A bid-bot sells votes to authors who want to get their posts in the “trending” and “hot” sections of web services like steemit.com or busy.org. It allows authors to show their work to a wider audience and to build a following. Bid-bots usually receive deposits from investors (delegators). This allows them to have a bigger vote value to sell. Investors earn interest on the amount lent to bid-bots. This developing part of the Steem economy has then characteristics of both an advertising business and a credit market.
Let’s describe how a typical bid-bot works and what are the motivations behind the actors in this economy. Imagine a bid-bot that has a vote value of USD 100. If you were an author and only you got voted by this bot – and the vote had 100% power at the moment of the vote – you would have received approximately USD 75 from the bid-bot vote, as “author reward”. The other part of the vote value, USD 25, goes back to the voter as “curation reward”. When a vote is given with 100% vote power, it takes 2.4 hours to refuel the vote power back to 100%. So every 2.4 hours the bid-bot can cast a USD 100 vote that rewards USD 75 to authors. If the bid-bot does not vote when its voting power is 100% full then it postpones the USD 25 curation reward until it eventually casts its vote. The bid-bot then has an incentive to vote every time his voting power is full.
The vote auction happens this way: the author sends the bid-bot account a transfer. The amount of the transfer is how much the author is bidding for the bid-bot vote value. Let’s say the amount is USD 25. If other bidders send the bit-bot USD 50, then we would have authors paying USD 75 for a vote that returns to the authors the same value, USD 75. In this example, the promotion service – a big vote value that makes the post rise in the trending pages – would have no financial cost to authors. If bidders had instead sent the bit-bot USD 125, we would have authors paying USD 125 for a USD 100 vote. In this case, the authors would have spent their resources in exchange for the promotion service. It could also be that only one author sent a bid. She would bid USD 25 for USD 100 vote and, if the bid-bot does not have an upper limit on how much a bidder can profit, she would have made some good money buying the promotion service.
The bid-bot always makes money, as long as he keeps on voting. The other side of the bid-bot market is the delegation transaction, that acts like a credit transaction. Some accounts delegate resources to the bid-bot and receive in return interest payments. The interest is paid from the bit-bot profits.
There are a lot of details that make the picture more complicated but the description above tries to capture the main elements of the bid-bot/delegation markets. The 75% - 25% division of the vote value between author and curator depends on the vote timing. If the vote is given immediately after a post goes online, then the division turns to 100% - 0%. To avoid the loss of the 25% share, bid-bots may only accept bids to posts that are at least 20 minutes old (see each bid-bot post age policy in https://steembottracker.com).
Now that we have a description of how bid-bots work, we are closer to answering: how much money are bid-bots doing?