Steem Dollars

The Steem blockchain is a decentralised social media and content sharing platform that incentivises user participation through a reward system powered by its native cryptocurrencies. Launched in 2016 by Steemit Inc., the platform was designed to merge blockchain technology with content creation, enabling users to earn rewards for posting, curating, and engaging with content.

The Steem ecosystem includes two primary tokens and a staked asset representation:

• Steem (STEEM): The core liquid token used for trading and transactions.
• Steem Power (SP): Represents influence on the platform, which cannot be easily liquidated and grants more voting power for content curation and governance participation.
• Steem Dollars (SBD): A token designed to provide price stability, aiming to maintain a value pegged to the US dollar.

Steem uses a Delegated Proof of Stake (DPoS) consensus mechanism where elected witnesses validate transactions and secure the network. The platform rewards users from a fixed pool of newly minted tokens distributed based on content popularity and community engagement.

Steem Dollars (SBD) is a cryptocurrency token native to the Steem blockchain, introduced as a stable-value asset aimed at maintaining parity with the US dollar. It was designed to mitigate the volatility commonly associated with cryptocurrencies by providing a predictable store of value for platform users.

SBD was created through a mechanism similar to a convertible note, which allows holders to convert their tokens into the underlying asset (STEEM) at the current market rate. The supply of SBD is regulated by a price feed submitted by Steem witnesses, with additional measures in place to prevent price manipulation.

Within the Steem ecosystem, Steem Dollars (SBD) serves several purposes:

• Content Rewards: Users are rewarded in SBD for creating and curating content on the Steem platform, with the goal of promoting high-quality contributions.
• Medium of Exchange: SBD can be used for peer-to-peer transactions within the Steem network, including payments for services, tips, and other digital commerce activities.
• Conversion to STEEM: SBD can be converted into STEEM, the primary liquid asset of the platform, allowing users to reinvest in the ecosystem or trade the token on external exchanges.

Although SBD was initially described as a stablecoin intended to maintain a 1:1 peg with the US dollar, its design has led to significant deviations from this goal. Factors contributing to its instability include:

1. Debt-to-Ownership Ratio Limits: The protocol prevents excessive issuance of SBD relative to STEEM's market capitalisation, capping debt issuance at 10% of the total supply.
2. Conversion Mechanism Flaws: SBD can only be converted to STEEM, and market dynamics can lead to significant price fluctuations if demand outpaces the supply of SBD.
3. Speculative Trading: SBD has often been subject to speculative trading, leading to price volatility significantly higher than the intended $1.00 peg.

Although 'SBD' was the ticker assigned during the deployment of the Steem Dollars token, it is already linked to a fiat currency. Due to this prior association and to avoid confusion in the marketplace, the alternative ticker 'STEEMD' has been adopted for this token. This designation ensures distinct asset identification.