When you see a post worth over a hundred dollar, there is no need to be jealous. It may not be a gain that much as seen or even be a loss at the end. Let's explore this interesting topic in today's steemit in a minute.
Upvote bidding bots
As we all know, there are lots of bots on steemit. One of the major types is bidding bot in which you place bid for the bot's upvote on your post. Steem Bot Tracker is a well known website that shows how the bots are being bidded. You may also directly place a bid there too. In this post, I assume you have a basic understanding of how bidding bot works. In this post, we put the focus on how much should we place a bid.
Basic formula of ROI
Upon we receive upvote from the bots, there is a 7-days payout period counting from the post creation date. At this stage, the reward is seen as a "Pending Payout".
It is important to know that we will not receive the exact pending payout amount. First of all, it depends on the price of STEEM/SBD at the moment of payout calculation (i.e. the 7-days payout period). Secondly, the reward will be divided into two parts namely author reward and curator reward.
Author 75% + Curator 25%
As an author, we therefore would expect to receive only 75% of the amount. This percentage may vary according to the timing of upvote received. For example, upvote received immediately after the posting will make a share of closed to 100% back to author (an extreme case). Nevertheless, let's take a more conservative approach by using 75% in our calculation.
Another rule that we need to aware is the author reward is further separated into two parts.
SBD 50% + Power Up 50%
At the time we create the post and before clicking the "Post" button, we see above 50%/50% is the default option of reward distribution. Although there are two more options namely Power Up 100% and Decline Payout, these two options are even less or non-profit making.
Putting the Power Up 50% apart at the moment, the ROI in SBD will be:
Return in SBD = (Payout amount x 0.75) / 2
Case Study
In the following cases, we assume the bot has a $200 upvote value at its 100% voting power, minimum bid is 5 SBD, and it will upvote all the bidders using full 100% in a voting round. To calculate the Profit & Loss (P&L) for the SBD part, you need to cover the cost (i.e. your bid amount) in the formula.
P&L in SBD = ((Payout amount x 0.75) / 2) - Your Bid Amount
Case 1
In this first case, it is more theoretical in order to illustrate a basic concept. This case assume you are the only bidder. In the first four rows of the table, your bid raised from 5 to 10, 50 and 100. Your P&L decrease as your bid increase. As the only bidder, you will get 100% of the $200 anyway. A higher bid would only mean a higher cost.
In the fourth row where the bid amount is 100 SBD:
P&L in SBD = ((200 x 0.75) / 2) - 100 = -25
That is a loss!
If you were the only bidder, placing minimum bid will earn you the most
Case 2
In the second case, it is assumed there are some other bidders competing with you against the bot's percentage of voting power. The rule of the bot is that higher bid proportionally gets higher percentage of the 100% voting power.
For example, you place a bid of 5 SBD when you see the total bid is 20 SBD. After your bid, the total bid becomes 25. You have a 5/25 voting weight. That is 20%.
The upvote amount = 200 x 20% = 40
P&L in SBD = ((40 x 0.75) / 2) - 5 = 10
i.e. Earn 10 SBD if you placed a bid of 5 SBD.
With all other conditions the same, you increase the bid from 5 to 10 SBD. The total bid becomes 30 and you will have 10/30 voting weight. That is 33.3%.
The upvote amount = 200 x 33% = 66.67
P&L in SBD = ((66.67 x 0.75) / 2) - 10 = 15
i.e. Earn 15 SBD if you placed a bid of 10 SBD.
You earn more because you get a higher weight with higher bid.
How about to boost up further? Let's bid at 50 SBD this time. The total bid becomes 70 and you will have 50/70 voting weight. That is 71%.
The upvote amount = 200 x 71% = 142.86
P&L in SBD = ((142.86 x 0.75) / 2) - 10 = 3.57
i.e. Earn 3.57 SBD if you placed a bid of 50 SBD.
You earn less with a higher bid because you need to cover the higher bid cost. It will even turn into a loss if the bid is 100 SBD at shown in the table.
Case 3
In this case, the total bid is 70 SBD and you placed the minimum bid of 5 SBD. The total bid becomes 75 and you will have 5/75 voting weight. That is 71%.
The upvote amount = 200 x 6.6% = 13.33
P&L in SBD = ((13.33 x 0.75) / 2) - 5 = 0
i.e. It is risky to place a bid when the total bid is already high
Case 4
The last case is that you place high bid at the time when the total bid is already high. Although it is guaranteed to be a loss, we still see this happen occasionally. The reason could be many bidders rushed in the last minute, the bidder do not care about P&L, or the bidder does not understand the calculation. In any case...
i.e. All bidders loss
Conclusion
All the above examples are not difficult. The problem is that we do not have time to do the calculation every time when we place a bid. Therefore the best bet is to place the minimum bid when the total bid is still much less than half of its voting value.
There are some bots implemented a Min/Max ROI. Theoretically, the overbid problem should have been reduced to a certain extent. I am not sure if this was the best solution for both bidders and bot investors. At least, we see this seems to be the new trend.
We all know steemit is huge. There are lots of numbers, concepts and formula. It is very easy to be confused. Be a smart steemian, we should always look into the details. This is also part of the fun being here. In case you have any experience to share regarding bid bots, please kindly give a comment. It is more fun learning with a community than learning alone.
Thanks for reading.
