The economics of the STEEM blockchain are quite complex. The fact that there are two currencies on it (well, one is just a smart contract, if you want, and I'm talking about SBD) doesn't make things easier, on the contrary.

As you probably saw already, payments in SBD declined in the last few weeks, and now they stopped entirely. Rewards are paid exclusively in STEEM / Steem Power.

But why is that?

Well, it's all written in the code, my friend.

Let me try to explain this thing.

The Magic Concept Is "Debt To Ownership Ratio"

As you know, the STEEM blockchain produces STEEM tokens, the basic currency of the ecosystem. But it also "prints" SBD, which are tokens intended to be pegged to $1. They are pegged to "$1 worth of STEEM", though, not directly to USD (meaning there is no cold storage of USD backing this supply).

Because of this, SBD is basically a debt instrument.

So, the ratio between the circulating SBD and the circulating STEEM is called "debt to ownership ratio".

This is may be also written as: SBD amount / STEEM market cap.

And there are some constraints to it in the code.

It goes like this:

• if the debt is under 2%, printing rate is 100% SBD
• if the debt is over 5%, printing rate is 0% SBD
• if it's between 2% and 5%, the printing rate is: 100% * ( 5 - debt)/3

So if the debt to ownership ratio is over 5%, the blockchain stops printing SBD entirely. This is the case now.

If the debt to ownership ratio is under 2%, printing rate is 100% - that was happening when rewards were paid entirely in SBD / Steem Power.

For the last weeks the debt to ownership ratio has been increasing (hence the printing rate has been constantly decreasing, getting to a halt). This constant increase was a means to control the SBD price: by increasing the supply, the price naturally went down. If you wonder, this increase is controlled by witnesses, via their price feed biases.

As the STEEM supply increases, the debt to ownership will go down, hence we will see SBD printed again, at some point.

Hope this make things clearer.

Steem on!

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I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.

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