The REAL story behind the Fluctuating Steemit Payouts Explained
UPDATE JUNE 30, 2017
It appears that a majority of my hypothesis was correct but one part may not have been. As I do not ethically believe I should edit the original post to reflect new knowledge, I will present it here above my original post instead.
What are the new findings that contradict my earlier claims?
- STEEM Rewards have declined recently. What I will do instead of going through a lengthy explanation of why our rewards have declined is to link you to a post by @penguinpablo who does a superb job of going over it. https://steemit.com/steemit/@penguinpablo/here-s-why-your-potential-payouts-are-going-down
What remains intact based on my own findings below? Everything else:
- STEEM price fluctuations do impact estimated payouts
- STEEM DOLLARS are considered to be (incorrectly) pegged to $1 USD which is not reflected in the estimated payouts
- The Formula I show to calculate your current USD earnings remain unchanged
Additional Thoughts:
- After you read the post by @penguinpablo the other suspicion I have is if the Reward Pool (which is the total pool of STEEM allocated to users in a given period) does not increase as the community size increases, then it makes sense that our STEEM rewards may continue to decline since there is only so much STEEM to go around in a given payout period. Just have a look at the huge growth in the number of votes delivered over the last week alone below. Of course the one thing this graph doesn't show us is the total weight of the votes. What are the ramifications? Well, if the amount of STEEM paid out declines as our community size grows, we should actually see the USD value of STEEM increase to offset this. This is as per a discussion I had with @penguinpablo and it makes sense.
After HF19 many of us were so happy to see that our voting power had increased significantly. I know mine went up almost 10x!
With that said, recently there have been so many posts and questions about WHY the overall STEEM payouts have been on the decline. Mine, specifically has gone down by nearly 1/3 since the incredible boost post HF19.
We are paid in terms of STEEM POWER and STEEM DOLLARS, NOT $USD.
First, our payouts have actually NOT changed (i.e. declined) over the past week since HF19. We EARN in terms of STEEM POWER and STEEM DOLLARS, not USD. Hence, we are all still earning the same.
Second, Steemit estimates the value you see on your Post in terms of USD. However its estimates are not very good at it, whatsoever. I'll explain why.
Why has the USD value of my Posts dropped?
The reason for why the value of your posts may have dropped (as of today) in terms of USD is because the value of STEEM fluctuates. The lower the value of STEEM, the lower the USD value of our posts. And over the past few days STEEM has taken a real hit.
But that isn't the whole story.
There are two problems to crack here and I'll try my best to explain it.
1 - STEEM Price is at the Mercy of Market Price Fluctuations in terms of USD. The question you've all been wondering about.
The USD value of your payout is dynamic and based on the current price of STEEM.
Recently the entire cryptocurrency market suffered a 20% haircut.
STEEM, itself, dropped 40% (over $1 USD) from its recent all-time high of around $2.70 to around $1.50.
Since the USD value of STEEM dropped, our payouts appear to be smaller
2- STEEM DOLLAR is NOT actually worth $1 USD. The question you didn't know you should ask.
The other problem with the $ value shown on your post, that you may not even realize, is that it assumes the STEEM DOLLAR is worth $1 USD at all times. However, the STEEM DOLLAR price fluctuates just like the price of STEEM. Because of this, the true value of your post may be higher or lower depending on where the STEEM DOLLAR sits.
Example: My post is worth $1.77 in USD right? Nope, it isn't!
The image above shows my earlier post is valued at $1.77. However, shortly after HF19 it was sitting at well above $3. And then it dropped to this value. What the hell, right?
So what is my post actually worth?
First let's look at how much we were actually paid out for the post.
Looking at the image above you can see we were actually paid out 1.447 STEEM DOLLARS. That's the true value. In terms of USD it gets a little more complicated.
Payout is based on half of the 1.447 STEEM DOLLARS being converted into STEEM POWER and the other half remaining STEEM DOLLARS.
So,
1.447 STEEM DOLLARS = 0.7235 STEEM DOLLARS and 0.7235 STEEM DOLLARS converted into STEEM POWER.
How does this relate to the $1.77 displayed? Follow along.
The STEEM Dollar portion is shown in terms of STEEM DOLLARS, NOT USD
The $1.77 is comprised of 0.7235 STEEM DOLLARS, not USD.
Again, STEEMIT considers the STEEM DOLLAR to be valued at and pegged to USD $1 (even though it's not). So, it values the 0.7235 STEEM DOLLARS to be equal to USD $0.7235 of the $1.77 estimated payout.
That means the left over is
$1.77 - $0.7234 STEEM DOLLARS = USD $1.0465 for STEEM POWER which is covered in the next section.
The STEEM POWER portion is shown in terms of USD value
As mentioned the remaining 0.7235 STEEM DOLLARS are converted to STEEM POWER.
STEEMIT assumes that the STEEM POWER value of the displayed $1.77 is worth
$1.77 - $0.7235 STEEM DOLLARS (As calculated above) = USD $1.0465 in terms of current USD Prices.
The internal price for STEEM today would be calculated by taking the USD $1.0465 value it calculated for the value of my post's STEEM POWER and dividing it by the equivalent STEEM DOLLAR price.
1.0465/0.7235 = USD $1.4464 per 1 STEEM.
So STEEMIT is valuing STEEM at $1.4464 today, whereas the market rate is $1.87. This is because STEEMIT uses a moving average to calculate the value of our STEEM POWER so it will always lag behind current prices.
And this is exactly why all of our Posts fluctuate in value over time.
Calculation Time. The TRUE USD value of your Post.
Today's true value of the 1.77 post is broken down as follows
- Post is worth 1.447 STEEM DOLLARS
- Half the reward is delivered in STEEM DOLLARS = 0.7235 STEEM DOLLARS
- Half the reward is delivered in STEEM POWER = 0.7235 STEEM DOLLARS of STEEM POWER
USD Value of STEEM DOLLAR Reward = 0.7235 * USD $1.85 per STEEM DOLLAR (today's rate) = USD $1.3385
USD Value of STEEM POWER Reward = 0.7235 * USD $1.87 per STEEM (today's rate) = USD $1.3529
TOTAL USD Value of 1.77 Post = 1.3385 + 1.3529 = $2.69
That is an USD $0.92 difference from the $1.77 value shown!
Key Takeaways for why Steemit's Post Value is Not Accurate
- Payments made to your account are in STEEM POWER and STEEM DOLLARS, not in USD.
- The USD value of STEEM POWER fluctuate which is why the $ USD displayed value of your post fluctuates
- Steemit assumes that STEEM POWER is the average price of STEEM over a select number of days. Hence, it can be higher or lower than today's actual price.
- Steemit assumes that STEEM DOLLARS are always worth USD $1, which it is NOT. Hence the displayed value of your post is never accurate.
Calculate your own post's USD value
Now you can use this formula to calculate the true value of your own posts. Just look up
- STEEM DOLLARS Paid out for your Post. I used https://steemd.com to find the payout for my post.
- Current STEEM Price. Go to http://coinmarketcap.com for the latest price
- Current STEEM DOLLAR Price. Go to http://coinmarketcap.com for the latest price
USD VALUE OF POST =
(USD PRICE OF 1 STEEM DOLLAR * # of STEEM DOLLARS EARNED) / 2
+ (USD PRICE OF 1 STEEM * # of STEEM DOLLARS EARNED) / 2
I realize the above was a little math heavy, but hopefully it clears up some misconceptions. Of course if you find any mistake in my assumptions and calculations please point them out. Happy to discuss it and ensure this guide is accurate
A nice explanation! Neat.
Glad it helped! :)
I like what you did with this post, nice explanation to a problem that's being videly discussed atm.
I writing a post related to this subject.
Is it OK if I link to your post in my piece?
So glad that you found it that valuable! And please do :) Happy to be a part of your writeup.
Thanks, I will let you know when it lands :)
Some new knowledge has come out regarding the payouts. I've updated my post and I hope it helps you in your own
Thanks for the update :)
Thanks for helping to clarify these things for us :)
My post is out and I linked to your article in it.
https://steemit.com/steemit/@cryptodan/why-you-should-keep-posting-even-if-you-get-low-rewards
Well, that makes perfect sense. Very well stated clarification of that issue. The system is just doing its best to summarize a complex situation into one bottom line estimate for us. I can live with that.
It doesn't seem worth the effort to try to calculate exactly what a post is worth in USD - it is what it is. Your reasoning is solid and I will go with that, unless /until I see some evidence to the contrary.
I'm glad the post helped you :) It's certainly a very complicated method to understand the three currencies, how they relate to reach other, and then to get how payouts work. Took some real digging and math to get it.
And yeah, unless you're really interested, no need to keep track of the USD payouts. The focus should be on good content and accruing STEEM/STEEM DOLLARS as most of us are pretty sure the appreciation in value is going to be solid.
Thanks for the comment
Good point and the whole smd peggin to usd is not working. I think i discussed this topic in a blog as well as with a developer
Makes it really challenging for sure. I also hope that they consider a more dynamic method for future hard forks since this can really make it confusing to those who don't understand the insides of Steemit, which would be most, especially as we scale up.
It doesnt explain to me why one posts priced earlier gave me ~SBD3 and 1.5SP but now 2 posts give me that(assuming that each post had same likes with same weight). On exchanges the steem and SBDs are traded and therefore if you exchange them you will get more/less USD for them. But this is double whammied. You get less SBD and SP and when you go to bittrex you will get less money for them cause Steem is worth less. If you meant we are still getting same dollar value thats also not the case I dont think 3 Sbd before the drop are the same value in USD as 1.5 SBD after the drop. By now if you look at steem and SBD they have nearly gone back to their previous levels (maybe not fully) but have the payouts improved?
Upvoted
I haven't been able to examine your payouts specifically, but if you're actually receiving fewer SBD and SP then will have to take a look again. From my end I'm receiving roughly the same, but the price of STEEM has just dropped from around $2.70 from a couple weeks back down now around $1.80. But it was at below $1.50 a couple days back, which is what it seems Steemit seems to be valuing it at roughly. It will take some time before it values STEEM at a higher value since their moving average appears to be a few days behind.
I'll continue to keep tabs on this to see if in fact our rewards have dipped as well as the price. Thanks for letting me know.
this is really insightful. am few weeks on steemit,kept wondering about the fluctuations now i know, glad you posted.
The mystery was a big one for me too. There is a lot to learn about how Steemit works. It is a bit complicated with three currencies and the inaccuracies around the valuations of them. The learning curve is far steeper than it appears on the surface. I'm really glad this helped and I appreciate the comment :)
They've made it unnecessarily complicated with that silly conversion into $ instead of showing the payoff in steem dollars
Absolutely agree with you. When I first learned about Steemit and was trying to grasp the concept of THREE currencies that were running under the hood it made no sense. To be honest I'm still trying to wrap my head around all this. And it takes some real digging to figure out how the calculations are done. For Steemit to go mainstream it really needs to streamline this entire concept and make it simple for people to just create content and earn. Micromanaging the way the system works just isn't fun
Thank you for explanation and for examples, at first I didn't fully understand it, but after seeing the examples, I get it..;) So my post's USD value is higher thet it appears. Good to know..
I'm sorry for some of the complicated writing here. I'm glad that the examples and calculations helped though. So, yes, as of today all of our posts are worth more than Steemit is highlighting. Not a bad thing at all :)
The writing was ok, Im just a newbie. I have been thrown into the pool in order to learn how to swim.. :D
And so far, my head is still above the water :D Let's hope it's gonna stay this way, need more followers to not to drown ;)
I hear you. I'm also relatively new to Steemit. Just have been researching and reading a lot. And you seem to be doing very well for yourself, follower and engagement wise. Keep it up
Thank you very much i start to understand how its calculate :)
You're very very welcome. I'm glad you found the post helpful!
Thank you for the explaination, it solves many of my queries because whenever i exchanged my steem dollar to steem power i will see an up in my account value because internally it assumes sbd as 1 but when you exchange that in market, the true value will unlock.
You're most welcome! Glad it helped. And, yeah I screwed up initially when I converted about 15 SBD to STEEM using the internal system of conversion using a peg of $1 USD. And that is when SBD was valued at over $2 USD. Learned a lesson there.