The Case for Showing Pending Rewards in STEEM
Why are pending rewards shown in $?
I suspect every Steemian has, at some point, wondered how their post payouts are calculated. How does a "$" amount get converted into SP, STEEM and SBD? This question has been answered in numerous posts; what I wish to highlight is the fact that it needs to be asked, partly because the calculations are slightly complicated but also because the dollar-sign is not really a US Dollar. Instead of repeating a post on "How are payouts calculated?" I wish to show how much easier, and more meaningful, it would be if rewards are shown in STEEM.
STEEM is the local currency
STEEM is the native currency of the Steem blockchain and the whole ecosystem. Just as you need to use the local currency when you travel abroad, so you should be using the local currency of the blockchain. Yes, the value of STEEM outside the blockchain varies, but within the blockchain it is actually astonishingly stable.
STEEM is a stable currency within its economic system
This is something that few seem to mention, or possibly even notice; I suspect this is precisely because pending rewards are shown as a $-amount. As the exchange rate of STEEM/USD changes, so does the pending rewards; looks great if the price is increasing, but causes deep concerns when the price falls. We have all experienced our pending rewards decrease during a post's 7-day lifetime. And yet, the STEEM-value of that post has probably not changed. As I showed in another post, the profitability of Steem changes quite slowly.
Most people look at the blockchain's profitability as an "inflation rate"; the two are one and the same thing. It is the inflation rate that powers the profitability of an upvote. Should Steem gain wider acceptance and an increase in overall activity, then that inflation rate will drop down to be nearer the official rate at which STEEM is created. In this scenario, the reward pool would shrink (do not panic, this is what it is designed to do) and the value of an upvote in STEEM terms would also decrease. All this would happen relatively slowly, measured in a few weeks, and can be tracked so that it can, to a certain degree, be predicted.
STEEM currency for merchants
The relative stability, profitability and predictive power of the Steem blockchain should give merchants confidence in using the cryptocurrency. Sure, it is volatile with respect to fiat, but every fiat currency is also volatile compared to other currencies - that's why the Forex markets exist. But if a merchant or platform creates products or activities that are denominated in STEEM, and that require STEEM to be circulated within the ecosystem, then those entrepreneurs can have confidence that their STEEM holdings will have a predictable purchasing power within the system.
Sure, at some point we all wish to cash out to our local fiat currency, but that is a different calculation; that requires having a plan and making a judgment call as to an acceptable target price in which to take some profit. Selling when prices are low (and buying in when they are high) is what amateur investors and traders do every day on the global markets.
The psychological importance of STEEM
Changing the pending rewards from "$" to STEEM is not a mere cosmetic exercise; to me, it is of fundamental psychological importance that Steemians operate in STEEM. It is the local currency within the local Steem economy. By focussing on the exchange rate rather than the internal value seems a sign that everyone is milling around the exit doors. Many online games have internal tokens; do gamers constantly look at their fiat value, or are they focussed on using those tokens to improve their gaming experience?
This is also somewhat like people on holiday abroad who convert everything back into their national currency. Makes sense if on holiday, but if you're an expat who earns and spends in the local currency then such constant conversions become less meaningful. What remains important is seeing your total holdings in case you need to move back to your homeland, and for that reason your STEEM holdings will still show their (approximate) USD value within your wallet. One interim solution is to show rewards in STEEM with the $-value in brackets.
How to show pending rewards in STEEM
OK, here comes some mathematics.
The important thing here are the rshares created when someone votes. The relevant formulas can be found here but one tweak is also necessary.
If a post is accepting rewards as "100% Powered Up", the calculation is fairly simple.
STEEM = (net_rshares)*(reward_balance)/(recent_claims)
Note that reward_balance is measured in STEEM whereas the other two parameters are in Vests. The net_rshares is the "sum of rshares" and can easily be seen on steemd.com. I assume that the net_rshares is equal to the vote_rshares less any downvotes; am willing to be corrected on this, so please leave a comment.
However, if a post is being rewarded at "50% SBD / 50% SP" then we need to make an extra calculation in order for our STEEM rewards to be as accurate as possible.
Firstly, calculate the above formula, then take 37.5% of that value as the "SBD rewards".
Multiply this by the STEEM price on the blockchain - this gives a $-amount that, assuming SBD is worth $1, is the same numerically as the amount of SBD.
Finally, convert this SBD into STEEM by multiplying by the STEEM/SBD rate. This exchange rate can either be taken from the internal market or as the ratio of the external market prices.
For example, assume STEEM = $0.5, SBD = $4 and your pending reward is 8 STEEM (assume this has already been calculated from the first formula).
Then, 2 STEEM will go to curation rewards, 3 STEEM will be paid out as SP, the 3 STEEM going towards SBD will be worth $1.5, hence 1.5 SBD, which (at 8 STEEM/SBD) is equivalent to 12 STEEM! Total pending reward, just before payout, will thus show 17 STEEM.
Note that the actual STEEM value is much higher than the simple formula. We had this situation some months back when SBD was well above its so-called peg.
As a second example, and closer to current prices, assume STEEM = $0.25 and SBD = $0.75, with the same 8 STEEM value from the first formula.
In this case, the 3 STEEM allocated to your SBD account are worth $0.75, hence 0.75 SBD and, converting back to STEEM, worth 2.25 STEEM. Total pending rewards will thus show as 7.25 STEEM.
Note that in this latter case, as SBD is below $1, the STEEM-equivalent is less than 3 STEEM.
And finally...
The native currency of the Steem ecosystem is STEEM; I think it damages the perceptions of the ecosystem to keep seeing a $-amount being promoted more than the STEEM amount. Seeing dollars everywhere encourages the view that the coin is unstable when, in reality, the STEEM macroeconomic system is fairly stable to even major price changes. Yes, there are issues with the distribution of the coin, but that can be seen as microeconomic issues and can, possibly, be solved at that level.
One thing I am heartened to see is that many devs are talking explicitly about creating platforms that give extra value to STEEM. What that means in pure money flow is that STEEM should be worth more within its own economy than it is outside of it. It means that new types of transactions can be created using smart contracts so that STEEM flows more within its economy. I look forward to seeing how these new platforms develop.
The point I am making here is that STEEM must be seen to be the primary currency of the Steem economy. For that to be the case, STEEM must surely be more visible within its own ecosystem. One small but important step is to show all pending rewards in STEEM.
Your comments are welcomed!
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@rycharde manages the AAKOM project and the MAP Rewarder and Trail.
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Thank you for your review, @favcau! Keep up the good work!
spot on, I couldn't agree more. Pending rewards should be shown in steem. resteemed
You should let @steempeak know that you're interested in this and why it's good. We're listening.
Thanks a lot @paulag.
If you can think of any more killer reasons that I've missed, let us know.
Yes. A very good point! It would be a lot better if everything would be quoted in Steem by default. Currency conversions should be done by front ends on request.
I do wish this was an option. I would much rather see a post paying out 20 Steem than $5.
What about the reverse position, with 5 STEEM worth $20? :-)
This is very helpful @rycharde but i guess i ll have to read it 5 times to understand it, lol!
Your first PREMISE is that rewards are shown in $ ... ummmm
... We found in testing the dollar sign was the most confusing part of a new users experience. "Oh so you make $1.31 on this post?" Nope "Then why does it say that?"
Your case you're making is that value should be shown in steem
(Stability and it being the currency of our blockchain high on that list)
USER DECISION?
A. What should be the DEFAULT shown? (stu/steem/usd)
B. Should the user be able to see the value as the value they want (stu/steem/sbd/usd/eur)
And I'd like to think @steempeak is willing to listen to users... what do they want? And more importantly what would be the most intuitive thing for the future of steem and thinking about new users?
MATH
I can't speak to the math and 1. if it comes up with the actual rewards of a post 2. if all of this information needed for this math is easily at hand for a front end.
Thanks for your considered reply. In my first draft, I kept calling it a pseudo-$ as it doesn't match the real USD of the payouts; in the rewrite I dropped it as didn't want to get heavily diverted into the way pending rewards are calculated at the moment as it would have doubled the length of the article.
But, yes, I have no idea why the "$" is used.
After a few comments, I think the "simple calculation" is the simplest one for users to follow inasmuch as the numbers match the payouts more closely, that is, in my example of 8 STEEM payout, leave it as 8 STEEM so that 2 STEEM go to curation, 3 STEEM become SP and the remaining 3 STEEM are transformed into SBD. There will always be some mental gymnastics involved but this has only one transformation, from STEEM to SBD.
The comment by @steevc mentions that it is good for users to see their rewards rise, something that won't always be the case if shown in native STEEM. What do you think of that? I think in STEEM users can see whether their posts are truly rising due to more upvotes rather than just due to exchange rates.
I can also already see that smart contracts can create blockchain transactions that are new to the ecosystem - I'm thinking of @steemmonsters - and that if this develops into new financial instruments then it is best denominated in STEEM.
What we're asking ourselves is what should be the DEFAULT view.
If we have STEEM as the default then calculating related values in other currencies is a piece of cake. So just allow them to change or show side by side with a $ that is a real $usd value. haha
Another question... if curation is now consistently 25% then why show that portion at all?
What's the argument for keeping that as part of the value? Do you think users (specially new users) would rather just see the value that they're going to actually get?
Curation is defined as 25% in STEEM terms but this is not always the case when converted to $ or SBD; it is mainly the SBD distribution that affects the true % going to curation, and since HF20 some also gets recycled into the reward pool.
As for a default setting, I personally would go with STEEM. I have set up my steemworld settings to STEEM to 4 decimal places. (Thanks to @steemchiller!) Indeed, steemworld is a good example of how flexible a UI can be, with data to suit most people, including EUR as well as USD.
One thing to be careful of is not to overload the data calls on long lists, such as trending or tag pages, so have one default for lists and perhaps more visible data, maybe in a popup, on a post page.
As a plug-in and overlay, @steem-plus can, I think, already be set up to show different prices.
One argument that continues unresolved is whether to use the blockchain price for STEEM or the market price average. IMO those algos that specifically use the official blockchain price should be duplicated as they are; to calculate a real USD value will, however, require market prices. Also, in my example, selling SBD for STEEM requires market prices, but a "conversion" must use the blockchain price.
This is just how I set up my data for my fund - what is important is how much STEEM I can earn because that I can manage, whereas the $ returns are beyond my control.
It's important to note that any front-end could implement this display trivially. Steemit does it on purpose because putting values in terms of USD makes more sense to new users. I imagine in the future a much more advanced front-end for advanced users would take this idea to heart and much much more.
perhaps it is a marketing ploy aimed at prospective new members; actual new members seem usually thoroughly confused once it is their rewards at stake.
Been thinking about this for some time and glad you wrote such a detailed post on the matter. I have seen that whaleshares does this and think we most certainly should follow suite.
It seems it would be easy to accomplish on the UI side, right?
I also think we should consider dynamic inflation that adjusts to the market but haven't really thought through the implications.
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If Whaleshares already does this, then the code will be easy to find :-)
What do you mean by "dynamic inflation"? The "real inflation" rate, in terms of upvote value per SP has been analysed here. It is already dynamic in that it reacts to blockchain activity - any wild swings tend to have safety measures, such as the SBD print rate and tonsure (or haircut).
To start messing with the actual STEEM creation rate would IMO require a very good reason to do so!
@rycharde : This seems to be a really useful article with links to other helpful ones. As @georgeboya said I need to read it multiple times. Plus I need to understand much more about blockchain and economic fundamentals. I always hear from people STEEM is the fundamental currency here, not SBDs. But I never understood really why. There are many gaps in my understandings. I don't understand when you say APR. Even the concept of rshares are not very clear to me. But when I get time, I read about these.
The link I gave re the formulas should be helpful:
https://www.steem.center/index.php?title=Rewards:Formulas
STEEM is created through the inflation algorithm, it cannot go to zero unless a HF decides so; in contrast, SBD is only created as part, but not all, of rewards, and the print rate can go to zero. For the why of SBDs, you'd better ask @dan :-) It does seem to work on a macro level but possibly not as intended.
Thanks for the reply. I will have to learn more. You tagged Dan Larimer?? Woah!
Why, is that a crime? ;-)
Although Dan has been largely inactive the last 6 months, his father, @Stan still posts - perhaps the Graphene family needs to work together more; there are ready-made solutions to certain things, such as SMTs. Wandering slightly off-topic now.
Graphene family? I know very little about the background stories. I have heard that both bitshares and steem uses graphene tech. Nothing more than that. Yeah we are going off-topic. So maybe I should stop. :)
Some interesting, albeit old, concept-articles by Stan:
https://letstalkbitcoin.com/bitcoin-and-the-three-laws-of-robotics
and
https://letstalkbitcoin.com/dacs-that-spawn-dacs
Thank you for the links :)
I do not count any of this money until I get in my hot little hands to spend it. I look at the rewards with hope, and look at my sp to see if I am growing. But I consider it to be "funny money" while here on STEEM and not worth worrying about. Once I get it through Blocktrades and my exchange and into the currency where I am it is lower anyway.
Right now my posts are paying out a lot more sp and steem than they used to. That's all good and I like the sp increase, but in the real world it is less than it seems.
I take cash out for as much as I need or have available to take about weekly and have since Dec 2017. I use this money to live on in the third world. The ups and downs are not easy to deal with, but watching the rise and fall in here is pretty much meaningless to me.
In those heady days a years ago, times were great, and I sure hope they will be again :)
Yes, some of us live in places where online earnings can stretch further - some years ago was easily able to earn my rent. Not quite at the moment, though!
But the point is that earning the steem happens within the blockchain, spending it is at the moment of exchange. Would be good to get that room in Yangon in STEEM :-)
The place in Yangon was $7 usd for two nights so steem got that one. It was a hostel, so I only had a bed in a cubby, but it was a great place in every way.
Where I am now in Kuala Lumpur is $85 usd per month - my whole month is about $300 usd for everything here and I struggle at the moment to get that. But I am ever the optimist :)