% of Author Rewards to be Paid in Steem - Tuesday 13th onwards...

in #steem-help8 years ago (edited)

Many users will have seen the latest Steem Protocol Update 0.14.0, which is due to come into effect 9/13/2016 at 11 AM EST (3 PM GMT).


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This is a quick post to get everyone’s attention to the section;

Steem Dollar Stability

Starting when Steem Dollars are 2% of the market cap, a portional of content rewards will be awarded as Steem instead of Steem Dollars. The rate at which Steem Dollars are printed is 50% of the reward at 2% or less market cap and 0% at 5% or more market cap, linearly extrapolated from 2%-5% market cap. So, at 3.5% market cap content rewards will be 25% Steem Dollars, 25% Steem, and 50% Steem Power.

When Steem Dollars reach 10% of the market cap, the price feed will jump off the peg to keep Steem Dollars at 10% of the market cap and will return to the peg when the reported price feed goes below 10%. Witnesses should still report the real dollar value of Steem for their price feed. The median price feed is automatically capped regardless of what witnesses report.

This change is designed to protect the blockchain from a theoretical, but highly unlikely, event where by the SBD debt would completely devalue Steem. Steem holders are now guaranteed that SBD holders will never be entitled to more than 10% of the market cap.

We are currently beyond the 2% threshold;

  • Steem in Circulation: 153,737,832.220 STEEM

  • Current Steem Price: $0.717792

  • Steem Market Cap: $110,351,478 [2]

  • Steem Dollars in Circulation: 2,444,596.234 SBD [1]

  • %SBD to Steem: [1]/[2]: 0.02215282, 2.2%

At Current Levels, How Much Author Rewards will be paid in Steem?

  • From 2% to 5% (%SBD to Steem) we need to Linear Extrapolate From 0%-100% of Steem Dollar Author Rewards to be paid in Steem...
  • @2.2%, we are 0.2% into the threshold.
  • 0.2/3 = 0.0666666* or 6.6666*%
  • So, we can expect 6.6666% of Steem Dollar Rewards to be paid in Steem

This will change depending on the Steem Market Cap, and the supply of SBD. Essentially, If the price of Steem Falls, the Debt (SBD) priced in $USD gets relatively bigger. We are currently at 2.2%, so that signifies that Steem needs a ~10% rally in prices to go back below the 2% threshold.

I am happy to take any questions or correction

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Ok, I have a question. If it is so bad for the Steemit network that many are holding SBD, then why does the network offer such a generous reward for holding them: the insanely good 10% interest? Shouldn't witnesses just lower the interest rate to encourage SBD holders like myself to buy up SteemPower?

The issue they are trying to solve is limiting debt burden on the Steem system. Each Steem Dollar that exists is essential debt, and if that Debt gets (relatively) too big, it could make the whole economic system unstable.

If the price of Steem continues to fall, and the amount of SBD in circulation keeps increasing, we could get to a situation in the future where Steem Dollar holders could call for 20%-30%-40% of extra Steem to be 'printed', which could render Steem value-less...

This measure is purely designed to make that impossible..

If the price of steem is falling by 10-20% per day then the interest rate isn't much of an incentive to hold SBD, correct? Although I am not totally clear on what the relationship is between the price of Steem and the price of SBD... anyone?

Sbd doesn't fall at that rate.

so you actually want people to hold sbd? it's still very unclear. I see you hold sbd, but should we too?
What would you, @dantheman, do if you had 5000SP and 500sbd?

This is not about whether you should do X Y or Z. It's merely protecting the Steem System from too much debt. It makes everything better to hold, because a risk has been quashed...

Ok, thank you. I wasn't thinking that it did, but I was thinking there was some relationship between the two... Is there any relationship between Steem and SBD?

Steem is not SBD. SBD is supposed to be pegged at 1 US dollar (though in practice it may be less). Holding SBD protects you from the falling Steem price.

Oh yes, thank you. I remember reading that now. Is there any relationship then between the price of Steem and SBD?

Only that, if your expecting the price of Steem to fall over the following 7 Days, your conversion will take place at a price worse than market. So, if Steem is falling, often the price of SBD will fall.

The opposite is the case for when the price of Steem is going up, and users expect that to continue.

I have gone through this roughly here

There is still an incentive to hold SBD. SBD is deliverable for $1 worth of Steem, at the Average Daily Price, over the following 7 days after conversion request. This still remains true, whatever the price of Steem.

I got it, so does that mean the best protection over a plummeting price of steem is to hold as much in SBD as you can? What is more beneficial in the current market conditions (falling price of steem), holding SP or sitting in SBD?

Hold SBD protects users from falling Steem Prices. So, in that instance, SBD is more beneficial

Good stuff!

I'm curious, do you know of any posts which have gone through the hypothetical situations of converting SBD to STEEM with price going up, down, and staying flat at various SBD feed prices? I've been converting lately and so far it's been working out really well with very nice weekly returns. When I try to run the actual calculations before hand as a hypothetical, it gets quite confusing because the feed price doesn't match what's going on in either the external or internal markets. I'd love to see a bunch of examples at various feed prices, with various rates of change in the median price and the ending price for converting back to SBD. I've been measuring success by ending the process with more SBD than I started with.

Hello @lukestokes. I will take a closer look into this and get back to you.

I kind of looked into it here, however I will look to do a post in a far more detailed manner, because I know a lot of users are a little confused by the 'feed price' and such...

Yes, I remember that post as being one of the best I've seen so far on the topic, though I do question the conclusions of using the market every day instead of converting because you miss out on the smart contract of $1 of buying power with a token which may be priced less than that on the markets. Understanding the feed price will certainly help me better understand the conversion process along with more examples of how things move around. What might be fun is a daily breakdown over the past few weeks showing what a concert of 10 SBD each day at, say, noon resulted in 7 days later as if the resulting STEEM was sold on the internal market. So far, I've done rather well with my converts, the last of which turned 50 SBD into 60 SBD. Might also be that I got lucky with an upswing on the internal market to hit my sell order.

So . . . . if an author's reward is $100, they would get 50% of that in Steem Power, 3.3333% in Steem and $46.66?

What are your thoughts on what will happen to the entire community when the hardfork takes place? Some are saying it won't have much of an effect on things, others are saying it will be the beginning of the end of the platform as it will kill activity on the site over time? What say you?

I hate the name hardfork. It's an "upgrade" . . . . :smile:

In reality, it doesn't do much except handle edge cases and allow minnows to vote at 8 times the value (whales too but there is no reason why they would want to). Personally, I would have altered the vote slider to max out at 800% and avoided all the arguments but YMMV.

Yes, I think a lot of the fear is fear of the unknown... several weeks from now we will have a much clearer understanding of how this will ultimately effect the system.

I don't think there will be much impact @jrcornel. I think most of the new measures make sense, and there won't be any immediate impact, or negative long term effect..

To my undestanding after this very complex wording is that an author will additionally get steem which he would then convert either into Steempower, Steemdollar or transfer to Poloniex/Bittrex and trade into bitcoin?

Authors get less SBD, and get Steem in place of that. Rewards in $ terms are the same, they just receiving it in a slightly different form. To your latter points, correct.

Apologise for not wording this in a simple manner. I could have done better...

Thanks this is great information !

Some very clever calculations going on there - I will be there to greet the new dawn! @mindhunter

Interesting post. Watching, reading and learning!

Will this create a situation where people are then selling off their Steem for BTC, taking money out of the system and thereby continuing to push down the price of Steem?

I don't think so. SBD is still exchangeable for Steem (over 7 days), so I believe the net effect will be minimal

True. It just makes it one step closer to conversion to the USD

For users who still want SBD instead of Steem, they can always exchange their Steem for SBD on the open market.

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