The Difference Between Selling vs. Converting Your Steem Dollars

Understanding this could make/save you a lot of money!

Peace,
dan-atstarlite

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This an important topic, and people need to watch this! I was going to do a post about it, but I'll just resteem yours instead.

You said you were unsure where the STEEM comes from when converting SBD to STEEM. To the best of my knowledge, that STEEM is created by the blockchain and it doesn't come from anybody.

If anyone is curious about why Steem Dollars are trading for over a dollar, I think I know why. You can read this post to find out: https://steemit.com/crypto/@shenanigator/why-it-makes-sense-to-pay-a-premium-for-steem-dollars

Yeah, it's created as inflation, not extracted from the Vesting fund.

The reason it doesn't come from the vesting fund is so that liquid holders are also included in the "collateral". Otherwise there could be a "run on Steem Power" in a sharp price downturn. It is preferable that the risk is held by everyone.

So I've read different opinions about this... this comment by @sigmajin led me to believe otherwise... Obviously there is a right answer, I'm just not sure who's answer is right. So is this comment incorrect:

Screen Shot 2017-06-19 at 4.35.09 PM.png

Full post
https://steemit.com/steem/@modprobe/how-the-steem-dollar-peg-works

@sigmajin is wrong. Otherwise there would be no difference between the Steem virtual supply (which includes the Steem that would be created if Steem Dollar contracts were all filled instantly) and the total supply.

Just to clarify then... of the 70% of STEEM's inflation that flows in through the rewards pool... roughly half of that remains virtual supply until the newly minted SBDs are are converted into STEEM. Is this correct?

ps. I had to write this comment twice cause the first time is disappeared... do you see it twice or only once? This has happen to me a couple times recently. Right now it shows up twice on my desktop but only once on my phone.

Yes.

This is why people talk about Steem Dollars posing a 'systemic risk'. In a bad enough downturn, the existence of Steem dollars could result in hyperinflation of Steem. It is a very unlikely scenario but possible, and some want rid of SBD simply to close that possibility.

Edit: I only saw your comment once. It's just a guess but Steemit.com nodes might be failing to propagate transactions to the network under heavy load. If that's the case, Steemit Inc simply need to spin up more instances, and maybe handle the error better.

Correct, although I am not sure that the inflation is actually tuned to account for the STEEM value on exchanges. So if I understand right: the STEEM you get from changing SBD is created by inflation, say that STEEM value goes really down and there are large hodlers of SBD, I don't see why there should be enough inflation to produce enough STEEM for them. So if you hodl SBD, STEEM price goes down, you are setting up the system for default, please let me know if I understood correctly. SBD are not a bad idea per se, but they should be emitted keeping in account how many of them are circulating (like government bonds)

The only way default could happen is a hard fork supported by consensus. Building default into the smart contract doesn't really make sense, a default is a violation of a contract (usually with mitigating circumstances).

a very nice explanation...I have been converting SBD to steem basically to power up...but after watching your video I think I should trade it till the price settles around 1 US$.

Yes, exactly! Just use the internal market... and you'll get a lot more STEEM, plus you'll be able to power it up right away instead of waiting 3.5 days!

Thanks I only realised this lately and good for new users to know.

This post received a 4.7% upvote from @randowhale thanks to @shenanigator! For more information, click here!

Very well put - I guess trading it, then "buying steem" with the BTC you traded for, would end up making you quite a bit more! Thank you for the information

yes but you could just trade Seem Dollars for STEEM directly on the internal market, that would be quicker and easier than going through bitcoin

Thank you so much @dan-atstarlite. You help me understand how it works! 😀

Thanks @dan-atstarlite for sharing expert advice on Steem Dollars, learnt alot from your video, will be doing SD transactions as mentioned.

Informative post, thank you....I just resteem this post

You always bringin that value... Appreshhh @dan-atstarlite :)

excellent now i know what do Thanx a lot :)

This is really useful.
I'd like to see future videos as you said about steem dollars.
Thank you Dan!