I will discuss as little as you may not know about Steem Dollar (SMD) in the Steemit Platform. Actually, all facts related to Steem Dollar (SMD) are written in the documentation whitepapernya steemit, but if you are still confused and stuck in the previous article ane also not explain in detail, then ane dedicate this article specifically to discuss Steem Dollar (SMD).
The most common thing we know about the Steem Dollar (SMD) is that it was created as a stable value unit in the Steemit Platform. Steem Dollar (SMD) created from blockchain Steemit when blog post diupvote by reader. Steemit then calculates the value of each blog post based on the number of votes and the quality of Steem Power (SP) contained in each of these votes. The value of the post result will be split 50:50 to Steem Dollar (SMD) and Steem Power (SP). This concept of understanding creates the formation of Steem Dollar (SMD).
The main thing you should know is, there is no USD (US Dollar) who really membacking the value of Steem Dollar (SMD). The value of the Steem Dollar (SMD) unit is pegged to USD (US Dollar) due to Steemit blockchain capability to create unlimited supply STEEM units. Steem Dollar can be claimed in the form of STEEM unit value, which then STEEM can be sold to buyers with USD (US Dollar) or Cryptocurrency Assets such as BitCoin. When 1 Steem Dollar (SMD) is created then the $ 19 STEEM is also created and then converted to Steem Power (SP).
Well based on the above point is very important once we realize that if one day later if the price of the STEEM unit collapsed and no recovery back then the benchmark Steem Dollar price (SMD) to USD (US Dollar) will break.
Next, the second important information is that the Steemit system selects a set of people to provide value for STEEM to USD (US dollars) to be honest. The person chosen by this STEEM holder is compensated / rewarded in the STEEM unit for the services they are delivering. If these people do not provide accurate data, they can be fired from the system and new people will be selected to replace them. The purpose of all this is to ensure that the Steem Dollar (SMD) can still be exchanged fairly to the STEEM unit equivalent to $ 1 USD (US Dollar).
One other unique fact that can ensure the value of the unit Steem Dollar (SMD) pegged to the value of USD (US Dollar) is the interest rate system in the economy Steemit. Holders of Steemit Dollar (SMD) will earn 10% interest annually (annually) which continues to be accumulated automatically per second. What is the interest rate system for? The point is if the Steem Dollar (SMD) falls below the USD (US Dollar) price then this rate can be increased to trigger an increase in demand for Steem Dollar (SMD).
We must think of the Steem Dollar (SMD) as it seems to be a USD denominated debt in which the Steemit community must pay the interest rate in the value of the STEEM unit. If Steem Dollar is traded above $ 1 then this indicates that the market is willing to lend more credit than the person who wants to owe.
So Steem Dollar (SMD) is designed with the aim to create a stable money value in the system. It uses a combination of blockchain's endeavors to create a NEW STEEM that contributes back to Steem Dollar (SMD), then it has a set of people who provide honest market value and so on it has an interest rate system to stabilize the value of Steem Dollar (SMD) to USD ( US Dollar). Also be aware that there is no USD (Dollar America) legit you can claim from Steem Dollar (SMD) because we have to convert to STEEM or BitCoin first. If this system works as it is designed, then every 1 Steem Dollar should always be exchanged to 1 USD (US Dollar) or more. Nevertheless it does not close the possibility either it will not go as expected where no one wishes that this will happen.
So my first article today. Hopefully useful for all.