Steemit Crypto Academy Contest Season 9 Week 4 - "Blockchain Steem: Debt Vs Ownership"

Greetings! I hope you all are fine and doing well by the grace of Allah Almighty. This is my participation post. I'm going to share my participation in Steemit Engagement Challenge Season 9 Week 4. This contest is organized by Steemit Crypto Academy. Wonderful and very informative topic is here. Let's learn together a new informative topic of Crytpo Academy.

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Explain indebtedness and ownership in the steem network. Explain this concept in the centralized fiat world.

I would like to explain the difference between Steem Network and Centralized Fiat World. Steem Network us decentralized blockchain platform that is not controlled by any central Authority. While the Centralized Fiat world based on central Authority that is controlled by any government, financial system and institutions. In Steem Network, transactions are processed on public ledger there is no need of any central Authority. Steem Network allows security , transparency , immutability of the data. Steem Network always works on a cryptocurrency . Cryptocurrency is a digital asset and this asset is not controlled by any government and financial institution.

In the Centralized Fiat World, transactions are processed through centralized institutions such as banks , government or financial institutions. It operates on Fiat Currency such as US Dollar 💵. And this is controlled by central banks and government. It's value is totally bse in supply and demand in the market. Overall both are involved in Indebtedness and Ownership.

In Steem Network, Indebtedness represent a liability or debt that an entity has. It refers to the amount of Steem Dollars ( SBD ) that are converted to Steem Tokens. SBD's are liability to the network. They are used for short term expenses. They provide stability to the network.
In the Centralized Fiat World , indebtedness refers to the amount of debt or liabilities that is held by an entity. It includes loans or other financial obligations that are needed to be repaid.

In the Steem Network, Ownership represents assets that an entity owns. It refers to the amount of Steem Tokens that is held by investors. Ownership refers to the assets held by an entity which include investment or shares in a company. In the Centralized Fiat World , indebtedness and ownership work in a similar way. Balance between indebtedness and ownership is important for financial stability and growth 📈. Too much indebtedness may lead to financial risks and instability. On the other side, too little indebtedness may limit growth . So this is how balance is important for long term succeess and growth.

The lower the debt ratio , there are more investors ownership. The higher debt ratio is taken as too much debt it means financial risks and instability.

Debt Ratio = Total Liabilities / Total Assets

Ownership ratio = (Total Shares Owns/Total Shares Outstanding) × 100

Debt Ownership ratio = indebtedness /Ownership

Let's Explain with an Example!

For instance, I want to but a car that costs $40,000. But I have only $10,000. So I have to borrow $30,000 from bank.

Indebtedness = The amount of debt or liabilities
Ownership = The assets or equity.

Amount owe to bank = $30,000
Ownership = $10,000

Formula

Debt Ownership Ratio= Total Indebtedness / Total Ownership

Debt Ration= 30,000 / 10,000
Debt Ratio = $3

This percentage is showing for every dollar I own $3 to bank. It indicates the financial risk. The higher the ratio, the higher the level of risks.

If the ratio (SBD debt/Steem ownership) is high, how does it affect the Steem price?

If there is higher amount of debt as compared to the amount of ownership. It indicates that there is a higher risk on debt and it will potentially lower the demand for Steem Token. As a result there is downward pressure pressure on the Steem Price. Becuse lower debt /ownership ratio leads to increase the demand of investors and Steem Token that will drive up the price of STEEM.

Because when SBD/Steem ratio is equal to 10% or more than 10% it indicates there will be no printing of SBD. So, for calculation the payout percentage we have to use the following formula & calculations:

SBD print rate = 100% * (10 - debt ratio)

If the debt ratio is 9.5% then the calculated SBD print rate is

SBD print rate = 100% * (10-9.8)

SBD print rate = 100% * 0.5

SBD print rate = 50%

According to calculations that if the debt ratio is 9.5 then the post payout will be 50% printed of SBD and 50% payout as Steem and the same will be Steem Power. If SBD print rate is 30 percent it means there will be 30 percent printed of SBD and 70 percent payout is in Steem Power. Therefore, increase or decrease in the debt ratio will directly affect SBD/Steem ratio or debt-ownership ratio.

What mechanism does Steem blockchain use to control the debt/ownership relationship?

To find out the mechanism of Steem Blockchain used to control debt-ownership ratio by using given formula:

For calculation of Steem market cap we have to find the virtual supply value through steemdb.io and Steem price through coinmarketcap.com. Here we have to add values in the given formula.

virtual_supply = 433961711.857

Steem market cap= Virtual supply * price

Steem market cap= 433961711.857 * $0.1918

Steem market cap = 83233856.3342

For calculation of SBD market cap we have to take value of the current SBD supply from steemdb.io and the SBD price will be $1. Here we have to add values in the given formula:

Current SBD supply = 12156026.808

SBD Market cap= 12156026.808 * $1

SBD Market cap= 12156026.808

After calculating the values of Steem & SBD's market cap, now we have to find their current debt-ownership ratio by the given formula and put the values calculated above. As I have earlier mentioned , If the debt ratio is equal to or greater than 10% then SBD will not print out and ultimately Steem price will decreases.

Current Debt-to-ownership ratio = SBD Market Cap / Steem Market Cap

Current Debt-to-ownership ratio = 12156026.808 / 83233856.3342

Current Debt-to-ownership ratio = 0.1460

According to the calculations the debt ratio is around 14.6% or 15 % which is more than 10% and SBD printing rate is 0% at that point. So, the 0% reward on steemit is given in SBD and 100% is given in Steem and same as Steem power. If the debt-ownership ratio remains 10% or more than 10% then there will no print out of SBD. SBD is only possible when debt ratio become less than 10%.

Show the step by step to convert SBD to Steem, using the Steemit wallet. Show screenshots.

Conversion of SBD to Steem :-

Here on this section i will tell about that how i do buy steem from my steemit wallet. First of all we need to login our wallet and then down scroll and press on the small arrow that is show with the amount of steem dollars then simply press on the Market.

After doing this a new page will be open where we can trade our Steem & SBD . By doing we can easily exchange our sbd into steem just put the amount of your available sbd and click on buy steem.

After confirmation your sbd will be exchanged into your liquid steem balance. That's the method i used for buying steem form my steem wallet by selling my steem dollars.

Can you convert Steem to SBD? Explain.

Yes, I can. Just like SBD conversion into Steem.

Step to sell steem :-

First of all we need to login our wallet and then down scroll and press on the small arrow that is show with the amount of your liquid steem then simply press on the Market.

Aftet doing this a new page will be open where we can trade our steem & sbd . By doing we can easily sell our steem and buy steem dollars just put the amount of your available steem and click on sell steem.

After confirmation your all steem will be changed into steem dollars as your account balance. That's the method i used for selling my steem through my steemit wallet.

Note: All screenshots are taken from my personal account.

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This was all about my participation. I hope you will appreciate my effort. It was very informative contest. I would like to invite my friends @faran-nabeel, @jospeha, @patjewell, @pelon53 , @visonaer3003, @m-fdo and @suboohi to share their participation. Best of luck to all. Thank you for reading my post. *

With Best Regards
Aalia Rubab