Pegging SBD to the USD - what are the consequences?
There’s a big dabate about the price of Steem Backed Dollars going on at the moment. The problem is in the title of the currency, Steem Backed Dollars were supposed to be just that, pegged to the US Dollar. The underlying price of Steem may vary, but an SBD would not - or as near as made no difference. This would allow an economy to flourish on Steemit with goods and services traded in return for SBD.
All well and good so far.
Then, as Christmas approached, SBD went to the moon. It rocketed from a value of $1 US to $14+ in a month. Santa knocked it out of the park for anyone with any kind of investment in the Steemit platform and people cashed out big-style to fund their seasonal spend. This dropped SBD back to $3 US by mid January.
Hardly a stable currency. And still no-where near the $1 US that it was intended to be.
Steem, the underlying cryptocurrency that Steemit runs on, rose too. Not as high or as fast but it went up significant amounts, loosely tracking SBD to $8.50 US or so. It too, dropped to three bucks. Unlike SBD, Steem was always intended to fluctuate.
What does this mean for content providers? Let me break it down.
A $10 post reward, when it comes to pay out is calculated, thus:
25% goes to curators – the people that upvoted it and ultimately enabled the $10 reward.
The remaining 75% is split in two:
37.5% goes to the author of the original work in the form of SBD. In this case that is a direct translation from Steemit reward dollar value to SBD. $3.75 becomes 3.75 SBD.
The other 37.5% goes through a transformation, though. The $3.75 is taken as being $3.75 US and buys as much Steem as it would in a normal fluctuating market.
Now, at the time of writing, SBD is $7 and Steem is $6.50.
That $10 reward is now worth 3.75 SBD @ $7 US each which = $26.25 plus $3.75 worth of steem (0.58) which totals $30 US or, if taken in Steem, 4.62.
Steem Price (USD) $6.50 SBD Price (USD) $7.00
This is great if you’re in it for the money but it’s not so good if you want to power up with Steem. That is, after all, how your account gains influence and voting power on the platform.
If you’re in this for the long game, things are looking grim.
Previously (before November 20th), you could convert the SBD portion of your reward straight to Steem with little or no calculation. That $10 reward would convert to 7.5 Steem.
Steem Price (USD) $1.00 SBD Price (USD) $1.00
In the second example, which is where we were a week or so ago when this was written, that conversion is marginally more complicated but results in 4.62 Steem. Just 61.6% of what it was before.
Now, let’s extrapolate this and drop SBD back to $1 US and leave Steem to wander about as was intended. We’ll use late January's $6.50 US value. That $10 reward now nets you 1.15 Steem. Just 15.3% of what the same post would have returned at the beginning of November.
Steem Price (USD) $6.50 SBD Price (USD) $1.00
What does all this mean?
If you’re in this for the long haul and want to grow with the Steemit platform, you will have to work a hell of a lot harder than anyone that went before you to match their Steem holdings. Their voting power.
If it previously took a year to make Dolphin (5,000 SP), at $1 US per SBD and Steem it will take more than six and a half years to do the same with SBD pegged to the USD and Steem loose. By then your 100% vote is worth a whole $2.23 in reward money.
I work damn hard to produce good content. I spend days, sometimes weeks on each short story, crafting it carefully and polishing it thoroughly before posting. As a newbie (less than three months), I frequently earn only $1.50 in rewards per post. Multiply that by 5 for a serialised short and it’s worth $7.50 in rewards, $5.62 US or 0.865 Steem if SBD is pegged to the dollar.
That’s a terrible return on investment. After all, your time is the most valuable thing in the world. The platform will empty of talent.
The way I see it, there are three choices.
- Leave it alone. Let SBD and STEEM roam where they will for the moment and hope that they stay roughly equal. Your $10 post nets you 4.62 Steem or $30 cash.
- Peg SBD to the USD and let Steem run loose. If you’ve been here less than a year, then prepare to spend the next decade getting anywhere even remotely interesting.
- Reverse the polarity on Steem and SBD rewards. Then a $10 post would return 3.75 Steem and $3.75 US of SBD. Now you can peg SBD to the USD
Option 3 allows the pegging of SBD to the US Dollar and a guaranteed payout of Steem. Bear in mind that there’s an option when posting whether to go 50-50 or 100% Steem.
This choice allows the community to grow from the ground up.
Thanks for this, John. It's made things a whole lot more clearer.
Ugh, the system drives me batty. But I'm willing to learn. Thank you for taking the time to write this (and make the nifty diagrams)!
I'll readily admit that I'm still coming to grips with how this all works. But I'm picking up what you're putting down and I have to say I'm not deeply heartened. Hopefully the community is as open as it presents itself to be, and we'll see what we can do about it.
Resteemed your article. This article was resteemed because you are part of the New Steemians project. You can learn more about it here: https://steemit.com/introduceyourself/@gaman/new-steemians-project-launch
So that is why I was getting a whole lot more steem when it was valued at around $1. Thanks for the explanation.
I started off, for first 3 months, posting with my settings at 50-50%. When the value rose, I decided I am not going to be withdrawing any money as I want my power steem to rise, so I changed my settings to 100%.
Now I see, whatever I do, I will never rise to a level that will make a difference in my power or earnings. I had decided not to withdraw any funds for at least another year, but thanks to the changes in value, the level I'll reach then is a tiny rise from now, it no longer makes sense - being 74 years old, I cannot bank on being here another 10 years and I'll probably be senile by then and permanently lost within the worlds I created (or so I am hoping, I hate the idea of becoming less sentient).
There is another very important point that affects our earnings (I do not know if others have noticed this). Those with a stronger rep than myself, last year, when they would upvote me, I'd get a $ or two from them, with my earnings for each post of my story totalling about $4.40. Because those 'curators' now think of their $ of upvote being worth three times what it was, they have reduced the % slider, so that I end up with a few cents from them - making their upvote no more rewarding than those I get from the smaller rep upvotes.
EDIT: The majority of steemians can only upvote by a few cents and many of us, when we find a deserving poster, wish we could do more. One way you can help such people is by answering a few comments, as they can then be upvoted, raising your total for the post. Anyway, I like your stories and so you are now on my feed (nope, I'm not carnivorous - in a cannibalistic sense)
I'm pretty sure that the only time it's worth going 100% SP is if Steem is below a dollar and also above the price of SBD. At all other times, take 50/50 and buy Steem with the SBD and power it up.
I'll do the math later as I've just woken up.
Not to put too fine a point on it but none of us can bank on being here in 10 years. Or next year for that matter.
I wanted to change my SBD to Steem for powering up, but I saw I'm being offered much less, which means I lose whatever I gained by having it at 50-50. Am I wrong?
Have a hot cuppa coffee first
:)
At the moment, SBD is worth more than Steem and they're both above a dollar - SBD = $4.40 and Steem = $3.50. So the conversion rate of Steem to SBD is around .8, 1 Steem buys you .8 of an SBD or 1 SBD buys you 1.25 Steem.
Unfortunately, the internal market doesn't always accurately reflect the external market for this pair and if you go to your wallet, click the little down arrow next to Steem and select Market, you'll find that the internal market is around .9 SBD to 1 Steem.
So, you're getting 1.11 Steem for every SBD. Your 50/50 worked. Trade them in the market whenever you like. Or, as the graphs show that Steem is not rising as quickly as SBD, you may want to wait and see whether you can get .8 or .7
Your call.