Printing Of SBD Is Throttling Now. SBD Prices Gonna Rocket Soon. Shouldn't You Buy SBD instead of Steem?

in steem •  last year

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Since yesterday, you must have observed that instead of getting your author rewards in the form of SBD & SP (if you ain’t 100% powered up) , we are all receiving a third component in our author rewards – STEEM. Yes, now we receive one part in SBD, one part in Steem and one part in the form of SP.

But what difference does it make? And how can I take advantage of this situation?

Before answering these, let’s understand how SBD & Steem prices are designed to move in opposite directions:

Why SBD prices will get to $1 in long run?



SBD value is pegged to always be equal to 1 US dollar worth of Steem. When Steem prices are higher, more SBD are generated and rewarded to authors. Because 50-50 payout structure means more SBD needs to be given to equate them with the value of 50% of SP. Thus more supply of SBD will eventually lead to decrease in its market price and will approach towards $1.

Similarly, when Steem prices are low, less SBD are generated. So we get a lower supply of SBD which would lead to increase in its market price due to its shortage to meet market demand.

Thus SBD and STEEM prices are designed to move in opposite directions. When one moves up, the other heads downward. Both SBD & STEEM can never go to moon together. If one will fly, the other will sink.

Why am I receiving Steem in my Author Rewards?



Simplest answer is because Steem price is currently too low. At these prices, there ain’t sufficient Steem to comfortably redeem all SBD supply for Steem.

Actually, Steem blockchain is coded this way. There should always be a sufficient provision of Steem to redeem every SBD with a $1 worth of Steem. If too many SBD get printed, it will not be possible to back them up with sufficient Steem. So there is a caveat to the 50-50 payout structure. The total number of SBD printed so far should never worth more than 2% of total market cap of Steem (valued according to the witnesses’ price-feed).

If SBD worth goes over 2% of market cap of Steem, the Steem blockchain will automatically throttle the production of SBD and replace a part of SBD with Steem in author rewards. This will continue until the SBD worth is back to below 2% mkt cap of Steem. In the eventuality of total SBD value reaches above 5% of market cap of Steem, SBD printing will be stopped altogether. Then all author rewards will be paid only in Steem & SP.

Total virtual supply of Steem at the time of writing this post is 271,518,758.408 STEEM.
Whereas total SBD supply is 10,841,595.447 SBD
and the feed price is 1 Steem = 1.855 SBD (or USD).

So total worth of Steem supply is $503,667,296.84684.
SBD as %age of Steem mkt cap = 10,841,595.447x100/503,667,296.84684
= 2.15%

So as long as this figure is over 2% and below 5%, you will get some Steem in lieu of SBD.

At 2.15% 5% of your SBD rewards will be converted to Steem (taking into account the pegged SBD rate = 1 USD)
At 3.5%, 50% of SBD rewards will be replaced by Steem
At 5%, 100% of SBD rewards will be replaced by Steem and no more SBD will be printed until this %age falls down below 5%.

To understand this phenomenon in detail, I'd recommend you to read @eonwarped's excellent post on this issue: SBD Printing Code Walkthrough.

Am I making a loss compared to when no Steem was included in Author Rewards?



Apparently, you are making a loss. But it also depends on the market scenario.

E.g. Let's say a few days back, you get $100 SBD as your author reward for a post along with $100 worth of SP (@50-50 split). If that post was paid out today, instead of 100 SBD, you will get 95 SBD and 2.695 Steem.

So yes, you made a loss as you get only 2.695 Steem for 5 SBD because the Steem ecosystem equates 1 SBD to 1 USD though market rate of SBD is $2.33. You lost about $6.65.

But think from a different perspective. Just because of 5% decline in printing of SBD, its market price increased by 10%. So in effect, you will make a profit. But you will need to sell your SBD before the total SBD worth reaches below 2% of Steem market cap again.

Why should I invest in SBD instead of Steem when SBD is designed to get to $1 anyhow?


Everyone here will tell you to invest in Steem at the moment to take advantage of its fall in the price. It's certainly a good long term strategy. But if you are concerned of decline in the post payouts due to the Steem rewards instead of SBD and want to make most of this situation; I'll suggest you to invest in SBD now. But this should be very short term investment and you would need to sell off all your SBD before its total worth fall below 2% of Steem's market cap based on witnesses' price feed. I hope it will take some days to get back the total SBD value to below the 2% mark. Until then make the most of your SBDs and convert it to Steem at its peak.


Remember that Steem & SBD prices can't rise in tandem like other cryptocurrencies currently do with Bitcoin. Here, it's almost certain that if one will rise other is doomed to fall sooner or later. Take advantage of this understanding and play your cards right.

All the best and steem on!

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Thank you for this wonderful analysis, I didn't get a grasp of this scenario till now. Please keep us updated with future proceedings.

WARNING! The comment below by @blockchainfiend leads to a known phishing site that could steal your account.
Do not open links from users you do not trust. Do not provide your private keys to any third party websites.

quite complicated calculations.

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If you too feel this complicated then perhaps I haven't done justice with this article. I should have explained it better. Sorry about it!

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haha, don't worry. I got a few things from it and thanks for that too.

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Ha ha ha! Thank God for rescuing me a bit! 😊

This is really an excellent analysis and I read it 2-3 time to understand it fully.
Now I am clear how SBD and Steem designed to work against each other.
Thank you for such an informative article.

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Thanks for paying so much attention!

It seems really complicated and I still don't fully understand it but I at least understand that they both can't be high. Thanks for the breakdown of this information, it helped me understand it a bit better than before although I still don't really know how this affects me haha. I'm just going to keep posting and let the background stuff do it's stuff :P

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That's the best strategy in any case.

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You explained a lot and i try to understand this, but it also very difficult to me understand all this. But it is beneficial that something is better than nothing.
Thanks for your details post. I really like the whole thing. It is very informative.

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Thank you for giving it a try! You can re-read and point out what you didn't get. I'll try my best to explain it in more detail.

I love your "something is better than nothing" stand.

Thank you for the clarification. Useful article. So you are now proposing to translate SBD to STEEM?

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No, I ain't proposing anything here. In case you didn't notice, SBD are already being partially replaced by Steem in everyone's author rewards recently.

very nice @xyzashu i like to read it

This post has received a 3.13 % upvote from @drotto thanks to: @banjo.

sad you can't re-steem older posts despite the fact that they're golden, and sadder if you made the same post twice you might end up being attack by a plaguebot on your own content lol