEEM/SBD.
Price 2: The internal blockchain price, set by the witnesses price feeds.

There is also a difference between "converting" SBD to STEEM (done through the wallet, and takes 3.5 days), and "trading/exchanging" SBD for STEEM (done through the internal market, or through an external exchange).

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46
  ·  22 days ago

Thanks for clearing this up for me. Just to make sure I understood properly, the STEEM price set by witnesses has no influence on STEEM market price, it is just an internal price to do conversions correct?

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71
  ·  22 days ago

Yes, that is correct.

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69
  ·  22 days ago

Good questions / answers. Upvoted with @adm for visibility.

71
  ·  23 days ago

there was time when SBD was trading on 1,7 USD few days ago, now its not that far from usual 1 USD +/- 10%.
sure feeds need updating but there was better times to sell SBD for crazy profits ;)

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71
  ·  23 days ago

Indeed. Holding and hoping for another spike might not be a horrible idea either :) The main thing though is converting to STEEM via the wallet conversion is not a good idea at this time, because it will give you less than you would get from trading.

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69
  ·  22 days ago

Oh nooo! I wish I had read this in time, I'm going to lose an arm on this conversion now:

:P

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65
  ·  22 days ago

Also you shouldn't convert when the coinmarketcap price of SBD is over $1. That's a good time to sell instead.

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68
  ·  21 days ago

SBD a few days ago it wasn't 1,7 USD, it was almost 7 USD! I'm not going to lie, but I sold 50 SBD for 250 USD! 5 times more!

73
  ·  23 days ago

Thanks for the heads up. You always have very useful and valuable information. You got my witness vote.

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71
  ·  23 days ago

Thanks @jrcornel :)

60
  ·  23 days ago

Thanks for sharing this as I am trying to learn all I can!

67
  ·  23 days ago

Thanks for the information Tim! Also, would you happen to know when the steemit announcement is going to be made?

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67
  ·  23 days ago

I think it was already made. Try the tag #steemitblog

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67
  ·  23 days ago

I clicked on that, and the only thing there was from 29 days ago, lol

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67
  ·  23 days ago

If you're referring to this: https://steemit.com/steem/@steemitblog/important-notification
I've already seen it. I was told they were putting out a more in depth announcement today.

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67
  ·  23 days ago
66
  ·  23 days ago

Thanks @timcliff, resteemed.

71
  ·  23 days ago

Many thanks sir @timcliff for the valuable information, always accurate and accurate, I appreciate what you do for the platform and the community.

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71
  ·  23 days ago

Thanks @jlufer :)

72
  ·  23 days ago

Thumbs up and thank you for the explanation!

51
  ·  23 days ago

Cheers @timcliff! Engaging and very useful material. Keep posting!

62
  ·  23 days ago

Thanks, resteemed.

49
  ·  22 days ago

Now I'm confused. I thought SBD was pegged 1:1 with USD.

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71
  ·  22 days ago

The reason that it is pegged is the trust that the blockchain will produce "approximately 1 USD worth of STEEM" when users convert SBD to STEEM via the conversion.

Because of fluctuations in the price of STEEM though, users who convert often receive more or less STEEM than "1 USD worth". Because of this, witnesses often use a small 'price discount' to artificially lower the price of STEEM internal to the Steem blockchain, so that the conversions result in a little extra STEEM. With the price discount in place, it helps keep SBD closer to the $1 peg.

Witnesses also influence the peg by setting the SBD interest rate, to encourage users to buy and hold SBD (to gain interest).

Based on all the activity and parameters (set by the witnesses), the market decides what SBD is worth. It is the responsibility of the witnesses to adjust the parameters they have control over in order to influence the market conditions so that SBD does peg as close to possible 1:1 with USD.

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49
  ·  22 days ago

Thanks for putting things into perspective. Following for more insights!

69
  ·  22 days ago

Thank you Tim! You're aces.
:D

58
  ·  22 days ago

Resteemed... thank you for your explaination. Nice !:)

54
  ·  22 days ago

Resteemed!

67
  ·  22 days ago

Resteemed.

64
  ·  22 days ago

Great information, as always, thanks !!.

60
  ·  22 days ago

Why would anyone sell of SBD unless there is a pump?

70
  ·  22 days ago

Thanks Tim for alarming this. I think artificially increasing the feed a lot (even up to 50%) may bring about some side-effects, such as what you mentioned here.