How Steem Back Dollars, Steem Power and Steem work. Plus, How to Squeeze The Most Steem That You Can Out of Your SBD.
Never in a million years...or even just 10 months ago, did I ever think that I would be attempting to teach others how a scocial media platform built on a blockchain and tied to a cryptocurrency works...Hahaha!
Seriously, if you only knew where I've come from, you'd be laughing out loud for real too!
I was the kid in high-school who didn't really understand the language that mathematics describes. Those damn physics conundrums just stacked multiple levels of extra confusion on top of already mentally shaky ground, for me.
You remember the type... where you read about poor Jane who had to leave from a train station, cut 8 apples into 1/16 pieces and launch a rocket before her friend Betty who lives in a different time zone on the other sided of the planet does.
OMG Jane! That's a lot of pressure. Can't we just squish those apples, let them ferment, and enjoy some hard cider?
Hahaha! After that, no one is really going to care what time the damn train has to leave and whether or not anyone is on it.
You can see that my forte was really in the practical applications of biology and chemistry and as such, you might want to include me on your next party guest-list for that reason, alone. ;)
Without wasting too much of your time, let me get to the heart of the subject matter.
I want you to think of:
- Your Steemit blog;
- Your Steem Backed Dollars;
- Your Steem Power;
- and your Steem tokens as 4 separate train cars that are all linked.
When we create Steemit accounts, these 4 dedicate cars are given to each of us to use as our own on the Steemit train. Every Steemer's 4 cars are essentially linked and are being pulled along together by a main locomotive engine. We'll call this power-house of a locomotive engine (which is the platform itself): Steemit. (It's a very very long train.)
Steem Backed Dollars, Steem Power and Steem Tokens are essentially slightly different forms of the same thing. They are all slightly different forms of Steem currency which have different features.
Every time a Steemer creates original content, writes, upvotes/curates, comments, or buys Steem tokens they are creating transactions that are recorded on the internet. This activity is acknowledged and verified by Steemit's witnesses who collaborate each activity that has occurred from every Steemer. Once a certain number of these transactions are verified or collaborated that triggers the locomotive engine (Steemit) to generate more Steem tokens. This is happening constantly, every minute of every day and it is through these activities and the authenticating of these transactions, that the Steemit block-chain is actually made. Steem tokens are produced as a direct result.
Every day, a certain amount of these generated Steem tokens get pooled together and they form the daily rewards pool that gets divided up and shared with every Steemer who has contributed somehow to the smooth running of the locomotive engine during the same 24 hour time period.
The whole rewards pool gets replenished and divided up every single day among all the Steemers who contributed during that time period. Basically, if you are riding in and contributing to the Steemit train, you are being rewarded using some of the tokens that are generated.
When the tokens are generated for the daily rewards pool, they are awarded in a form of currency known as a Steem Backed Dollar or SBD. Once you start making blog posts, curating content and commenting on Steemit, your portion of the rewards pool is determined by the number of upvotes you receive from other Steemers (or train passengers). The amount of SBDs that the other steemers can award you is determined by their respective reputation levels and the amount of their voting power that they have chosen to use. The decision on the amount of voting power that a Steemer uses to upvote posts with, is often related to what they feel your content contribution is worth, in terms of value to the community at large.
This form of Steem, the SBD, is tied to the US dollar. It's been designed to protect the passengers on the train (that's us Steemers and outside investors) from incurring losses or damages along the way. I also think that it gives potential investors a certain comfort level in how the Steemit platform or engine is run because investors are use to seeing currencies pegged to the US dollar. In this regard, the SBD simply acts as reassurance to dispel any fear, uncertainty or doubt.
Steemers who choose to hold their rewards pay-outs in SBDs in their wallets are protected from hyperinflation of the US dollar by algorithm enforced by Steemit's block-chain. Steemers who choose to hold their pay-outs in another form of Steem currency called Steem tokens, are protected from hyperdeflation of the US dollar which is also enforced by Steemit's block-chain. (It, too, relies on this same peg to the US dollar to offer this security.)
Under normal circumstances, SBDs and Steem (tokens/coins) share a 1 to 1 ration but this ratio can fluctuate depending on the value of a US dollar relative to Steem tokens.
Steem tokens are referred to as Steem. This form of Steem currency is very easily used. It can be traded and it can be converted into Bitcoin and then into a fiat currency, for example. (I always think of Steem as being very liquid and flowing. Like... it's been designed to move.)
Steem Power is a very secure form of Steem currency. It is locked in and if a Steemer wishes to withdraw it, their total amount of Steem Power is divided into 13 equal payments and paid out in Steem weekly. Steemers build their voting power up by holding lots of Steem Power. A Steemer who has lots of Steem Power can pledge higher rewards to posts and comments. This gives them more influence and it also makes a statement that they believe in the core values of Steemit and are willing to help maintain the viability of the community.
Let's put all of this information into practical use now.
You'll notice that when you are ready to post a story or blog entry, you have the choice of 3 rewards options from a drop-down box. You can either receive your pay-outs in:
- 100% Power Up (Steem Power);
- 50% SBD & 50% Steem Power;
- or you can decline pay-out.
You can select one or, Steemit's default setting is set to pay 50% of your rewards in SBD and 50% in Steem Power.
Underneath the Rewards selection box is an "Upvote post" check box. If you check the box, you will automatically upvote your own posts. It's like ensuring that your work will always receive an upvote and once you have some Steem Power behind you (voting power), you'll be rewarding and curating yourself with SBD, just for checking the box and voting for yourself.
Once you post your blog or story, other Steemers will read it and upvote it, (if they like your work).
With each upvote, you'll receive a pledge of a small amount of SBD from the rewards pool. Your post will be eligible to receive upvotes and SBD for 7 days from the time it was posted. Then you are paid 75% of the total amount of the SBDs for being the author of the post. Steemers who curated the post and upvoted it, split the remaining 25%.
Some Steemers are keenly interested in building their voting power. This is so that they can give other Steemers more of the rewards pool when they upvote blog posts or comments. Anyone interested in that, would simply select 100% Steem Power from the Rewards drop down box. It is important to note that all your rewards will be held in Steem Power as tokens that are locked in until you make a decision to Power Down. Once the decision is made to Power Down, you will be paid equal payments, for 13 weeks in Steem.
If you select the 5o% SBD and 50% Steam Power option, just as the name implies, 50% of your rewards will be paid in SBD and 50% will be paid in Steam Power.
The reasons why a Steemer might choose this option, is if they want to collect Steem tokens so that they can buy goods or services with it. Or, if they want to use it to buy Bitcoin which, will let them convert it into any currency that they want.
Currently, there is a 3rd reason to choose this option. It has to do with the difference in price between the SBD and Steem token. Right now, 1 SBD buys just over 2 Steem. The SBD can buy more Steem because the ratio is just over (at the time I am writing this) 1:2.
Here's a bit more brain work with some math behind it. If your rewards are paid-out to you in 50% SBD and if you then take those SBD and convert them to steem (which takes 3.5 days to process), you're currently earning at least 25% more Steem just by choosing this option. Again, this is because the value of a SBD and the value of Steem can fluctuate so you always want to know approximately how much these 2 forms of Steem currency are worth compared to one another. This is important so that you can make the best "rewards option" decision before you actually post your blog, if you are interested in stacking as many Steem tokens as you can.
Many people think that having to wait 7 days to receive a pay-out, then another 3.5 days to convert SBD to Steem and then another 7 days to Power Down, Steem Power to convert it to its most liquid form (which is Steem) is a negative thing.
I would like to suggest that this is not, but that it is a protective mechanism for the Steemit platform, Steemers and investors. It protects against there being a "run" on Steem where everyone tries to take their currency out of the system at the same time. It also offers some level of protection if your account is hacked by someone who has stolen your password/keys. They'll be able to potentially steal your liquid Steem tokens instantly (if you are holding any), but they won't have as easy a time stealing your SBD or your Steem Power due to the processing time it takes to make the conversion of these forms of Steem into its liquid Steem form. It gives you time to stop the theft.
There you have it folks, everything I currently know about SBD, Steem Power and Steem. Plus, the reasons why a Steemer might want to use the different forms of Steem currency.
The best place to start is just to jump on the Steem train and Steem On!
All systems are a go and full STEEM AHEAD! Please join me.
I welcome your comments and I invite you to follow me on my journey. ;)
~ Rebecca Ryan