Since I joined Steem in June of 2016, I've been trying to better understand the complexities of the economic system here. Between, STEEM, Steem Power, and SBD (Steem Blockchain Dollars), things can get pretty confusing. I've written about these things many times, so I won't repeat it again here other than to say STEEM is the liquid token, Steem Power is vested STEEM which takes 13 weekly payments to divest (and gives you voting power and influence over the rewards pool of new value created via inflation) and SBD are debt tokens controlled by smart contract which are supposed to be worth one USD of STEEM.
If that all sounds too complicated, just think about this gif and a nerdy blockchain giving out money:
(source)
The 1 USD peg doesn't always work and for more on that you can check out this post (and the many comments): Should SBD Be a Pegged Asset? If So, When Should We Peg It?
Back then SBDs traded for higher than $1 and there is currently no mechanism to prevent that. Some (myself included) argued for a reverse conversion where STEEM could be converted into SBD to increase the supply which, in theory, should lower the price.
Reverse conversion, you say? Well what happened to a normal conversion?
Since SBD is a certificate of debt against STEEM, you can convert it using the blockchain to one USD of STEEM under normal circumstances. This feature used to be part of the Steemit website which I've written about before:
It was removed when SBDs were trading on the market much higher than $1 and some people who didn't understand how things work were using the convert function (imagine taking a $10 token and trading it for $1 worth of STEEM. Ouch.)
What those previous posts didn't cover (and I only recently understood) is what happens when the value of the supply of SBD grows larger than 10% of the value of STEEM. In these situations where there is basically too much debt and not enough support of the debt because the value of the supporting asset (STEEM) has fallen too low too quickly, then the median of the price feed published by the witnesses is no longer used. Instead, it just uses whatever 10% is based on the price of STEEM and the supplies available.
Page 9 of the Steem White paper explains it:
A rapid change in the value of STEEM can dramatically change the debt-to-ownership ratio. The blockchain prevents the debt-to-ownership ratio from getting too high by reducing the amount of STEEM awarded through SBD conversions if the debt level were to exceed 10%. If the amount of SBD debt ever exceeds 10% of the total STEEM market cap, the blockchain will automatically reduce the amount of STEEM generated through conversions to a maximum of 10% of the market cap. This ensures that the blockchain will never have higher than a 10% debt-to-ownership ratio.
(emphasis mine)
You can see the actual code involved here on Github:
Here's the formula involved:
usd_per_steem = total_sbd_supply / total_steem_supply
steem_per_sbd = total_steem_supply / total_sbd_supply
Thanks to 
So what does this mean to you? Well, even that's a bit complicated. Right now the conversion of SBD to STEEM is a little funky. Doing conversions is always risky, but depending on how things go, maybe converting is a good idea. You can see all the other people converting here from SteemDB Labs:
As I was looking through that list, I happened to notice the 
So how can you get in on this since the feature is no longer part of the Steemit.com interface? Well, you can use the cli_wallet command:
convert_sbd(string from, condenser_api::legacy_asset amount, bool broadcast)
Which for my account would be:
convert_sbd "lukestokes" "100.000 SBD" true
But that's a bit too nerdy and technical for most people so instead you can use the wonderful https://steemworld.org site:
Thanks to 
It's a bit tricky to find, but just click Balances, then Convert SBD (assuming you have SBD to convert). From there, choose how much you want to convert and when you click OK, it will prompt you for your active key.
You should never put your keys into any website you do not trust.
When I tested this out, I watched the net tab in my browser on a test account to ensure the only thing sent was the signed transaction, NOT my private key. If you have questions about that, contact 
Your private keys are not being stored in cache or anywhere else. They are only readable from the client (your browser) on this page. Therefore you need to re-enter them after you have refreshed the page or switched to a different account.
Okay, so now you know how to convert your SBD into STEEM which takes 3.5 days to complete.
Should you?
That's a question only you can answer. I found this page by SteemReports helpful, but it also can be a bit confusing as well:
You hopefully have more information than you did before. What you do with that information is up to you. I know it's a bit technical and confusing, but at least SBD is still functioning, where as bitUSD had a global settlement. If enough people convert SBD and the price of STEEM goes back up, we might get that debt back under control.
For some more context, here are the results of two recent conversions I did which happened to be profitable (but again, with prices swinging in both directions, you can also lose money in a conversion).
12:00 PM, Dec 16th
Price of STEEM:
$0.221206 USD (2.13%)
0.00006760 BTC (-0.17%)
Price of SBD:
$0.537000 USD (-2.59%)
0.00016411 BTC (-4.79%)
2,800 STEEM to Bittrex
Sold at 0.00006737
Bought 1,124.058 SBD at 0.00016698
Internal Market:
235.488 STEEM for 95.588 SBD
Fill convert request: 1124.040 SBD for 2864.301 STEEM
Fill convert request: 95.588 SBD for 243.579 STEEM
Price of STEEM:
$0.288234 USD (6.89%)
0.00006903 BTC (-1.79%)
Price of SBD:
$0.647525 USD (9.27%)
0.00015508 BTC (0.40%)
The end result was getting 2,864 STEEM for 2,800 STEEM and 243 STEEM for 235 STEEM.
Not bad!
I tried selling STEEM on both the internal market and on Bittrex to see if one was better than the other:
2864.301 and 2,800 = 0.022964285714286
235.488 and 243.579 = 0.034358438646555
Seems the internal market was slightly better at 3.436% profit compared to 2.296%.
Again though, anything can happen depending on which way the market goes. This isn't trading advice because I'm not licensed to give out trading advice and big bad men with guns paid by The State would get mad at me if I did. That said, if I can make a suggestion between friends, if you are going to do this and have other crypto lying around, it might be best to buy SBD with that instead of selling STEEM as I did in this example. That way the value of the Steem ecosystem goes up instead of just shifting between STEEM and SBD.
Happy converting!
