I wrote this 5 months ago I thought I'd update it a bit and repost, I hope it helps some people

TLDR

It's a long post but this bit of info can probably make a lot of you, a bit extra, on your posts. So I thought it best to put the info upfront.

If SBD is worth less that $1 you should be using the 100% SP option for your posts.

If SBD is worth more than $1 you should be using 50/50 option.

Image altered from this source

First a bit of background.

##How Steem dollars keep parity with the dollar

There are two main methods used to keep steem dollars in line with USD, one is done by witnesses (like elected admins of steemit) and the other is done by regular individuals like you and me.

###Interest rate

If the value of Steem dollars fall below $1 witnesses can vote to increase the interest rate, people get paid to hold steem dollars. Currently it is at 0% with only a few witnesses voting for higher. You can see this amount on the wallet page.

As 0% is the lowest this can go (I think adding in an option to have a minus rate might be useful), this method is mainly used to raise the value of SBD.

###Rewards

The second way that SBD is regulated is via the payouts. We all have 3 options when posting, we can opt for

1. 100% SP and 0% SBD

2. 50% SP and 50% SBD

3. 0% SP and 0% SBD (Decline payout)

These reward options have a massive effect on the price of steem dollars as this is the main source of them. If more people use the 50/50 option the amount of SBD coming to the market will increase which will drive down prices. And conversely if more people use the 100% SP option there will be less SBD and the price will increase.

Why does it matter that SBD fluctuates?

That amount of money that you see under your post, you know the one we all obsess over, well that's not in USD it is in SBD. So let's look at an example where you write a great post about pineapples, or whatever, and you earn $10 lets see how you would be affected depending on 3 prices of SBD. We will also assume STEEM (same as SP) is worth $1.30

SBD worth $0.80

Reward Option	100% SP	50/50
post value(USD)	$10	$9
post value(STEEM)	7.692 STEEM	6.923 STEEM

SBD worth $1

Reward Option	100% SP	50/50
post value(USD)	$10	$10
post value(STEEM)	7.692 STEEM	7.692 STEEM

SBD worth $1.20

Reward Option	100% SP	50/50
post value(USD)	$10	$11
post value(STEEM)	7.692 STEEM	8.462 STEEM

Put simply if the value of SBD is above $1 it is definitivly worth more to go 50/50, and if below, to go 100% SP.

I put in the values in STEEM to show those that say 'I don't care about the dollar value I'm not selling', it doesn't matter you still make more value or less value depending on your reward choice. This is because the internal market adjusts to take into account the external values of STEEM and SBD. This happens because there is arbitrage between internal and external markets.

Let's get greedy

As far as I know (and correct me if I'm wrong) everything I wrote above is fact and can be relied on. What I am going to write now is a bit more guess work.

I only change between 100% SP and 50/50 when the price of SBD is at $1.20.

I do this for 2 reasons, firstly I believe steemit is a growing ecosystem and that growth will impart a premium onto SBD at least the next couple of years, or put more simply I think despite the methods to manipulate SBD to $1.00 its fair value at the moment is around $1.15. It has traded mostly above $1.50 for the last few months.

To be clear this means I am basically speculating that the value of SBD will go up, this is no different than me buying SBD below $1.15 and selling above. So I am trading, and as such that is risky and I don't necessarily advise you to do the same.

My second reason accounts for the missing $0.05, it is my belief that people are more likely to upvote posts that are 100% SP and have that cool icon next to it's title. Why $0.05? Pure guess work.

Let me know what you think in the comments below and if you liked it please consider following, upvoting or resteeming, or you could go crazy and even do all 3.

Thanks for reading.

KevinBacon

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More posts

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Disclaimer

Please do not invest on the advice of a stranger on the internet, only use this advice here as a starting point for your own research, and then if you choose to invest please only invest an amount that you can afford to lose.

Made with this pic as a template