The SBD:STEEM debt and payouts

in #steem6 years ago (edited)

Some might have noticed in your most recent payouts that instead of STEEM POWER/SBD it is STEEM POWER / SBD / STEEM.

SBD.PNG

Now, I am not a technical person and this is beyond me but what is happening has happened before and it worried me a little so firstly, don't worry, the system is designed this way. Secondly, this might be wrong so bear with me and go easy on the criticism.

Do you know what SBD Stands for? Steem-Backed Dollars. What this means is that for every SBD printed, some amount of STEEM also needs to be printed. Remember the problems that US-Tether had by not actually buying US dollars to back the stability? Steem has a mechanism to make sure it doesn't run too far into debt, it stops printing SBD.

The last time this happened was when STEEM price fell a lot and was around 7 cents. Low price means low market cap. I am going to use some fake figures to make it easier to visualize.

If STEEM has a market cap of 100 Million, the system is set up to back a maximum of 5 million SBD (5%) Remember the peg? and a 19:1 Ratio. But, if Steem market cap falls, the system starts correcting and will increase the ratio of STEEM to SBD.

When SBD price is at its normal peg (~1 USD) this isn't a problem when Steem is higher than it but like in the past when Steem fell very low, it meant that the 19 Steem printed didn't cover the 1 SBD. That is a problem because it means that STEEM can't BACK the Steem-backed Dollar and means the system is going into debt. Debt is bad, OK?

Now, SBD has a market cap of about 17 Million Dollars but Steem has only 400 Million. This means that SBD market cap is about 4.3% of total STEEM market cap. At 5%, ALL SBD stops getting printed but (apparently) between 4% and 5%, the system starts reducing the amount of SBD it prints and increases the amount of Steem.

SBD has been consistently above STEEM prices for several months but it is getting printed as if it is pegged at 1 dollar. This means the Market cap is increasing faster than it should be and even though Steem has also been rising, the ratio between the two has been closing. Now that STEEM price has fallen fast and SBD is still above it and there is a lot of high priced SBD on the market, the mechanism is kicking in to try and not go too far into debt.

Understand? I am only just getting a hold on this.

Ok, so printing more STEEM per SBD means that there is more STEEM to back the SBD, right? But, if SBD keeps rising and STEEM keeps falling, it is going to keep being a problem as the system still treats SBD as 1 US dollar (This is one reason why the peg is important by the way). So at 5% debt ratio, the Steem blockchain says, nope, and cuts ALL SBD printing to try to make sure that Steem is able to back the SBD that is already out there.

Now, I am not sure when the system decides to print SBD again after such an event. Anyone?

Ok, so what does this all mean? I don't know other than SBD is going to be decreasing in print if the situation continues and instead of having liquid SBD, it will be paid in liquid STEEM. What that means is that the steem paid is the equivalent price (based on the 3.5 day average) to SBD at 1 USD.

Do you know what that means? Well, before when you got paid 1 SBD (the system sees it as 1 remember) it had a market value of well above that (currently 1.60). But now, the system will pay it in STEEM at the 1 USD price the system sees it as. Essentially if only getting paid in STEEM it means to only get paid in STEEM market value. Because SBD is actually well above that, payouts have had a much higher real-world value recently.

So, now, posts will be decreasing in their real-world value as more Steem is printed and less SBD but, this is the way the blockchain is designed and would not be an issue at all if SBD had kept its peg. Also, remember that up until this point, people have been able to buy very, VERY cheap STEEM if they use the SBD they have earned on platform. Remember all those times I and others have said power up? Did you?

Anyway, I hope this clears up something and if some of the people who really know how this works can comment and correct it, I am happy to edit. This is about ten steps past the limits of my STEEM technical abilities.

Phew.

Taraz
[ a Steemit original ]

I would appreciate some help in the comments section if needed.

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Hello @Tarazkp
I have been wondering why I suddenly got STEEM as payout so this post was very clarifying. Thx a lot!!!

Umm. Am I the only one here who likes getting overpaid in SBD?

No, but individual benefit isn't the only factor to consider. It has given me a chance to power up more than I would have otherwise. I hope others did the same.

I liked the overvalued steem dollar too - especially when it went to $8 on the exchanges!

SBD got to 14$ at some point in December after SBD and steem were listed on that Korean exchange upbit. ... It was a juicy moment for some of us...
Meanwhile, if analysis in this post is anything to go by, Then I should be expecting more upshoot in the price of SBD soon... Let's not forget that less supply means more demand which leads to a higher price.
Also bearing in mind that what was causing the hike in SBD's market cap is because whales (non steemians and steemian traders alike) sees SBD as an easy to manipulate token mainly because of it's supply... That's the only reason I believe the market cap is soaring higher and a halt in printing would most def leads to higher prices.
I think I'll just brace myself for this while I keep powering up the Steem paid in place of SBD for my posts...

No :) Of course.

Now, I am not sure when the system decides to print SBD again after such an event. Anyone?

If have read the code:

  • If percent_sbd is below 2% then the sbd_print_rate is 100%.
  • If percent_sbd is above 5% then it stops printing sbd.
  • If percent_sbd is between 2% and 5% then sbd_print_rate = 100% * (5 - percent_sbd)/3.

We are not in 4% but 2.15%. This is the calculation:

  1. Steem supply: 265700335.221 STEEM
  2. SBD supply: 10858144.712. How much STEEM is it? The median price is 1.855 SBD/STEEM. Then 10858144.712/1.855 = 5853447.283 STEEM
  3. The virtual Steem (Total) is the Steem supply + SBD supply. Total = 5853447.283 + 265700335.221 = 271553782.5 STEEM
  4. Then the percent_sbd is SBD supply / Total = 5853447.283 / 271553782.5 = 2.15%
  5. This percent is between 2 and 5, then the printing rate is (5 - 2.15)/3 = 95%

Yup.

And I have wrote an appl than follow those metrics over time.
https://steem-supply.john-at-me.net/

Wow, very interesting. Thanks for pointing it.

Thx for the summary, the source code itself is the best documentation ;) Did not know that SBD printing is gradually capped between 2% and 5%, very interesting.

Perfect! Brilliant! Thanks a lot!

Unfortunately these formulas are not awailable in the whitepaper.

It's very interesting for me to see how this mechanism works.

I just can't understand how the system doing correcting,?
steemit is decentralized the market price is the sum of all exchanges that steem is there and the price is only because of people willing to pay for steem.

so if their is a dip in a price the market doing correction or the people that trading that coin they who did the correction.

if steemit is decentralized and no one is controlling steem price

then who doing the correction in steemit network?

if the system doing this automatically then that mean its connecting to
exchanges API and checking the price ticket?

and even the market cap it's sums of all steem in all other exchanges
how the steemit network know to do a correction
or does the steemit admins creating the tokens according to market dip and cap?

It doesn't go on market cap price (my mistake) it goes on coin supply. so the ratio between SBD supply and steem supply.

currently:

254,562,291 STEEM

10,848,198 SBD

This clear things up

Looks like you got the 2%- 5% figure already. I have an old post that chases this code, and the short answer is that it will print again when the market cap condition is reversed. In other words, it's purely a function of SBD supply to steem marketcap, as determined by the witness price feed.

I put that last bit on italics because the witnesses can adjust a bias to allow SBD to continue printing if they so chose.

Here's my latest quick post about the matter with a link to my older post that has the walkthrough:
https://steemit.com/steem/@eonwarped/steem-rewards-news-flash

Thanks :)
It is over 4% now, any idea of the hold up or is it just the speed at which it happened?

In case you're interested in breaking down the math involved, after talking to @eonwarped, I wrote this detailed post breaking the whole situation down.

Thank you very much, I will have a read in the morning :)

probably has something to do w/the 3.5 day lag

Already 4%? Oh yikes... Yeah that price feed is slowly crawling down. Last I checked it was still 1.90 to the current market value of 1.5 (since price feed uses 3.5 day average). Or is your 4% figure based on current marketcap?

I took it from current cap as I worked under that assumption. I had to piece this together from scraps. :D I heard 2 but couldn't find where that was.

Oooh one other thing: Just wanted to re-emphasize that the relevant metric is is SBD supply (not market-cap) compared to STEEM market cap.

Was talking to @geekornered about this recently and that is a common mistake when computing as well.

I assume this is why it is only starting to kick in now.

Ah yeah, then this is bad news as the feed price continues to go down, so it will go towards 4% if we don't see a quick turnaround.

This is well explained and I know get why.

I think the best way to go now is just to have both amt of each coin but most importantly to monitor te internal market and see how things go in there.

there is the likelihood for one coin to drift higher in price than the order an I believe steem was designed to be that coin. Prediction has not been my friend for a while now, so I will stand in the middle (have some sbd and have some steem or as much steempower as possible)

@tarazkp thanks for the clear information.
Many news every where don't know which to believe so let me ask you.
Will you advise one to convert sbd to steem?

I don't give that kind of advice Jules as now that you have it, it is yours. I have no idea what happens from here.

Hehehehe, thanks for your reply.😀

now this is good stuff ...Its beyond my limits but I just expanded my limit by a few steps . going to share this with others. very important that there is a way to stop debt . otherwise inflation (for the lack of a better term) would eat all profits .

Yeah, not a bad system really is it? I have to say that despite the many problems, there is a lot of brilliance within too..

I just found out that I've been supporting (mutual lol) a friend of yours adigitalife . what a great guy. we been in a chat room together the past couple days . this world just keeps getting smaller and smaller . he just made a quality comment check him out. I just told him to read this post . fun stuff

lol, yes he is a really great guy.

@tarazkp I read your post but I have a question. Under this new modality that it would be better to change the current SBD to Steem? or take care of them until the end?

I can't make that call for you. Who knows what wil happen to price.

If analysis in this post is anything to go by, then I should be expecting more upshoot in the price of SBD soon... Let's not forget that less supply means more demand which leads to a higher price.
Also bearing in mind that what was causing the hike in SBD's market cap is because whales (non steemians and steemian traders alike) sees SBD as an easy to manipulate token mainly because of it's supply... That's the only reason I believe the market cap is soaring higher and a halt in printing would most def leads to higher prices.
I think I'll just brace myself for this while I keep powering up the Steem paid in place of SBD for my posts...

This is very useful information. By nature, this will create a larger value for SBD, until the market corrects itself to account for the bloating of SBD in the system. Then people will begin to "burn" their SBD and all will be well in the world again.

Very intrigued to see how this affects voting bot payouts, since nearly all of them rely on SBD payments!

Interesting times indeed ;)

Do you pay for the bot consideing SBD might have a higher value later? even though the return of the bot is higher than the payment, it is split into STEEM also. So now the bidders are going to run a very large risk, the bidbot owners still make a bundle. Do you think they knew this was coming?

I think it was only a matter of time. I also think that they are the cause of the problem (or the users of the bots are), because they are not destroying / converting the excess SBD as a normal user would.

Several factors going on to be sure.

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