Steem Experiment - SBD Oriented Ultra Fair Favorable Lotto Experiment

Welcome to SOUFFLE the first and as far as we know only attempt to fix the SBD debt ratio with a game.

But what's wrong with SBD and what's a debt ratio?

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SBD by itself would be fine. It's nice to have a stable coin in the ecosystem it makes business planning easier if the unit of account isn't being tossed to and fro. But the system considers SBD a short term debt. Literally a callable bond. The debt ratio is the dollar value of steem vs the dollar value of SBD.

How is this a problem?

When the debt ratio gets too high, no new SBD can get minted. Even higher and when you try to convert SBD back to steem for instance to power it up, you get less steem. While one would think that this would have a protective effect on the steem price, the opposite is true. Being unable to reliably use SBD as it was intended to be used, i.e. as a replacement for the dollar, undermines confidence not only in SBD but in steem. A currency is only useful as long as people remain confident in it. Confidence produces what is called perceived value and right now the perceived value of SBD is hovering around $0.80 and that's at least in part because trying to convert SBD back to steem produces a 20% loss so people sell it at a discount to help cover.

http://steemreports.com/steem-sbd-info/

What can be done?

Well there are a number of things. They all fall into supply and demand categories.

Addressing demand, the best would be to buy steem. Lots and lots of steem, then power it up and use it to upvote lots of your favorite creators. If creators know they can get paid they will come and as long as they can make a living at it they are incentivized to bring more people over. People contribute to Patron all the time. Encouraging followers to buy steem and power it up and use it to upvote their favorite creators is just something influencers ought to be doing as a matter of course. This raises the price of steem and if the price of steem were higher, the debt ratio would be lower by definition. That is what @benicents is doing, but as an upstart non-profit there isn't a lot we can do by ourselves especially with things in their current condition.

If the peg could be straightened out,say ignoring the debt ratio by allowing SBD to always be convertible to at least a dollars worth of SP that would help a ton, demand would skyrocket actually, but we aren't holding our breath for that.

Other options work to reduce the supply. All of them are rather painful.

Burning your SBD for instance to promote a post brings you nothing but warm feelings. It's not particularly effective at lowering the debt ratio because steemit has such a low number of eyeballs compared to say medium. Promoting a post doesn't really help you get to trending where you can be easily found because most folks right now are well known to eachother, many of the most active users have been here since inception. However this is what @burnpost is doing and it helps by both reducing existing supplies and slowing down new supplies.

Another way to reduce the debt ratio is to bite the bullet, and cycle your SBD through conversion to steem and back by buying SBD on the open market. This presently results in a loss of between 16% to 20% and it could get worse if steem happens to fall. Everything depends on the debt ratio on the day your conversion clears. But this is what @sbdpotato is doing, and we tried it ourselves before fully understanding how the debt ratio factored into things and we will have live with the consequences. Thankfully @markkujantunen woke us up to the problem in time before we fell into an empty elevator shaft.

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The final way to reduce the debt ratio is to find a mutually beneficial way to shrink supplies. One that has the characteristics of a game rather than an investment, and that's what we're doing here. This way the burning doesn't hurt so much and everyone is a winner!

We've created a lottery that is open, inexpensive, equitable and provably fair (in the mathematical sense).

We believe it has the potential to put a serious dent in the debt ratio.

Here's how this works. Pick any 10 numbers between 0 and 9 and send at least 1.00 SBD per number (up to $10 SBD) to @benicents while this post is active. We will automatically convert half the contribution to steem and use the proceeds to buy more SBD on the market, thus reducing the debt ratio a little while increasing the jackpot. Meanwhile the other half will be added to the jackpot directly.

Ensure you put your picks in the memo field as comma separated single digits as follows.

1,8,4,9,2,7,6,6,4,8

Winning simply requires accurately predicting the n of the last 10 digits of the block_id in which this post pays out and n will determine your rank for payout purposes.

For example, let's say the payout occured on block_id: 0267da3518d0512fa855c9d7e31d38838f11f9ec

First we convert it to base 10...

13733966843378020071963946881509954067845216748

Next we take the final 10 digits and compare it to your picks to find the payout rank it falls in.

7,8,4,5,2,1,6,7,4,8
1,8,4,9,2,7,6,6,4,8

Because the odds of getting all 10 correct are literally 1:10,000,000,000 (one in ten billion) we've organized this to be more fair and equitable.

There are 6 pay ranks depending on how many you correctly guessed.

In the above example, this ticket would be rank 6 and assuming the Jackpot was $10,000.00 this ticket would have paid $4,750 ($2,500 + $2,250).

Rank payouts are multipliers against the jackpot and pay as follows...

5 = 0.25
6 = 0.30
7 = 0.35
8 = 0.40
9 = 0.45
10 = 0.50

Ranks are cumulative. This means if you achieve Rank 6 for example, then you are really getting ranks 5 & 6.
Ranked payouts are split between all winners in that rank. So for instance if 20 people make it to rank 5 and the jackpot is $10,000 then they will each get $125.00 (($10,000 * 0.25) / 20). This will be true unless the per winner payout would be $0.01 or less. In that case the entire amount is added to the next rank.

In order to avoid breaking the bank while providing the highest possible return in a fair manner to all, this lottery is reductive & cumulative. This means that unless the per winner payout in a rank is $0.01 or less, the total to split from a previous rank is deducted from the jackpot.

Assuming the Jackpot is $10,000 and there was only a single person who managed to guess 5,6,7,8,9 & 10 correctly.

Rank	Pool Remaining	Payout	Cumulative
5	$10000	$2500	$2500
6	$7500	$2250	$4750
7	$5250	$1837	$6587
8	$3413	$1365	$7952
9	$2048	$921	$8873
10	$1127	$563	$9436

But wait there's more!
If you're following the math, then you can see that the odds of making the bottom (rank 5) and getting anything at all are 1:100,000 which isn't great, it would be much better if you could at least get something for your troubles.

To get better odds you have the ability to do certain tasks to improve rank automatically.

Bet at least $10 (so all 10 positions are covered) you get +1 to rank!

Bet $100 you get +2 (+1 from $10 +1 more)!

Upvote this post at 100% for another +1 to rank!

Resteem this post for yet another +1 to rank!

Follow @benicents and @benitrade for another +1 to rank!

Spend at least $1.00 to promote this post and earn another +1 to rank!

Do all the above and you are boosted to rank 6 before getting a single number correct.
This means anyone can make rank 10 and get the maximum possible with as few as 4 correct picks.

We've put our money where our mouth is and the starting Jackpot is $100 + $10 in conversion.

100% of the earnings from this post will be added to the final jackpot. Winner rankings will be announced the same day this post pays out and winners will be paid once all pending conversions complete, since those conversions are also added to the jackpot.

Have fun and keep steemin!