Liquid STEEM Rewards
For the first time, today I received directly some STEEMs as author reword, instead of the usual SBD. This is a feature built into the STEEM blockchain, which is programmed to give STEEM instead of SBD, once the value of the new generated SBDs goes above the 2% of the STEEM total market value:
The value of STEEM is going down, with a market capitalization going as low as $387M, a negative record in the current situation of SBD not being pegged to the USD. This situation triggered the so called Liquid STEEM Reward phenomenon.
The direct result of this phenomenon, is that post will have reduced reward value. The post will be worth less STUs (Steem Token Units, a notation of the value displayed in Steemit as the $ value of a post) and there will be an increased offer of STEEM, as some of them will be generated as LS (Liquid STEEM). This will have a second order effect on the market, putting additional pressure on the STEEM price. With prices of STEEM going down faster than what can be compensated by the number of new generated STEEM, it will be difficult to maintain a steady market capitalization, forcing even more SBD to be generated as LS. Fortunate, some of the STEEM Witnesses started to lower the price feed bias, in an effort to reduce the supply of the new generated SBD.
Could you please explain how the "witness lower the price feed bias" works, I found the whitepaper quite unhelpful on this topic ?
Agree, @sorin.cristescu, this needs more clarification!
Well, I was never experimenting with the STEEM Witnesses Program, but some details on this topic are present in the Sustainable Debt to Ownership Ratios section of the White Paper.
The SBD was designed to be pegged to the US dollar, and viewed as debt in the White Paper. To ensure the stability of the currency, the debt has to be kept under control. When too many SBD are available compared to the STEEM market capitalization, the blockchain is programmed to award less SBD, and to replace them with STEEM (the so called Liquid STEEM). The witnesses are supposed to decide on the monetary policy, and to adjust their parameters in order to keep the pegging of the SBD to the USD. The "price feed bias" is the percentage floor used to compute STEEM creation, but the detailed mechanism I also do not understand... It would be great if somebody else can provide a different view.
One other topic which is also not clear for me, is about all the SBD created over time. It was intended that SBD will be destroyed when they are converted to STEEM, but this feature to convert SBD to STEEM was removed from the Steemit interface, and I have no clue what happens with all the SBD accumulated in the network...