Steemit Secret: Why we now get paid in liquid STEEM, STEEM POWER (SP), and STEEM DOLLAR (SBD) 💰

Have you also noticed that we get three currencies as rewards for our posts for some days now? If you have set the rewards to 50/50, we now get paid (mine) not only SBD and Steem Power (SP) but also liquid STEEM. But why is this the case?

The answer is, that the production of Steem Backed Dollars (SBD) is throttled when it's market cap reaches 2% of the market cap of Steem (both Steem and SBD) and at 5% market cap the printing of SBD is stopped entirely. This guarantees that the supply of SBD does not exceed this 5% threshold of the market cap of Steem, assuming that 1 SBD is 1 USD. The idea behind SBD is to have a stable cryptocurrency pegged to USD like Tether, which btw almost works in the case of SBD at least for the lower bound but is currently lacking a mechanism to enforce the upper bound.

So the reason for this throttling is the falling Steem price unfortunately, which has triggered this interesting algorithm to limit the supply of SBD and guarantee the peg to 1 Dollar at least for the lower bound, which is a very interesting concept.

I did not know all this, but have found a great comment by @jga under a discussion by @tarazkp about this topic.

@jga wrote [1]

If have read the code:
If percent_sbd is below 2% then the sbd_print_rate is 100%.
If percent_sbd is above 5% then it stops printing sbd.
If percent_sbd is between 2% and 5% then sbd_print_rate = 100% * (5 - percent_sbd)/3.

Here is the current calculation as of today (2018-03-27):

1. Steem supply: 266,021,867 STEEM
2. SBD supply: 11,101,353 SBD
3. Virtual Steem (SBD in Steem with the median price of 1.940 SBD/STEEM as reported by steemd.com): 271,744,212 STEEM
4. percent_sbd = SBD supply in Steem / Total Steem = 5,722,347 / 271,744,212 = 2.1%
5. Current SBD printing rate is then = (5 - 2.1)/3 = 96.67%

Since the price of Steem has fallen a bit since yesterday, the same calculation with the current market price of 1.75 USD / STEEM would result in a SBD printing rate of 90%.

Just hypothetically, the production of SBD would entirely halt if the price of Steem fell below 0.81 USD under current conditions. But let's hope this will not happen :)

Live your Secrets and Steem Prosper 🔥

Sources

[1] https://steemit.com/steem/@tarazkp/the-sbd-steem-debt-and-payouts#@jga/re-tarazkp-the-sbd-steem-debt-and-payouts-20180320t164828905z
[2] https://steemd.com/