A first look at the SPS cost-benefit numbers

remlaps-lite (76)in #steemtalk • last month (edited)

A couple weeks ago, I posted How attractive is the SPS as a takeover target?, where I considered the possibility of an outside investor buying STEEM just to gain control of the Steem Proposal System (SPS) funding. As a shot in the dark, I made the (unsubstantiated) assumption that someone who owned 25% of STEEM could control the fund.

Basically, I'm speculating that there is some theoretical point where it would make sense for a highly funded investor to load up with STEEM just to gain control of the SPS Wallet. I have no idea where that point might be, but if we track values over time, we can see whether it's getting closer or further. So, I slapped together a script and started saving the data every day.

Two weeks later, here's a first look at how things have moved based on daily downloads:

In the top visualization, we see the values of the SPS wallet during the two weeks.

External value (light blue) is based on @coingecko SBD prices. This rose from $10.3 million to $12.06 million (17%).
Nominal value (navy) is based SBDs at $1. This rose from $4.54 million to $4.57 million (<1%).
Haircut value (orange) is based on the blockchain's haircut pricing, if someone were to convert SBDs to STEEM. This gained from $3.07 million to $3.57 million (16%).

In the bottom visualization, we see the total cost to buy a 25% share of all out-standing STEEM divided by the value of the SPS wallet. Again, this is broken into the same three values.

External Costs / benefits (CBR): Decreased from 1.99 to 1.97 (1%).
Nominal CBR: Increased from 4.52 to 5.21 (15%)
Haircut CBR: Declined from 6.68 to 6.66 (~0.3%)

We can think of it like this: If the CBR is 2, that means someone would need to invest $2 to gain control of $1 in the SPS. If they achieved control of the SPS fund, that's an instantaneous gain of 50% on their investment (***_{on paper, but probably not in practice - see below}).

In general, higher CBRs mean that the SPS is a less attractive target, and vice versa.

There are, however, a lot of reasons why this scenario doesn't actually depict any real-world investment returns. Among them are the following:

The SPS is limited in how many SBDs it can pay out in a day, so the would-be investor would have to wait a long time to realize the gains.
Buying large amounts of STEEM would be sure to move market prices
Selling or converting large amounts of SBDs would also be sure to move market prices
Attempts to gain control of the SPS would almost certainly trigger bidding wars.
In those bidding wars, existing large stakeholders have a huge head start on outside investors who might want to gain control
etc... I'm sure there are more.

As these values change over time, though, I still think that the movement tells us something about the relative attractiveness of the SPS as a reason for investing in STEEM.

It also occurs to me that the existence of the SPS probably places some sort of a floor under the price of STEEM. It seems that any time the price of STEEM drifts below this hypothetical floor, it would be likely to trigger a takeover attempt, which would lead to a bidding war that would drive the price back up. So... the more valuable the SPS, the higher the floor... maybe 😉.