There are two kinds of limits on the issuance of Steem Backed Dollars ("SBD") as part of post rewards.
SBD are a debt instrument, since they can be exchanged for USD$1 value of Steem. The limits apply to stop this debt becoming too large in relation to the overall supply of Steem (measured in dollars).
The first kind of limits are the SBD print limits (All limits are expressed as a percentage of the overall supply of Steem.)
Currently print the limits are:
- Between 2% and 5% the supply of SBD is gradually reduced and replaced by liquid Steem in 50 / 50 payouts. The change from 2% to 5% is a linear progression.
- At 5% there is no longer any SBD included in post payouts, you receive liquid Steem instead.
The recent fall in the price of Steem has reduced the overall Steem supply (measured in dollars) such that the 5% SBD limit has now been breached. No more SBD will be printed until the outstanding SBD returns to below 5%.
The second kind of limit is the hard cap.
- At the 10% level the peg is broken and the exchange of SBD for Steem is no longer guaranteed to be $1.
The gap from 5% to 10% allows a buffer between SBD printing ceasing and the peg guarantee hard cap limit. This would allow Steem to fall another 50% (since no more SBD is printed) before the hard cap limit is reached.