The SBD:STEEM debt and payouts

in steem •  6 months ago

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?

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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.

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

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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...

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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%
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Yup.

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

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Wow, very interesting. Thanks for pointing it.

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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.

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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?

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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

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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

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

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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.

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

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probably has something to do w/the 3.5 day lag

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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?

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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.

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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.

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

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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?

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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.

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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 .

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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..

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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

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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?

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

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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!

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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?

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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.

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Several factors going on to be sure.

Thx for the clear explanation. Lots of people were wondering what happened and more important why it did happen.
I will resteem this post, so that people could easily find the answer in the question!

My biggest concern, when STeem will re bounce?

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one day, hopefully. or never. ;)

Good timing on this post. I was just about to go on a hunt to find the info on this. Wasn't around last time this happened.

I know you have said it at the beginning of your post, but I have to mention this:

Steem Dollars are referred to with the symbol SBD, an acronym for Steem Blockchain Dollars

source - the whitepaper

I know there is a lot of confusion about SBD acronym but since you have made such a technical post, I told myself that this could be fit here :D

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That is surprising :D I have never heard that before (never read the white paper completely either though ;) )

'Steem-backed dollars' makes more sense doesn't it? Steem blockchain dollars sounds like that drink that added blockchain to its name. :D

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I'm 99.99% sure that the original whitepaper said Steem-backed dollars :)

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I know that it sounds strange, I was surprised too when I saw it for the first time, but these are the names that were chosen, I don't know why. maybe to sound more like blockchain stuff :))

Thanks for the explanation. Makes a lot more sense now.

Thanks for the explanation.
I think the best option at the moment is to power up with already earned Sbd.

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I don't think so... If sbd printing is halted, I can assure you more manipulation would be done to SBD and we will see more spike in price over steem... At least before any future correction; if any...

You have explained in such a way that even a newbee can understand,can this new payout system effect us,thank you.

For the love of steemit!!!

Thank you!!! :)

Thanks for clarifying it! Then I need to update my infographic about the reward system because I didn't know this possibility of reducing the printing of SBD.

This situation leads me to a question. If we reduce the offer of SBD then there will be more demand and its price will go higher than it is now. What do you think?

Very good post. Resteemed!

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I agree totally with you.. I am keeping my SBD straight...lolz
Especially now that the traders' eyes are on it... They pump it more frequently because it has the capacity to respond to the pump 'cos of it's supply...

Does all this mean that the witnesses will most likely permanently peg the Steem Backed Dollar once it gets back to a $1.00 valuation?

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Not sure what they will do but it can't keep swinging wildly.

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I hear that, and it would be nice just to know it will always be $1.00 truth be told, because then I could also use it instead of USD which would be awesome!

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Exactly the point of it. It would mean that the Steem blockchain would secure its own tradeability. I think if people understood what that meant in regards to breaking away from fiat completely in the future, they would definitely back it.

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I totally agree, but do any of the witnesses have a proposal that we can vote on to peg it, or is this just all speculation at the moment?

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The plan is mainly to have it pegged at 1$. So, if it wants to go below 1$, it's going to be subsidized else, it's left flying high...

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Ahh, makes sense.

Thanks for sharing this! I see this as an opportunity to gather steem and power up! Now if only i could post something. :)

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I'm thinking same way you are too... " if only I can post something"...

Cheers Taraz, I don't know how accurate this post is but it's certainly informative and well written.

Seems to have helped me understand why my recent posts have paid differently.

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the only major thing that is not quite right is that it is based on the coin supply ration, not the market cap.

Steem Backed Dollars is the old name for SBD. In the current bluepaper they are called Steem Blockchain Dollars.

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Ok, so itwas though :D

Steem-backed dollars makes more sense still.

thanks for sharing I was wandering whats going on!

I just claimed steem and I was looking for an answer. Thanks for clearing this out! cheers @tarazkp!

Thank you for the clarification @tarazkp.

But, if SBD is pegged to the USD, what happens if the USD tanks... which it will.

Petro-yuan: China wants to dethrone dollar
https://www.cnbc.com/2017/10/24/petro-yuan-china-wants-to-dethrone-dollar-rmb-denominated-oil-contracts.html

Will then all payouts revert to Steem?

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Not sure but I guess it is about what it can buy. For the average user, what does a tanking US dollar do? Gaddhafi was going to dethrone the US dollar control on oil too by using a gold backed currency, they killed him.

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The future is one where the USD is not the default world currency. So it seems crazy to tether a crypto to a currency that is on a descent. The whole point of crypto was to replace the old system of money, not support it.

Hmmm you say you are not a technical person but I am struggling to understand a quarter of all you have written here. It has been well explained and detailed but too technical for me to wrap my head around.

All the while I was looking for what actually happens to our post payouts which you said would decrease . I don't see that as a good thing but you do and my question is why? Wouldn't it discourage people from making contents on the platform ?

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THe system hasn't been working as the system should as the SBD has broken the peg. Yes, people have been able to enjoy higher SBD prices and many (like me) have been able to power up more than normal but, it is designed for 1 dollar SBD. essentially,all people have been getting overpaid for the last 3 months ni terms of real value.

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I would actually prefer that after we hit 1 USD per SBD and 1 USD per STEEM, the peg be held firmly at 1 SBD = 1 USD. The crypto space is in dire need of a stablecoin. Having a stablecoin for real world payment purposes would be yet another use case for Steem and a reason for the price of STEEM and Steem Power to go up.

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Exactly what the SBD was meant for originally. It was meant to be a satble way to trade without worrying too much about market fluctuations. A tether in the wild would be awesome but some people don't seem to get it.

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There are three coins that do that: tether, bitUSD and nubits.

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I was just asking about it on the Steemit chat and some Steemit groups. thank you for clearing that up!!

Thank you... good reference for new learner

So if I understand that correcty, if SBD are not getting printed at and above 5% - then whales will have an easier time trying to manipulate the price.

Which in return means, I should hodl my SBD right now.

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5% so... yes.... I think.

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ha - I wrote 5% at first but I then looked at it and for some reason; changed it to 5$.

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Egzactly

The best time to buy Steem was when SBD was like $15 but steem was still like a dollar. Man I really racked some up back then.

Having said that, this stuff is all really complicated but I sure do hope the market starts going back up across the board because it's getting a bit depressing sitting here watching all the falling stars.......

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yeah, i grabbed quite a lot too luckily. I think i was able to get 8:1 at the best. Good times....

Yes, very complicated but there is a lot it must consider that other blockchains have ignored.

is the current steem/sbd/sp distribution good for the system?
Does this will not cause sbd's price to kick higher?

This is new to me since I just joined last May and only this time I encounter and seeing in the past history of steem/sbd were low At $1 each only at steem were cents too

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potentially yes, the price of sbd could spike higher but it is about the SBD printed. I thought (when I wrote it) that it was market cap but it is supply ratio. So as SBD stops getting printed, the supply ratio will improve.

Then why does the blue paper call SBD Steem Blockchain Dollar?

If its wrong its still ok, im just here to be here lol

*I should prob read all the comments first lol

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yes, it has been pointed out. What a silly name. :) But, like someone else pointed out too, perhaps once upon a time it said 'backed'. What is in a name as they say.

@tarazkp. Are you saying that the inflation rate of steem is changing? I thought it was fixed over a year ago at 9.5% declining 0.5% a year or something like that.

Can you provide a source or reference for this?

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this isn't the inflation rate, I think that is the same.
If you look at the top comment there is a post by @eonwarped that links to another of his posts that explains more technically.

Thank you for taking time and explaining this :)

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No worries, it really does push my limits.

Oh God, thanks for this. I will resteem it!

I hope Steem price won't be affected.

Thank you so much for the explanation @tarazkp! I was wondering the exact same thing yesterday, but I am not a numbers girl haha, so I'm very happy to find this! Now I know you're my go-to-numbers-guy ;)

Thanks again. Cheers!

I was search to read about this, now it's clear and understanding to me. Thanks.

Hola!
@tarazkp, Gracias por la informacion, un saludo cordial.

Brilliant as always! Thanks!

Ty for explaining todays most intruiging mystery!

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When it happened a year ago, I had no idea what was going on.

Why did someone create a new currency (SBD) and then decide to "peg it" to an outdated, failed fiat currency?

  • The current Federal Reserve Note is now worth 3 or 4% what a 1916 FRN was worth.
    Proving it has failed miserably as a currency,
    since one stated goal of the FRN was to control inflation.
    • To purchase a 1964 silver dollar in 1964 required 1 FRN.
    • To purchase a 1964 silver dollar today requires aboiut 12.7 FRNs.
      • I would rather see the SBD tied to a pre-1964 silver dime which currently takes about 1.2 FRNs to purchase.

Do you happen to know if there is a planned end to SBD production? Which will result in scarcity, which will result in increasing value, which will result in We, the early adopters, getting super rich, instead of seeing our holdings devalued at the stated goal of 9.5% inflation per year?

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Invest in Steem, not SBD.

thanks for the explanation !

Oh I see so this is what it's all about. Now I know. Thanks for explaining it to us.

Thank you @tarazkp cleared up a lot of my questions.So to be clear Steem needs to be higher up in value than SBD to increase the production and circulation of both cryptos right?

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A bit more complicated than that but SBD needs to drop in price or Steem needs to go up a lot.

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Got it. Thanks for your reply.

I loved being paid in the SBD because SBD was way above its intended price. I have stocked some 20 SBD waiting for a good conversion rate. I hope SBD rises about Steem for some time for me to exchange it.
I think new joiners will love a higher SBD.

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it is a risk but hopefully it pays off for you.

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i'm not sure what the target is when he says 'good' but this code is a sign of the opposite to me!

A good run through on what it means for us, although the end game stays the same I guess - keep building that vested SP :)

Cheers!

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Hard to say how it will swing tbh, I just hope that at least some people who deserve it can benefit.

Nice post, nice to meet you @tarazkp

I think the following next video explains the inflation the best.

Personally I would like more STEEM and STEEM POWER so I won't waste time selling my SBD to steem all the time. :)

I just cant understand the entire thing. Maybe I need to read it over and over again. This post is of great help for people like me. Thank you @tarazkp

Great to see steem new payout system.i dont think its a technical error.

i can't understand yet @tarqzkp

I can't believe I never asked myself what SBD actually stood for :p

Being a relative newbie I had this happen today. I have to say I was bewildered but I was not sure of its implications. Sounds like steem might fall even further....I really hope not for everyone's sake. Peace and Love.

Interesting. I resteemed this post.

Is this why my account value is going down while stem seems to be rising. Also, why my upvote total on active posts are going down instead of up?

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no, that works on a 3.5 day average. the price isn't on 'current price' it is counted back to market price 3.5 days ago (averaged). as prices increase, they will go back up.

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Hey thanks a lot! You have been most helpful. Mahalo.

how can i make a lot of noise please help me

I'm more newer to steem so this is the first time I see this. Looks like it's just for the moment as you stated only because it's low it will do this. Patience is key :)

Oh I see so this is what it's all about. Now I know. Thanks for explaining it to us.

Just now i have observed this new payout,is there any reason to introduce this payout.

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it is part of the system and has been for 2 years. it is a safety mechanism to protect value so, yes, there is a very big reason.

useful!

Nice work !
Followed, Upvoted, Resteemed !!!

Thanks. bitcoin.news

thank you for explaining the recent movement of steemit. It was indeed a helpful information. @tarazkp

Hello my dear friend,I really enjoy from your blog. I recently joined to steem and saw your posts. i like art, science, adventure and photography. I upvoted and follow you, If you like, please see my posts to support each other because i need to your help for being successful for even once. have good time.

good nice post

I think this is great for our work on steemit this will work many user

Super Post!!!upvoted

Thank you for this. It seems accurate and a good explaination. I’m resteeming.