We need trust when we buy something. Either we see a benefit in buying or we trust that the purchase will be worthier in the future.
Steem Dollars holds this promise.
Steem Dollars (or Steem Backed Dollars, SBD) should be always worth $1.00. You can swap them to Steem with the value of $1.00 at any time. This provides stability for this asset and should be an incentive to buy it or to accept it (merchants). In short: SBDs are the currency of Steemit paid out in a cryptocurrency called Steem.
This is the idea behind SBD and why they were invented. Otherwise, we could have Steem as the only currency. The relation to a real currency in US$ helps to present the value of the current received Steem.
Is this logical? Yes
Does it add confusion? Yes. A lot of variables on Steemit.
How is the conversion between Steem and SBD calculated?
The conversion rate to SBD and Steem is calculated on median prices over 3.5 days. This is done by the witnesses (more details in a future post).
Who Creates Steem Dollars?
SBDs are not produced. As explained they represent a conversation to Steem for a calculated rate. On the other hand, Steems are produced every 3 seconds. (More in future posts).
How To Convert To Steem?
You have 2 options on Steemit:
- Use the transfer option in your wallet. The SBDs are transferred over time to Steem. The delay of this transaction is 3.5 days.
- You can use the internal market to swap SBDs to Steem. The internal market is volatile, pay attention when you use it.
Can I Convert SBDs To Real Money?
You can convert your SBDs into Steem and sent them to any exchange. On an exchange like BitTrex you can trade your Steem against Bitcoin and convert this finally into a real currency.
Do I get interests for holding Steem Dollars?
At the start of Steemit.com, you got interests on your SBDs. The price was low at this time and users should have an incentive staying with their money on the platform. Therefore, interests were paid up to 10% a week.
Since the price of Steem is higher the interests of savings are not in place anymore. Currently, you get 0%.
Why is the price of SBD above $1 on Exchanges?
The price on exchanges is calculated on supply and demand. This has nothing to do with with the calculation on Steemit as a platform. Therefore the price is currently much higher as $1.
A visual summary of our learnings today (and of the previous post. Looks complex already):
Previous posts in this series:
Do you have questions?
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