Let me explain...
Forget about US Dollars for a moment. You are in the Steem ecosystem and your native currency is STEEM; its US$ value is meaningful when you need to exchange STEEM into, or out of, some fiat currency. But while you are in Steemland you are trading in STEEM. [1]
The prices of STEEM and SBD have been hovering around the US$1 mark for the past 3 months or so. The recent drop further down towards 50 cents for STEEM has spooked many Steemians, but what effect is it having on your earning power within Steemland?
STEEM author and curation rewards
The graph below shows data from the end of July 2018 to the present. The blue line is the earning power per active SP, assuming 10 upvotes per day at full power, annualised into an APR (non-compounded annual percentage rate). This is essentially the value of an upvote. The red line below it is the author-rewards for the same upvote; it thus subtracts the curation rewards per upvote.
One thing to bear in mind is that although curation rewards are fixed at 25% of the pending rewards, this does not translate into 25% of the actual post payout; it can be both higher and lower than 25%. When SBD was high, curation rewards as a percentage of payouts was squeezed because of the high value of SBD payouts. Curation rewards at the moment are about 25-27% of payouts because of the SBD price being below US$1.
But let's get back to the main thrust of this post. The large spike you see took place around the time of HF20. Many users were unable to interact, this increased the reward pool so that those upvotes that did take place were worth more. It then took about 3 weeks for the upvote values to come back to their pre-HF20 equilibrium.
Let me pull out some numbers. The value of an upvote is equivalent to about 22% APR, based on STEEM earnings per SP. The author rewards are currently yielding about 16% APR. All of this on a Steem blockchain that has an inflation rate of about 8.5%.
How can you earn 22% (or even 16%) in an ecosystem that is growing at just 8.5%? It means that not all the existing STEEM coins are vested and upvoting. If we ever reach the point of mass adoption and full activity, then the earnings percentage would approach close to the inflation rate. I publish these numbers every week in our MAP Rewarder distribution post to check on the health and profitability of the Steem blockchain.
Notice that there has been no drop off in rewards potential in the last 2 or 3 weeks. The profitability of STEEM depends both on blockchain activity and its external fiat value. The current low price should be a signal to increase activity, not decrease it.
Yes, it would feel great to see STEEM at US$10, but that feeling of abundance comes from the value of the STEEM you already hold! A high STEEM value, on its own, actually decreases your future percentage earnings.
The motto for Steem must surely be: earn low, withdraw high.
This is no different to those companies who buy up what appears to be cheap inventory from failing businesses in a downturn in order to see a profit later when the price rises again.
Why are pending rewards not priced in STEEM?
In closing, I think there is a deep psychological problem in seeing post pending rewards in "$", even if such dollars are actually SBDs. I thought this was odd when I first joined Steemit: why not publish the pending rewards in the native currency of STEEM?
Publishing pending rewards in STEEM would concentrate the mind on the Steem ecosystem rather than an external currency. It would also stop people being confused as to why their post rewards go up and down with no visible activity. You can always check the US$ value within your wallet - it is surely more important to monitor the value of your whole account rather than every single post.
In the current situation of falling prices, users would see that their pending rewards have changed very little, if at all, and may therefore worry less about STEEM's price instability, instead being pleasantly surprised at the stability of the Steem ecosystem.
What do you think?
Please resteem to inform more Steemians and improve understanding of the Steem ecosystem.
[1] Before anybody jumps on this, I am fully aware that when SBD is above US$1 and above STEEM that there is an increase in rewards, although this will also then erode the value of an upvote. However, a high Dollar value for STEEM, with SBD lower, will have the opposite effect, lowering the percentage rewards. This article really is aimed at the current scenario where both coins are about, or below, US$1.
images: logo by @rycharde; pixabay (edited); graph by @rycharde.
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@rycharde manages the AAKOM project and the MAP Trail.