Payouts Switched To Almost 100% STEEM, As SBD Printing Is Close To Zero Now
Yesterday I posted about the fact that rewards on the Steemit platform are now paid in a combination of SBD / STEEM + Steem Power. The STEEM part was small, compared with SBD.
Today, as you can see from the screenshot below, the balance switched drastically in favor of STEEM.
A few people asked why this change and what are the mechanics behind the payouts.
Here's how it goes (and, most important, why this is happening):
SBD is intended to be a stable currency, pegged to $1. But it's not a hard-pegged currency, meaning there isn't a fiat deposit somewhere, mirroring the total amount of SBD in circulation with an equal amount of US dollars (as Tether claims to have for their stablecoin). Instead, 1 SBD is pegged to 1$ worth of STEEM, which makes it basically a debt instrument.
So, if STEEM is traded at 1$, 1SBD will be equal 1 STEEM, but if STEEM is traded at $0.5, 1 SBD will be equal 2 STEEM. Meaning that it will "put a debt pressure" on STEEM, equal to the amount of SBD printed. This is called "debt to ownership ratio" and it can be defined as a percentages relative to the total STEEM supply.
At the blockchain level there is a safeguard mechanism preventing major slippages. This safeguard controls the debt to ownership ratio in the following way:
- if the debt to ownership ratio is under 9% (the total amount of circulating SBD compared to the total amount of circulating STEEM value), then the rewards are paid exclusively in SBD (talking about liquid rewards, the ones in Steem Power remain unchanged), meaning that SBD printing will cover the entire demand from the rewards pool
- if the debt to ownership ratio is between 9% and 10% the rewards will be paid in a combination of SBD and STEEM, based on the "distance" between 9% and 10%. For instance, if the debt to ownership ratio is 9.5%, the rewards will be paid as 50% SBD and 50% STEEM (and the SBD printing will cover only half of the demand from the rewards pool)
- if the debt to ownership ratio is above 10% the rewards will be paid exclusively in STEEM (the liquid ones, again) and the printing of SBD will stop.
The blockchain gives a prop to monitor these things, but instead of fiddling with debt to ownership, it simply returns the current SBD printing rate. As you can see from the screenshot above, this printing rate is 1% (which means the debt to ownership ratio is 9.9%). As a result, the rewards are paid in a combination of SBD (1%) and STEEM (99%).
You may wonder why this tight mechanism? Well, because the only reliable way (some may argue that even this one is not that reliable, but that's another conversation) to control the price of a stablecoin is to control its supply. Lately, SBD price felt significantly under $1, trading currently at around $0.87, so diminishing the supply (printing less SBD) should increase demand, which in turn should increase its price back to around $1. Subsequently, if the price goes above $1, the SBD printing rate should continue to be 100%, (more SBD is printed) to cover the demand and lower the price. This dynamic is more complicated, as it also takes into account the price in fiat of STEEM, but that should give you at least an overview of how things work.
This change was introduced in HardFork 20, before that the interval was between 3% and 5%.
Hope this clarifies at least some of the misunderstandings I've seen lately, on my feed and elsewhere in the ecosystem.
Steem on!
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
Wanna know when you're getting paid?
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I know the feeling. That's why I created steem.supply, an easy to use and accurate tool for calculating your Steemit rewards |
Rewards are going to go down some right?
Nope, why would they do it? I mean, in fiat, yes, but in STEEM, nope.
Since the rewards pool is fixed now they will have to pay out 100% in Steem instead of 50% Steem and 50% SBD. I noticed rewards were down and interest rates were down last time this happened. Steem price is so low it may not have as much of an impact this time though.
@dragosroua https://steem.supply has been getting PHP errors since yesterday. Guessing you are doing something?
Can you tell me what kind of errors? A screenshot will help. DNS may still be updating.
As always most of my understand about what's going on in the steemit world it's taught by you - thanks
Im voting for you as a witness, after reading this thread I understand that you are the chosen one!
/FF
Thank you, appreciate it! :)
More steem in circulation incoming phewww
Excellent mate... btw, do you know why the "Estimated account value" at the steemit wallet shows Billions or Trillions of Dollars ;-) ?
Nope, on which account did you see this? Really weird...
Later edit, I saw it too, funny :)
on mine but also on yours!!!
But the real question is whether SBD will spike to $10 again?
And, once we see bitcoin move again, STEEM will go back over $1 and probably stay there. So, will SBD be valuable to the STEEM infrastructure?
Should we be looking at removing SBD?
Do we have any emergency way to remove SBD if for some reason the dollar collapses?
I think you wanted to say STEEM, not SBD (also in the next paragraph)...
But if you really wanted to say SBD, I think chances to spike again are lower and lower. When it happened, it was because of its very low supply, which was kind of a "low hanging fruit" for speculators. Now the volumes are bigger and it will require more liquidity to pump SBD to those levels.
But given an attractive risk / reward ratio, somebody with deep enough pockets can move SBD in whatever direction he sees fit. Which is true also for the entire market, IMHO.
SBD was created as a stable currency, to encourage e-commerce. Wether or not it will remain in the system, only the system (read: usage) can decide. And yes, if we have consensus, SBD can be eliminated in a hard fork.
I meant SBD. And that spike, mostly from Korea, where they pushed it up to $15. It took forever to come back down to parity with the dollar.
Ok, got it. Same applies.
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This is a kind of post one must vote, reply to say "thanks" and resteem.
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Thanks :)
Tell me something D - does this mean that the Steem inflation rate is now higher than it was when paying rewards in SP / SBD?
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Nope, it has nothing to do with the STEEM inflation rate, which, by the way, it's programmed to go down 0.5% per year until it reaches 0.5%, in about 20 years.
You are covering all the bases today.
Very nice
This is nice to know D. However it must mean that the reward pool is being reduced.
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In fiat, yes. You can monitor the rewards pool in steem.supply as well.