TLDR
It's a long post but this bit of info can probably make a lot of you, a bit extra on your posts, so I thought I best put it upfront.
If SBD is worth less that $1 you should be using the 100% SP option for your posts.
If SBD is worth more than $1 you should be using 50/50 option.
Image altered from this source
First a bit of background.
How Steem dollars keep parity with the dollar
There are two main methods used to keep steem dollars in line with USD, one is done by witnesses (like elected admins of steemit) and the other is done by regular individuals like you and me.
Interest rate
If the value of Steem dollars fall below $1 witnesses can vote to increase the interest rate, people get paid to hold steem dollars. Currently it is at 0% with only a few witnesses voting for higher. You can see this amount on the wallet page.
As 0% is the lowest this can go (I think adding in an option to have a minus rate might be useful), this method is mainly used to raise the value of SBD.
Rewards
The second way that SBD is regulated is via the payouts. We all have 3 options when posting, we can opt for
100% SP and 0% SBD
50% SP and 50% SBD
0% SP and 0% SBD (Decline payout)
These reward options have a massive effect on the price of steem dollars as this is the main source of them. If more people use the 50/50 option the amount of SBD coming to the market will increase which will drive down prices. And conversely if more people use the 100% SP option there will be less SBD and the price will increase.
Why does it matter that SBD fluctuates?
That amount of money that you see under your post, you know the one we all obsess over, well that's not in USD it is in SBD. So let's look at an example where you write a great post about pineapples, or whatever, and you earn $10 lets see how you would be affected depending on 3 prices of SBD. We will also assume STEEM (same as SP) is worth $1.30
SBD worth $0.80
| Reward Option | 100% SP | 50/50 |
|---|---|---|
| post value(USD) | $10 | $9 |
| post value(STEEM) | 7.692 STEEM | 6.923 STEEM |
SBD worth $1
| Reward Option | 100% SP | 50/50 |
|---|---|---|
| post value(USD) | $10 | $10 |
| post value(STEEM) | 7.692 STEEM | 7.692 STEEM |
SBD worth $1.20
| Reward Option | 100% SP | 50/50 |
|---|---|---|
| post value(USD) | $10 | $11 |
| post value(STEEM) | 7.692 STEEM | 8.462 STEEM |
Put simply if the value of SBD is above $1 it is definitivly worth more to go 50/50, and if below, to go 100% SP.
I put in the values in STEEM to show those that say 'I don't care about the dollar value I'm not selling', it doesn't matter you still make more value or less value depending on your reward choice. This is because the internal market adjusts to take into account the external values of STEEM and SBD. This happens because there is arbitrage between internal and external markets.
Wait SBD is at $1.03 and this post is 100% SP, what gives?
As far as I know (and correct me if I'm wrong) everything I wrote above is fact and can be relied on. What I am going to write now is a bit more guess work.
The reason this post is 100% SP is because I only change between 100% SP and 50/50 when the price of SBD is at $1.20.
I do this for 2 reasons, firstly I believe steemit is a growing ecosystem and that growth will impart a premium onto SBD at least the next couple of years, or put more simply I think despite the methods to manipulate SBD to $1.00 its fair value at the moment is around $1.15. It has traded mostly above $1.50 for the last few months.
To be clear this means I am basically speculating that the value of SBD will go up, this is no different than me buying SBD below $1.15 and selling above. So I am trading, and as such that is risky and I don't necessarily advise you to do the same.
My second reason accounts for the missing $0.05, it is my belief that people are more likely to upvote posts that are 100% SP and have that cool icon next to it's title. Why $0.05? Pure guess work.
Let me know what you think in the comments below and if you liked it please consider following, upvoting or resteeming, or you could go crazy and even do all 3.
Thanks for reading,
FiveBoringGames
I have read something along these lines before, but you just simplified it to the point of making more sense. So thank you.
Also, I found this via the subreddit, so as a fellow redditor, cheers!
You're welcome and thanks for the support
Very interesting and informative article it's definitely giving me something to think about, cheers mike
Thanks I'm glad people got something out of it, you know how it is when you work all day on a post
many people underestimate that. my last post took me days.
eventually interesting for you, because you're using boosters...
??
Started playing around with them the last few days, I think they are probably good value when SBD is low
last week i've tested the four big boosters on steemit. and yes, i agree with you, they are a good tool to change sbd in sp, especially when sbd is low.
Good post, I found MB to be by far the best value. My numbers for randowhale was much lower though.
thank you for this post, fiveboringgames. that's really interesting for me. upvoted and resteemed.
I appreciate that thanks
hmm great info, never looked at this this way
This post is an eye-opener for minnows. Now, we can easily decide whether to use 100% SP or 50-50. Resteemed. :)
thanks for the support
very informative post.. i like this one!!!
Thanks and welcome to steem, ok I admit it I stalk
I'ts good to maximise your profit and know when to do that and how;) even with this small difference in steem , in long term can be huge difference.
Gotta love compounding facrtors
Thanks for clearing up this 50/50 or 100% choice. This makes it easy for to now know what is the better choice and when.
you're welcome
This post received a 3.6% upvote from @randowhale thanks to @fiveboringgames! For more information, click here!
This post has received a 3.61 % upvote from @booster thanks to: @fiveboringgames.
Thank you @fiveboringgames! I'm sure it will help me