Well now I'm wishing I hadn't sold all my SBD at $1.70. Today for a moment SBD surpassed $6, and at this point there's no particular reason to think it won't go higher, because the old dollar peg seems to have been completely forgotten:
Last week I wrote a post talking about this issue (back when $1.40 SBD seemed like a screaming good deal!), and the main point I tried to get across was that you shouldn't hit the convert button when SBD is worth more than $1:
Today I'll talk about a slightly different issue:
Take your rewards as 50/50. Do not take your rewards as 100% Power-up.
Why is this?
The reason is that when Steemit gives you your payout, it can't actually tell that SBD is trading at a very high price, so it just assumes that SBD is worth $1.
Suppose that after eSteem and curators take their cut that it says you're entitled to $10 of author rewards. I'll run through two scenarios to see how much you'd actually earn in that case.
If you take 100% power-up
Scoot over to steemd.com, scroll down, and find this:
That number 1.386 is the "price feed." It tracks the value of Steem denominated in real US Dollars with about a 3-day delay. If Steemit.com says you got paid $10, what it actually means is that you got paid that amount divided by the price feed. So 10 / 1.386 = 7.21 STEEM. If you took your payout as 100% power-up, you'd get 7.21 STEEM POWER, which is worth exactly 7.21 STEEM.
If you take 50/50 SP/SBD rewards
Here, you get paid half the $10 right off the top as SBD; then it converts what's left over to STEEM and gives you that in STEEM Power.
So in this case, you'd get 5 SBD and 3.6 STEEM. How much is that worth in STEEM? Well, in the market, you can currently get about 14 STEEM for those 5 SBD! See:
So here's the comparison:
100% Power-up: 7.21 STEEM
50/50 Split: 18 STEEM
You'd make more than twice as much by taking your payout as a 50/50 split!
Right? It's just been crazy! Hey, you know I'm using pocket to let my followers vote for their favorite puns? I'm so glad POCKET exists. It's just such a fun tool!
https://steemit.com/pocket/@improv/friday-is-pocket-friday-use-this-steemit-based-currency-to-vote-for-your-favorite-puns
Thanks for continuing to use Pocket! It was a fun thing to build, and I hope to add to it soon.
Ooo! I can't wait to discover more functionality!
The trouble is that there was never a dollar peg. There was a dollar floor.
If SBD was trading at 50¢ on the exchange, you could use steem to convert the SBD to steem at $1.
Yep.
Well, I'll say this -- there probably was a weak ceiling enforced informally by market makers. I, for one, had a personal policy of always selling when the SBD price went over $1.10.
I'm guessing any pegged currency has layers of support; market-makers keep the price steady in the short term, but you need fundamental mechanisms to have stability in the long run.
What actually happened is some trading pool or pools in Korea juiced SBD bc it was juicable (light trading, hard to sell by those who own a lot of it). Really nothing to do with the $1.00 mechanism or steemit accounts. We can see this by the trading volumes on exchanges which allow SBD trading, look for the volume and you can see who's doing the "juicing".
Everything to do with the mechanism. If the mechanism had a means of rapidly printing SBD to suppress the price, SBD wouldn't be "juiceable."
Glad you wrote this, as it changed the way I took rewards on my personal account, @damonhudac. Under what conditions would you ever use the "convert" button, or choose to be paid 100% in SP? If I understand your articles correctly, if SBD is trading under US$1, then it would make sense to convert, or get paid 100% SP. But since SBD is trading around $6, then it's a bad bad move to do it that way.
You got it, that's exactly right. Converting and taking 100% SP is the right thing to do when SBD is trading below $1.
Now I kind of regret following your advice earlier :P
It's really strange to see the SBD rise to high while the regular Steem value is just slowly rising. Something is going on, and I don't understand what or why!
Yeah, sorry about that - but if I had to do it over again I don't think I would have done it differently, because sustained trading at $5 is unprecedented.
What's happening now is just a consequence of the SBD not having a supply-increasing mechanism. Compare it to bitUSD, which can be printed at will to control its price. Its chart shows a nearly constant price, but a massive run up in supply in the past days.
Don't apologize; I still think it was good advice at the time you gave it, and I don't think anyone could have anticipated it to skyrocket like it did.
Do you have any idea why people are buying so much SBD by the way? I don't really see any good reason besides a pump & dump scheme.
I've just been assuming that SBD is caught up in the recent crypto frenzy. I'm not a technical trader so I don't quite get the mindset, but a lot of the technical analysis I see just completely ignores fundamentals of an asset.
But in this case, there's not any fundamental reason why SBD shouldn't trade above $1 because it has no mechanism to quickly increase the supply to push down the price. As @smooth says, SBD is only "half-pegged."
Alright, that makes some sense! Thanks for taking the time to explain all this :)
Great article for a newbie like me! Thanks and have a good day!
Wow, what a huge difference your payout choice makes! Resteemed to my four thousand followers. 🙂
It's not usually true, but with SBD so expensive it really really matters. Thanks for the resteem!
What is it that drives the price of SBD? At the time of writing, it's valued at $7.33
See my reply above for my thoughts about it having to do with liquidity and total current in circulation. Anything that is more liquid tends to be seen as more able to be used for transactions
I'm not reading too much into the crazy price other than that all cryptos have crazy prices right now. But I'm no expert on such matters, could be something else is going on.
Thank you thank you thank you 1 million times. I just used the market button and got way more steam. Thank you, resteemed!!! 🙏🎃🙏
Gracias por esto, lo entendí perfectamente, ahora tengo una pregunta....
Pocket va bien, pero no gran valor :)
Por donde puedo hablar contigo en un chat amigo?
Upvoted and resteemed! Great article, @biophil!
Cheers!
@mitneb
This is something else! Great article! @biophil
you confirmed what we suspected, steemit doesn't "know" steemdollars are worth more than $1, so it's giving you a nice multiple of that (now $10 worth).
Next Article?
How can small steem accounts get out of both steem AND steemdollars without incurring so much "mining fee" costs it depletes all the steem from the account?
Do you mean Bitcoin mining fees? Or are you saying something else?
Thanks
This post is very helpfull for us. Today I learned something new from you.Thanks for sharing this post with us.
thanks a lot for discuss about sbd crypto...
i appreciate your blog..best of luck..✌😒😒
That was important info, thanks, @biophil!
Useful information
https://steemit.com/bitcoin/@sumeet9696/mining-market-nicehash-hacked
Very informal, especially for some one new like me.
Thank you!!
Powerup is necessary for increasing vests and eventually your user level. So it's not about SBD all the time. As you increase vests your user level increases and you get noticed more and then increase in SBD payouts :)
Yes, but when you select the 50/50 version instead of 100% SP for payout, you get half of each. You can then sell your SBD for Steem, which you can power up. This will increase your vests a lot faster/higher ;)
Initially upto 50SP it's good to make 100 percent power up post. Because SP often goes down if you're generous with the upvote. In thaat context it's good to have 100 percent power up posts every alternate day. My SP is low on 19 right now. I am going to make random 100 power up post every now and then to recover the SP upto 50 now :)
No, this will end up giving you less Steem Power than if you follow what @biophil wrote in this post, as long as the value of 1SBD>$1.386.
I see. I'll have to check out.
thanks for the tip!
Very nice tip. Now if I could just figure out how and where to change my numbers back to 50/50 that would be great....
You can choose this when you are about to post a new post. It's a the bottom, right next to the "publish post" button. On comments it's automatically 50/50, so you don't need to worry about it.
Thank you! All of these things to learn about this space.....a little overwhelming.
You're welcome! Yeah, there is a lot to learn when you are new to this website! It takes some time to get used to all the stuff, but don't worry, you will get the hang of it all after a little while :)
yup. This is what I have been doing lately. I get some SBD together and wait for the price of steem to drop. And right now its pretty low. You can nearly double your money just now!
I don't think we can dictate the price, unless it is done strictly behind the door with locking code or something alike.
Do you mean we can't lock the price of SBD to $1?
I mean it is currently moved by the market (floating)
Surprised to see the difference 18 vs 7.21...
Thanks for this great tip.
Regards @xabi
Good point, thanks for the advice.
Wow!! Thank you for sharing! Changing my payout now!
thanks for sharing
Thank you for the advice and to all whom replied. Good reads!
Thanks for the post, seems like the issue is just in the amount displayed being delayed whereas current trading is in a frenzy. Exciting times we are living in!
The delay isn't what's causing this. In my article I wrote
The key is real US Dollars. When the Steem blockchain pays out a reward, it doesn't know that SBD is trading so high. All it knows is the value of STEEM in USD, and it assumes that SBD is worth $1. If SBD is worth significantly different than $1, it throws everything out of whack.
Oh as in it tracks the value of Steem and not SBD, that seems counter intuitive however it does also seem that in a real sense SBD is more liquid than Steem due to SP being directly linked to Steem, I would suggest both this and the current market cap are giving it the extra value in the real world markerplace. Also tied in with the idea that promoted posts burn SBD from circulation and therefore the more use of this function in the platform the higher value of the currency. Can you tell me what the print rate stands for in steemd.com? I cant seem to find anything that describes its function. Thanks!
Hmm, you're talking about sbd_print_rate? 10000 means 100%, so I'm guessing that means that right now all the liquid rewards are paid as SBD, not STEEM. It's been that way for a number of months.
I don't know how long you've been around so I don't know if you'll have seen this, but when the market cap of STEEM gets too low relative to SBD, the system starts paying liquid Steem instead of SBD for author rewards. It's a safeguard against there being to much SBD for Steem to safely back it, but it hasn't kicked in in a long time.
Thanks a lot @biophil. It's so article for me.
An excellent read, thanks for taking the time out to explain what is happening in the thought and calculation process @biophil
AGREE. That's what I did since day 1 here because 50/50 is the default. I didn't know that there are 3 options until one member advised me to make 1 post and set to 100% Power Up so I tried and forgot to change back to default 50/50. 😁
Thanks for the advice! Will follow price of Steem more closely.
Yes, Now I'm with 50/50 in all my comments and posts.
@biophill, I just posted an infographic about Author and Curators rewards, I think it is interesting and easy to understand, if you want to check out!.
Super simple explanation, and I hope you get to sell some more SBD at the new amazing prices! Who made up that pegged to the dollar tomfoolery? hehe
Thank you for sharing this. I wasn't clear about the advantages of one over another.
Merry Christmas @biophil
Sorry for reading (and answering) too late for voting. In addition I want to mention that the function "convert to steem" has been erased from the desktop. Nonetheless we can be glad about the stunning performance of the sbd.
Great article, @biophil. It makes sense to choose the 50/50 option.
I have a quick question for you. I have seen somewhere that Payouts are proportional to the votes ^ 2.
This would result in reward money flowing to the users with high stakes and that might explain why the voting bots work.
I have written a post (Is Steemit a Pyramid Scheme) about this.
What do you think about this? Am I missing something here? I'd appreciate your take on this, because I've seen several good posts by you explaining the mathematics of Steemit.
Yes, that's approximately how Steem used to work. That was changed a while ago so now payouts are proportional to the votes. No ^2 any more.
The ^2 was actually a cute idea, and I think it worked better than people thought it did. The purpose of ^2 was to make it so that people were incentivized not to waste their votes on low-value content, because their vote's strength would be maximized by voting on content that other people think is valuable also.
Everything in life is a tradeoff, and the downside to the n^2 algorithm was that small users never felt like their votes were ever worth anything.
Thank you for your explanation @biophil. I'm glad that formula changed, because that formula would make the reward pool abuse mathematically possible.
With the current system, all the bot promotions start with a loss. They can turn profit, only if other than the promoters vote the content.
In other words, if no one else than the promotion team upvotes a post, they are guaranteed to have a loss in Steem terms.
I will need to chew on this. Replying to your post...