Understanding Payouts on Steemit. The $ Sign On Posts Is Misleading - Here's Why...

in steemit •  7 months ago

One of the most confusing aspects of using Steem and Steemit is understanding how the rewards payouts are calculated. Not only is the basic formula quite involved, but the whole situation is made far more complicated by what amounts to a bug in the User Interface of Steemit.com - Allow me to explain.

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The basic formula for calculating post rewards, relative to the amount you see shown under a post in Steemit.com is:

75% goes to the author
25% goes to the curators (the users that upvote the post)

So far so good.

The amount that goes to the author can be paid out in two ways, depending on the payout option chosen by the author when they created the post:

Either receive 50% of the author reward in SBDs (Steem Backed Dollars) and 50% in Steem Power OR Receive 100% of the payout in Steem Power.

Steem backed dollars are intended to be a stable currency that is pegged to the US Dollar, but in practice that isn't what has resulted due to traders pushing the price up beyond the control of Steemit Inc. and the witnesses who help set prices for the currencies. Steem Power is the non liquid form of Steem that is used when voting for posts on the Steem blockchain - Steem power is your power to act on the network.

So that's the basics.

The problems start when we realise that the figure that is shown in the Steemit User Interface is not actually listed in either US Dollars or Steem Dollars.. I think this is the result of a poor design choice early on that was based on the logic that the Steem Backed Dollars would always be worth around 1 US Dollar - but now they aren't. Let's look in more detail.

As you can see in this helpful tool at steem.supply, the SBD compontent of the 50%/50% payout option is easy to understand since it is a direct 50% cut for the value seen in the Steemit interface.

So, for example, if your post says you will be paid out $100 then 75% of that will go to you as the author (75$) and then 50% of that 75$ will be your direct payout in Steem Backed Dollars - meaning you will receive 37.5 SBDs for this post. The confusion comes when calculating the Steem Power payout because it IS calculated based on the US Dollar price. Therefore, to calculate the Steem Power you will receive, you need to work out how much steem you will get for $37.5 US Dollars and that is your final value in Steem Power.

I see this as a bug, not a feature simply because it adds unnecessary confusion to the system that adds to the burden of complexity for users when things really should be and could be much more simple.

If Steem Power payout is being calculated differently to SBDs (apparently for no reason other than because there was originally an expectation that SBDs would be worth 1 USD) then I can see no justification for that other than it is an oversight.

How Might This Be Improved?


Since we have become used to being paid out a high value in SBDs for posts now, we have something of a challenge. Logically, we need to adjust the way the payouts are calculated/displayed, so that the figures shown in the User Interface are adjusted to take into consideration that the SBD value is not pegged to 1USD.

I think this would make the system a lot more simple to use.

What do you think?

Wishing you well,

Ura Soul

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I think the payout should be reported in SBD and not in $. This both more practical and makes more sense. Perhaps all the payout should be in SBD, and then people have to exchange if they want more Steem and power up?

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I think the logic behind the SP being enforced is to maintain money within the system, so that users are incentivised to build SP and can't just post and run. There are a variety of benefits to having SP as part of the payout. I personally think that scrapping SBD entirely is a good idea and then we can just get paid in SP and liquid steem - eliminating a lot of confusion. If SBD can be reliably pegged to USD then that changes things, but all current signs suggest it won't be easy to achieve that.

I'm a fan of simplicity and having 3 forms of currency is a bit overkill I think. In any case, I have no plan to push for any particular change currently... We have more pressing things to fix that aren't being fixed!

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We are already pretty incentivized​​ to have money in the system with the long power-down​ period.
I was also for scrapping SBD before, but I have changed somewhat and I believe payout should be in SBD, as kind of a dividend for holding Steem Power. Then it is easier to value the Steem blockchain also with traditional financial metrics. But, I agree with you: More pressing things to fix.

Interesting and helpful for understanding the structure, thank you! For me personally it is meaningless since I am not on steemit to make money but to share and receive uncensored information and exchange ideas.
I also tend to believe that the monetary reward system on steemit is not really a good thing. Money corrupts. People get greedy, suck up to the "Big Fish", try to manipulate the system and post articles and comments to get 'rewards' rather than to speak the truth which might be less popular.
But nothing is perfect. Still better than facebook...

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I came here originally for the uncensored aspect too - with the money being a useful addition. I have never paid a penny to buy any steem and everything I have has come from upvotes on my posts... So I can't say I am against the payout system - it has been more fruitful than 10 years of other social networks in just 1 year for me - both in terms of money and engagement.

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I had to invest quite a bit to get my reputation up because I was attacked by a professional "downvoter".
Made the mistake to post about our Best Friends Forever. So, money wise I actually spent money to be able to post here. But I agree on your point regarding other social platforms. At least I am not supporting Suckerberg...

One “you” is enough in “you your post says you“? 😜

This is my small added value: proofreading.

Happy day!

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Thanks! corrected!

I think that it's not only the reward display that is bugged but the rewards themselves. If I remember correctly, the Steem team programmed the blockchain with the permanent assumption that SBD would always be 1 USD. And now that SBD moves up and down, the rewards contain Steem sometimes, sometimes they don't, and the reward display is always divided by half the SP half should be literally half, but it's less...

Anyway, this all means that if SBD is more valuable than 1 dollar, we get more SBD, which is absurd in my opinion, unless we're talking about producing more to devalue the coin so that it goes back to 1, etc., but I don't see that happening nowadays.

I'm not sure of anything, though. I'm not an expert by any means and I haven't read the code of the blockchain.

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I don't know how deep the problem goes, but it can surely be fixed at the User Interface level anyway. Maybe they intend to resolve this at the blockchain level at some point. Messy!

More SBDs are being produced to compensate for the issue, but traders continue to push the price up anyway!

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Hmm sir @ura-soul you are right i agree with you sir.

we need to adjust the way the payouts are calculated/displayed, so that the figures shown in the User Interface are adjusted to take into consideration that the SBD value is not pegged to 1USD.

The confusion got me to a point to think the fault was from my calculations trust me you dont want to see my steemit calculation book, at some point it must have included calculus lol, thanks for more clarifying this i hope your suggested solution will be taken into serious consideration and implementation

Thank you @ura-soul, I often have this question of why my SP rewards figures are different from the SBD. I have a clearer picture of that now.
So, the amount of steem and sbd being paid out change depending on the current price of steem

This was really helpful @ura-soul,
I knew some of the facts but there are some new things I learnt in this post. This has mislead so many people. Some people have issue understanding this so I will resteem it so that I can tell more people about this. Thanks a lot for sharing this, nice thought.

I never really understood the need to have two different tokens but since that is what we are facing then we just need to adjust.

I always use steem.supply and check on the STU instead of the dollar value because the SBD not being pegged at 1 is making it difficult.

Now steeminc has no control now in SBD and with the rewards in SBDs and bot payment can be done in SBD it drives the market to want higher value for sbd.

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the point of sbd was to have a stable currency pegged at 1usd, but it apparently wasn't thought through effectively.

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Yeah and the trading and speculation of the SBD caused it to balloon which was both a boon and a bane because people joined because of the inflated value of posts but the bad thing was we got spammers and plagiarist and not to mention phishing scammers who tried to take advantage of things.

When SBD and Steem fell a lot of these quick rich minded people stopped posting and now that it is picking up again we are seeing activity again from these people.

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I think activity increases in general when payouts are higher. As soon as people can make more money here from posting than they can from their other activities, they post more.

Awww man, if only we read this when we started out, it would've saved us a lot of confusion! Must say, we were still confused about how SP was calculated as it seemed to vary and we weren't too sure why.

Thanks for clearing it up - the system sure does sound slightly flawed!

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You are welcome! It is possible to use the site just the same, but knowing the details helps settle the mind, for sure.

great post for people just starting this would have been soo helpful about 2 months ago when i joined :P

This is the most comprehensible version of this calculation that I've seen. Weĺldone

What I didn't know is that Steem power is calculated based on US Dollar, thank you for the exposure.

Although I knew about how the payout work, I can't help but admire a helpful and thoughtful post like this.
Steem on @ura-soul

Thanks for clear to me steemit payment related all problem solve.

Its needed for every new steemit users i think.

This is insightful.
But then, I think the results starts from the foundation.
Steem was created with the assumption that sbd would be 1 USD.
Now it's going pendulum.

Ive noticed that you used one of the bots to boost your post and I decided to check it out.

I must admit I love what I've found. Great read. So informative. Thanks.

Upvoted and followed

I had to read twice to understand. but also im get confusse all the time about this. so im just doing my job not looking the incomes. its more fun.

resteemed, upvoted and followed. I had no clue about any of this and I believe I have been here 2 years! Thanks for the education friend, looking forward to more

Great info. Had no clue. Lots to think about. So far I love Steem. AND. It’s like using a new concept with old methodology. It could stand to be much more simplistic. Like your ideas!