Debt Ratio's Impact on the Authors' Rewards on Steem- Understanding the Current Situation
Introduction
Many Steem users would be concerned about the state of rewards on the Steem blockchain at the moment as SBD reward vanishes, users would be bothered about what's going on and questions like what has happened to my account? and so on, would arise.
You don't have to panic, rather it's a time for you to get closer to the Steem blockchain and understand what is termed the debt ratio, I will take you on a ride about the concept today and I hope you'd have it all clear in the end.
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Debt Ratio on the Steem blockchain
You are familiar with rewards distribution on the Steem blockchain and various settings you'd like to set your rewards to on an article. For example, 100% Power up means you are receiving your rewards purely in SP, 50%/50% implies your rewards would be in 50% SBD and 50% SP but this is also determined by the debt ratio at any point in time.
Authors are the ones that receive SBD rewards on the Steem and it was specifically created for that, curators take their rewards in SP, likewise, locked STEEM (SP) interest is also in SP. As such, SBD is backed by an equivalent STEEM on the blockchain to reward authors.
That being said, the debt ratio comes in to ensure that the printing rate of SBD is put under control based on the STEEM/SBD ratio (debt ratio) depending on the amount required to back SBD. Let's see how authors receive rewards in line with the debt ratio at any point in time.
- If the debt ratio is less/equals 9%, authors receive rewards in SBD and SP.
- If the debt ratio is between 9% - 10%, authors receive rewards in STEEM, SBD, and SP and the printing of SBD for rewarding authors declines linearly.
- If the debt ratio is greater than 10%, authors receive rewards in STEEM and SP. With no more SBD rewards.
The debt ratio in a bullish market phase is always around 9% or below which means fewer STEEM tokens are required to back SBD, as such author gets their rewards in SBD and SP for 50%/50% reward settings.
In addition, in a bearish market phase, especially an extreme one, the debt ratio tends to exceed 10% which requires more STEEM to back SBD, the printing of SBD declines. The printing rate of SBD starts from 100% and declines linearly with the debt ratio and at a point, it hits 0%, there would be no more printing of SBD as such authors get their rewards in STEEM and SP alone for a 50%/50% settings.
Where are We?- The Debt ratio has exceeded 10%
At the moment of writing this article, the debt ratio has exceeded 10% and there would be no SBD rewards for now. To know the current state of the debt ratio, we would need to know the market capitalization of STEEM and SBD to calculate debt ratio.
- STEEM Market Capitalization = Virtual Supply of STEEM X Current Price.
- SBD Market Capitalization = Total Supply of SBD X Current Price.
Let's explore a tool to get the supply of the assets in question here and calculate the market capitalization. I will be using https://steemdb.io/.
https://steemdb.io/
From the information above, we can easily calculate the market capitalization and the debt ratio. Now we have;
- STEEM Market Capitalization = 450168459.178 X $0.2283 (Market Price) = $102,773,459.2303374.
- SBD Market Capitalization = 11268210.807 X $1 (Assuming the $1 peg) = $11268210.807
Now the debt ratio would be calculated using SBD Market Capitalization value/STEEM Market Capitalization value. As such;
- 11,268,210.807/102,772,459.2303374 = ~ 0.1096 (10.96%). Now, the debt ratio is well above 10% which indicates there is no printing of SBD for now on the blockchain.
https://steemdb.io/
The debt ratio is now at 10.96% which implies that the printing rate of SBD would be 0% and it's evident from the tool above. As such, the authors' 50%/50% reward settings now would be received in STEEM and SP and you can see that on one my articles pending payout below.
Image Source
The authors' rewards can only come back to SBD and SP for 50%/50% settings when the debt ratio drops to 9 and below, and it increases linearly as the debt ratio is reducing, which means at 9% - 10% that is > 9% to 10%, the percentage of SBD received would be fewer while the remaining is paid in STEEM, until it hits 9 below when SBD printing rate would return to 100%. The bullish market of STEEM would be the way to achieve such a lower debt ratio again.
Conclusion
In conclusion, we have been able to address the current state of author rewards as attributed to the debt ratio and I hope you now understand the debt ratio and its effects on the rewards. There is nothing wrong with your Steem account, it's how the Steem blockchain works and we have just witnessed a season like that again due to the extreme downtrend that occurred in the crypto ecosystem a few days ago. Thanks for reading today and #Steem-on.
Written by;
@fredquantum
Thank you for the interesting post.
The problem with Steemit is that there are not enough genuine curators.
The curators who can make a difference with their upvotes either want you to delegate your STEEM POWER to them or want you to follow some rules in order to get an upvote. The system is corrupted.
Realy work is good keep it up.
Thank you for replying!
Yeah Of course,
Thank you for stopping by!
You hit the nail on the head with that one, D3. I was always looking for a way to describe my discontent with Steemit, and your reply here describes it perfectly.
I hope you are well.
I'm fine and I hope you are doing well too.
Thank you for leaving a comment!
man, you're really helping people around and I come to this war just to see your replies. your post are very interesting
Great explanation ✌🏻 Let’s wait this will take care the blockchain, useful information for users
Thanks for reading through, @alejos7ven. The market of STEEM is gradually on the rise, this is a time for users to acquire more Steem and to stake more of their rewards. Everything would take the right shape with time.
I thought as much, i have even told my newbie that this is the only way steem/steemit will surviving, thank you @fredquantum for throwing more light to it
I'm glad you found this piece interesting and educative. Thanks for your time.
Muchas gracias por esta información, es muy útil para todos los que hacemos vida en la plataforma 👍
Good to know that you have learned a few things from my article today. It doesn't affect your blogging on Steem. #Steem-on.
Thank you so much @fredquantum Sir, for this detailed explanation and awareness creation as regards The
It's indeed an eye opener for us all.
Thanks for reading through this piece and learning from it. I'm glad it helped.
You're welcome 🙏
Thanks for this great post Prof. It has helped me to understand the current ratio.
That's a very important concept to learn about rewards distribution on the Steem blockchain and I am glad that you have learned about it today.
Thanks for the clarification
You are welcome.
Thank you for this valuable article, it really ease tension and I've learned something new the debt ratio. I hope everything will be normalize soon.
Thanks for reading through as well and I am glad that you have learned something in the process.
I hope so too
This is a well explained publication regarding the current happenings in the ecosystem, but then, the calculations are a bit confusing.
Now, we have clarity of the situation at hand.
Thank you, and let's hope steem bounces back, so that we will receive our normal author and curation rewards.
It's a great pleasure to know that you have learned a few things from my publication today.
Yes, thank you.
So, please per your knowledge and experience, what duration does it take for the dept ratio to normalize?
Thus moving from >10% to <9%
Until the Steem market cap is appreciable to achieve 9% debt ratio again when divided with the SBD market cap. Knowing that the market cap is a product of the supply and price, the only way to achieve an appreciable Steem market cap again is when the price of Steem goes bullish.
This is not a time to sell but rather a time to acquire more STEEM, power up, and adopt 100% power up reward settings again as we contribute to the Steem ecosystem.
Noted.
Thanks for the gist.
I don't think the market price of SBDs is used in the calculation by the blockchain. The ratio that the blockchain cares about is the one for SBD -> STEEM conversions, which want to treat 1 SBD as being worth $1 USD.
Thanks for the observation, friend. I have studied a few journals on the internet that have followed the same steps I utilized but I noticed that those times, the market price of both assets were very close (Say, SBD = $3.2 STEEM = $3.32) or when SBD was around $1 or slightly below. I now have the understanding of putting the $1 peg of SBD into consideration on the Steem blockchain and the calculation has been edited. Thanks once again.