The Case for Showing Pending Rewards in STEEM

[rychardemanne]

The Case for Showing Pending Rewards in STEEM

Why are pending rewards shown in $?

I suspect every Steemian has, at some point, wondered how their post payouts are calculated. How does a "$" amount get converted into SP, STEEM and SBD? This question has been answered in numerous posts; what I wish to highlight is the fact that it needs to be asked, partly because the calculations are slightly complicated but also because the dollar-sign is not really a US Dollar. Instead of repeating a post on "How are payouts calculated?" I wish to show how much easier, and more meaningful, it would be if rewards are shown in STEEM.

STEEM is the local currency

STEEM is the native currency of the Steem blockchain and the whole ecosystem. Just as you need to use the local currency when you travel abroad, so you should be using the local currency of the blockchain. Yes, the value of STEEM outside the blockchain varies, but within the blockchain it is actually astonishingly stable.

STEEM is a stable currency within its economic system

This is something that few seem to mention, or possibly even notice; I suspect this is precisely because pending rewards are shown as a $-amount. As the exchange rate of STEEM/USD changes, so does the pending rewards; looks great if the price is increasing, but causes deep concerns when the price falls. We have all experienced our pending rewards decrease during a post's 7-day lifetime. And yet, the STEEM-value of that post has probably not changed. As I showed in another post, the profitability of Steem changes quite slowly.

Most people look at the blockchain's profitability as an "inflation rate"; the two are one and the same thing. It is the inflation rate that powers the profitability of an upvote. Should Steem gain wider acceptance and an increase in overall activity, then that inflation rate will drop down to be nearer the official rate at which STEEM is created. In this scenario, the reward pool would shrink (do not panic, this is what it is designed to do) and the value of an upvote in STEEM terms would also decrease. All this would happen relatively slowly, measured in a few weeks, and can be tracked so that it can, to a certain degree, be predicted.

STEEM currency for merchants

The relative stability, profitability and predictive power of the Steem blockchain should give merchants confidence in using the cryptocurrency. Sure, it is volatile with respect to fiat, but every fiat currency is also volatile compared to other currencies - that's why the Forex markets exist. But if a merchant or platform creates products or activities that are denominated in STEEM, and that require STEEM to be circulated within the ecosystem, then those entrepreneurs can have confidence that their STEEM holdings will have a predictable purchasing power within the system.

Sure, at some point we all wish to cash out to our local fiat currency, but that is a different calculation; that requires having a plan and making a judgment call as to an acceptable target price in which to take some profit. Selling when prices are low (and buying in when they are high) is what amateur investors and traders do every day on the global markets.

The psychological importance of STEEM

Changing the pending rewards from "$" to STEEM is not a mere cosmetic exercise; to me, it is of fundamental psychological importance that Steemians operate in STEEM. It is the local currency within the local Steem economy. By focussing on the exchange rate rather than the internal value seems a sign that everyone is milling around the exit doors. Many online games have internal tokens; do gamers constantly look at their fiat value, or are they focussed on using those tokens to improve their gaming experience?

This is also somewhat like people on holiday abroad who convert everything back into their national currency. Makes sense if on holiday, but if you're an expat who earns and spends in the local currency then such constant conversions become less meaningful. What remains important is seeing your total holdings in case you need to move back to your homeland, and for that reason your STEEM holdings will still show their (approximate) USD value within your wallet.

How to show pending rewards in STEEM

OK, here comes some mathematics.

The important thing here are the rshares created when someone votes. The relevant formulas can be found here but one tweak is also necessary.

If a post is accepting rewards as "100% Powered Up", the calculation is fairly simple.

STEEM = (net_rshares)*(reward_balance)/(recent_claims)

Note that reward_balance is measured in STEEM whereas the other two parameters are in Vests. The net_rshares is the "sum of rshares" and can easily be seen on steemd.com. I assume that the net_rshares is equal to the vote_rshares less any downvotes; am willing to be corrected on this, so please leave a comment.

However, if a post is being rewarded at "50% SBD / 50% SP" then we need to make an extra calculation in order for our STEEM rewards to be as accurate as possible.

Firstly, calculate the above formula, then take 37.5% of that value as the "SBD rewards".
Multiply this by the STEEM price on the blockchain - this gives a $-amount that, assuming SBD is worth $1, is the same numerically as the amount of SBD.
Finally, convert this SBD into STEEM by multiplying by the STEEM/SBD rate. This exchange rate can either be taken from the internal market or as the ratio of the external market prices.

For example, assume STEEM = $0.5, SBD = $4 and your pending reward is 8 STEEM (assume this has already been calculated from the first formula).
Then, 2 STEEM will go to curation rewards, 3 STEEM will be paid out as SP, the 3 STEEM going towards SBD will be worth $1.5, hence 1.5 SBD, which (at 8 STEEM/SBD) is equivalent to 12 STEEM! Total pending reward, just before payout, will thus show 17 STEEM.
Note that the actual STEEM value is much higher than the simple formula. We had this situation some months back when SBD was well above its so-called peg.

As a second example, and closer to current prices, assume STEEM = $0.25 and SBD = $0.75, with the same 8 STEEM value from the first formula.
In this case, the 3 STEEM allocated to your SBD account are worth $0.75, hence 0.75 SBD and, converting back to STEEM, worth 2.25 STEEM. Total pending rewards will thus show as 7.25 STEEM.

Note that in this latter case, as SBD is below $1, the STEEM-equivalent is less than 3 STEEM.

And finally...

The native currency of the Steem ecosystem is STEEM; I think it damages the perceptions of the ecosystem to keep seeing a $-amount being promoted more than the STEEM amount. Seeing dollars everywhere encourages the view that the coin is unstable when, in reality, the STEEM macroeconomic system is fairly stable to even major price changes. Yes, there are issues with the distribution of the coin, but that can be seen as microeconomic issues and can, possibly, be solved at that level.

One thing I am heartened to see is that many devs are talking explicitly about creating platforms that give extra value to STEEM. What that means in pure money flow is that STEEM should be worth more within its own economy than it is outside of it. It means that new types of transactions can be created using smart contracts so that STEEM flows more within its economy. I look forward to seeing how these new platforms develop.

The point I am making here is that STEEM must be seen to be the primary currency of the Steem economy. For that to be the case, STEEM must surely be more visible within its own ecosystem. One small but important step is to show all pending rewards in STEEM.

Your comments are welcomed!