Before you read this, read quickly this to have an overview of how the three main currencies on which Steemit is built upon work.
As you will notice, SBD currency works as a sort of short-term.
In fact, in the startup world, short-term resources are needed to make sure to sustain the operations and grow over time. Startups use convertible notes to achieve that. This is a sort of short-termthat gets converted into equity at successive rounds of funding of a startup.
Steemit uses a similar form of short-term : the Steem Dollars. In fact, this works exactly like a convertible note. There is only one issue with these kinds of financial tools. You want to make sure you cap them to avoid the risk of getting into bankruptcy for a shortage of liquidity.
That is why there is a safety net to avoid that thegoes out of hand. As specified in the Steem White Paper:
If thelevel were to exceed 10%. If the amount of SBD ever exceeds 10% of the total STEEM cap, the blockchain will automatically reduce the amount of STEEM generated through to a maximum of 10% of the cap. This ensures that the blockchain will never have higher than a 10% -to-ownership ratio.
Thus, to have a rough estimate of the financial health of Steemit, you might also want to look at whether the -to-ownership ratio is lower than 10%. The more it touches that threshold, the more the blockchain will intervene to limit the of STEEM from the platform.
This would also limit the ability of Steemit members to exchange their SBD and SP in STEEM, which over time erodes the trust of the.
How to track it? Go on https://coinmarketcap.com, and check thecap of the STEEM:
Do the same for the Steem Dollars:
The ratio is 4.9% given by $38,435,033 / $773,754,507.
The more this ratio gets close to 10% the more the blockchain will have to intervene to rebalance the-to-ownership rate by limiting the availability of STEEM for the Steemit . This as already remarked might erode the trust of the while also making it less attractive from a financial standpoint.
The Steem Dollars (SBD) is one of the three currencies on which Steemit is built upon. The SBD also has a critical role. In fact, this works as a sort of convertible note that allows Steemit to finance its short-term operations by “sweat equity” from its members to sustain its growth.
Thus, having the ability to emit SBD is critical for Steemit to survive. However, it is also crucial to balance the SBD with the STEEM available on the . In fact, like any other startup, Steemit needs short-term , but it needs to adjust it with the equity available on the . That is why the Steem Blockchain has a mechanism that allows limiting the emissions of STEEM available through .
If this mechanism is critical as it works as a safety net that allows the short-term survival of the Steemit less interesting from the financial incentives standpoint. Thus, you might want to keep an eye on this metric.. If the 10% threshold is reached too many times, this might erode the trust of the over time as the will become less and less convertible on actual currency. This would also make the
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