A reason to hold Steem Dollars - 10% RISK FREE INTEREST PER YEAR [Newbie Edition]

in steem •  2 years ago

I recently discovered that just by holding Steem Dollars I gained $83 worth of interest in Steem Dollars. What does this mean?

It means it pays to hold Steem Dollars and in fact it might pay more to hold Steem Dollars in the medium term than to hold Steem Power. The price of Steem going down due to power downs could mean those who hold their value in Steem Dollars will be in a position to buy very cheap Steem Power in the near future.

So perhaps now it is a good time to encourage people new to Steemit to hold onto their Steem Dollars to collect the interest. This is particularly true for bloggers who earned relatively high payouts, or people who truly don't need to buy anything any time soon. Of course you can also always use your Steem Dollars to promote posts as these go to null and are burned. What it means is that by spending Steem Dollars on promotion you help make Steem profitable, and by holding Steem Dollars you can collect 10% interest which is profit for you.

If you have $10,000, you get $1000 just for holding Steem Dollars. If you have $100,000, you get $10,000 just for holding Steem Dollars, every year, indefinitely, as long as Steemit is viable. So as a secure bank account, Steemit could find a niche because I don't know any bank account, stocks or bonds which pay 10% yield annually. This 10% yield if it were marketed right, could attract people to buy Steem Dollars and hold them in their virtual savings accounts.

Note: Nothing is truly risk free, so don't take the title literally and don't take my statements as financial advice. The post is merely to highlight a feature of Steem.

Reference

  1. http://www.investopedia.com/terms/r/risk-freerate.asp
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I like this perspective.

Another interesting note regarding SBD. I used to think SBD always needed to be transferred to STEEM to cash out, but poloniex has an SBD/BTC exchange.

I don't have to deal with that 10 day delay to cash out, and can let my SBD collect 10% interest if I am not in a rush to exchange it.

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Poloniex, Bittrex, Hitbtc, and Blocktrades all support direct SDB/BTC exchange. Shapeshift seems to support STEEM but not SBD.

Note: I advise against using Hitbtc and make no recommendation either way on the others.

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Where is that 10 day delay to cash out?

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There's actually about three ways to sell/convert your steem dollars. You can convert them to steem internally (which takes one week). You can sell them for steem on the internal exchange at steemit.com/market (instantly). And you can transfer them to an external exchange like Poloniex or Bittrex and sell them for bitcoin (instantly).

Note: Nothing is truly risk free,

This. Your title is misleading and dangerous. SBD might be a good investment, but don't sell it for something it is not.

Good thing to think about. Now that people can pay for promotion with SBD, it should mean that they start to reach dollar parity again.

The thing is, you've said it's risk-free, but of course that's not entirely true. The proviso is these words:

as long as Steemit is viable

There's no guarantee that Steem is going to be worth anything in the future, and SBD, being a derivative, also has no guarantee. Still, it's something to think about for people who believe in the long-term viability of the platform.

Also, you ought to be a little careful with these kinds of posts... you don't want people thinking you're giving financial advice, so best to leave a little disclaimer.

Have a good one

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Good points. I think it's also important to note that the 10% interest rate is in no way guaranteed (as far as I know). The white paper makes it sound like the ability to freely change the SBD interest rate is an important tool in order to maintain dollar parity.

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I never gave any financial advice or instructions, just highlighting a feature of Steemit.

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For sure. Can't be too careful with this stuff though. The financial sector can be ruthless.

It is for this 10% interest that I am taking half my incoming Steem Dollars and keeping them as such; I am converting the rest into Steem->Steem Power. Beyond the interest, I think there is more flexibility in holding onto the Steem Dollars

That is like calling a junk bond risk free. Sbd is backed by something that is falling in value.

Here are some ideas to help sbd
https://steemit.com/sbd/@dennygalindo/sbd-near-80c-on-bittrex-should-interest-rate-be-raised

Doesn't Steem move the decimal place once to the left every 3 years to curb inflation?

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Risk free? What are the chances steemit flops? Zero?

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Yeah definitely not risk free...

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In that case nothing is risk free, not even holding USD, but the point is it's the lowest risk in the economic system and low risk compared to alternatives. Where else can you find 10% yield with risk this low, not just in crypto but anywhere?

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For a fixed rate investment, probably moderate riak, but not risk free. Preferred stock in a utilities company is probably less risky, and the interest rate reflects the risk difference

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USD will crash in less than a year. Anything tied to it (stocks, bonds, bank accounts etc) will loose almost everything.
I am not soliciting, I am not trying to convince, you will either be ready or not~
Bless~*~

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The value is pegged to the sbd but the sbd is a cryptocurrency of which has value beyond the uSD. When the USD crashes it is possible the SBD does also but that's more likely due just to the fact people are freaking out over the world wide wake that will affect.
It's also possible the SBD could go UP in value because it's a worldwide currency not controlled by a government and people feel it is safer and thus invest or hold investments.

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The election is a pre planned event part of a MUCH bigger event.
People think that voting has an influence but the facts are is that voting has been rigged for a very long time not to mention media coverage and financial support of which determine who gets attention.
The global plan is to collapse the USA as it has played its roll and a new world power shift is happening.
Gold Silver and Cryptocurrency is where to be and you will be fine.

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You think the election will cause it to crash?

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So if sbd is based on the dollar, won't that crash too?

Is it really risk free?

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Nothing in life is risk free by the strict definition. Breathing air and drinking water aren't risk free. But it's the lowest risk way of getting 10% interest and I challange anyone to show me where you can get 10% interest with lower risk.

The risk here is that Steemit fails, and developers change the code to remove the interest.

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I used to think 18%/yr USD lending on Bitfinex was 'risk-free'. It was, until it wasn't. The point is, its very hard to quantify risk. All we can really do is setup hedges to mitigate the loss in case of a failure.
Given the statistical odds of startup failure, and current price/traction trends, 10% might be more risky than you think.

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How about bittrex, can we also earn interest in there?

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So far I can't think of a cryptocurrency that went to 0. But you are right there is some risk in anything but what do you suggest I change the title to if it's not completely risk free but it's the lowest risk available that I know of? Bitfinex doesn't even compare because that was a centralized exchange which never had low risk assumption.

As far as risk, compared to everything else the Steem Dollars are low risk, I mean what else is there to compare it to which is lower risk? But risk free, even government bonds could be said to have some risk but chances are the government wont collapse and chances are Steemit wont collapse. Bitshares, even Litecoin, haven't collapsed, and Dash is going strong.

But yes, there is a risk that all governments in the world could ban Steemit simultaneously and kidnap the developers to shut it down. But this isn't centralized like a bank or traditional startup, and witnesses can be anywhere around the world.

Risk free ?

Until you try to withdraw them, and realize there's a 10-30% spread for doing so.

(yes, I saw the note at the end - but crazed newbies might not :-P)

Good post @dana-edwards, I was considering converting to SD to SP but have waited patiently for a better price while collecting the 10% interest. If one looks hard enough through junk bonds you could find bonds and even funds that pay in excess of 10%. They come with quite a bit of default risk.

Very informative article, @dana-edwards. I'm pretty new to this still and I've been adding my dollars to steem power mostly. But, i guess the steem power do autopower-up with each post that makes profit, and as long as your posting good content, you don't have to add more power. Is that kinda close? lol

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The thing is that Steem Power is not "risk free" interest. It's very likely the price of Steem will not fall to a penny but what if it does? Then your Steem Dollars might hold value better and with 10% guaranteed interest on top?

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Surely though, the bank niche would not exist since any user can transfer SBD a day before interest would kick in?

Well... that's something I need to think about.. I forgot about that. I had been converting it to STEEM and SP, and I have been going to STEEM on the markets... to try to make some money there. Thanks for the reminder!

Take care. Peace.

I like the creative minds that steemit has brought to light. Most would simply turn steem dollars into steem power, but you have put a new wrinkle into that idea. I love to think about interesting ways to be more valued on steemit.

Indeed, if we gain big steem dollars, the steem power will up.
But, in my that I am earning small steem dollars. What some tips to gain more dollars? Can you help me? Thank you @dana-edwards

God bless .. from @zionuziriel

I don't quite understand. I thought the price of Steem Dollars was crazy volatile, so how can be consistently paid on them?

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If you have patience to wait for when it's 90% of the price of a dollar or even 93% in some times, then you do fine. Volatility is mainly due to traders not knowing how to arbitrage it properly and other factors.

So you're saying at some point in the future steem is going to fail?

Good idea!

to factor in: SBD isn't currently worth $1.

If you actually want to exchange it for other currency, it's been averaging $0.85-0.91. Occasionally, you might be able to swap for BTC around $0.95 - but the $1SBD = $1USD peg has not yet been able to maintained.

So, if average rate is say $0.90, the 10% interest rate only really brings it to break-even. I suppose given compound interest, it'd work out to more than break-even at the end of the year.

Though in consideration of this, the 10% figure may not be completely accurate...

As long as your are not lost to Synero I would call Steemit a risk-free investment :-).
@steempowerwhale 🐳
🌞 upvoting your lifetime dreams!

Nice post, upvoted and follow.

So as a secure bank account, Steemit could find a niche because I don't know any bank account, stocks or bonds which pay 10% yield annually.

Maybe you have the answer right there. Steem and Steemit have what? 4-6 months? Do you understand how the SBD dollar peg works? Did you see some Steem graphs lately? Do you know what's the current traders sentiment towards or opinion about Steem? Do you consider an experimental platform with only some months of testing and still in beta, that was already hacked, a proven system already? You are literally telling people their money is safer here than buying a bonds, funds, stocks or even or putting it in a bank , think about that for a second.

I'm not trying to spread fud, come on...this is just non-sense sorry.

The answer to these questions by the way is yes, a well managed portfolio will give you around 10% and possible more with much less risk.

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I have experience with Bitshares 1.0 which paid a similar interest and held a peg for almost a year if I recall. It's because of Bitshares that I have confidence that Steemit will hold the 10% interest.

But you are right, anything can happen, so I will change the title.

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Sorry if it sounds harsh, I do agree that it's perfectly valid to feel confidence behind the system and bitshares but you are just exposing yourself unnecessarily.

I also understand you just wanted to promote this fact (10% rate) which is something that not many people know (especially newcomers).