Ned Was Wrong About Steem Dollars

Background

Late last year in an interview with Epicenter Bitcoin, @ned made an off hand comment about the possibility of removing Steem Backed Dollars from the Steem ecosystem. He later expanded on his argument, making the case that Steem Dollars add unnecessary complexity to the system without contributing much value.

The Data

I would like to make the case that the data proves Steem Dollars are in fact contributing quite a bit of value to Steem. The following graph shows the number of transfers that have happened on the Steem Network over the past 5 days, denominated in SBD and STEEM:

Edit: Here is a lifetime chart:

Over the whole life there have been 1236719 Steem transfers and 1854617 SBD transfers.

There are twice as many Steem Dollar transfers being made every day versus Steem transfers. This is strong evidence that people prefer to transact with a loosely pegged currency than with a highly unstable one such as Steem. Further evidence of this can be found in the persistent premium on Steem Backed Dollars above their pegged value, which in recent days has been frequently more than $2. It is almost always above $1 in bull markets, even up to $7 at times, but does not go far below $1 even when Steem is declining.

Not only do Steem Dollars compare well to Steem in transfer volume, but Steem Dollars are one of the most used cryptocurrencies period. The following graph from BitInfoCharts.com shows the transactions per 24 hours for some of the top blockchain cryptocurrencies:

Steem ranks 34th by market cap, and Steem Dollars rank only 339th, yet transfers alone account for more than almost any other blockchain. SBD and Steem transfers combined rank 5th by transactions per day, and when split up they rank 6th and 7th respectively.

Cryptos that do fewer transactions per day than Steem Dollar transfers:

1. Dash, worth nearly $5 Billion
2. Monero, worth over $2.5 Billion
3. NEO, worth over $2.5 Billion
4. Ethereum Classic, worth over $2 Billion
5. NEM, worth nearly $2 Billion
6. Tether, the pegged cryptocurrency which supposedly acts as the backbone to major exchanges such as BitFinex, Poloniex and Bittrex
7. Almost all other cryptocurrencies.

Conclusion

Standing alone, Steem Dollars is a top cryptocurrency in terms of people actually using it. So is Steem, but notably people prefer to transact in Steem Dollars by a factor of two. The fact that people use it, prefer it to Steem transfers and are willing to pay a premium on the markets, shows that Steem Dollars are providing meaningful value to users.

Data in this post taken from SteemSQL, the database service run by @arcange. Coinmarketcap.com and BitInfoCharts.com used for charts.

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