# Have you thought about SBD Arbitrage?

![](https://cdn.steemitimages.com/DQmV5SzY5XsYWU1VbpLUNi9QU79YrU8t9cLXr3zaStbs15L/image.png)

I have discussed how SBD interest rate and the 100% SP reward VS the 50/50 reward helps to peg SBD, but there is a much more powerful mechanism that supports SBD price at $1.00 if there were a sudden dip in SBD price on the open market:
## Arbitrage
### What is arbitrage?
Arbitrage is taking advantage of one entity that is buying and selling a currency at a low price and an another entity buying and selling the same currency at a higher price. For example:
![](https://cdn.steemitimages.com/DQmfV1k1e3iVyb75xG2sdd3VXL6es8pvgo5w9nHpUhnyent/image.png)
This is an exaggerated example, but you get the idea. 

# How does Arbitrage support SBD Peg from falling below $1.00?

Let's examine how this would work. SBD is an IOU for STEEM. This IOU guarantees that you can convert your SBD to $1.00 worth of STEEM. 

#### What happens if SBD on the open market falls below $1.00? 
This would create an opportunity to profit on the low SBD price which is arbitrage. SBD would then be bought up at the cheap price on the exchange and would be "Converted" to STEEM in the Steemit wallet. The conversion is different from an exchange. In an exchange, the SBD only changes ownership. In a "Conversion", the SBD IOU (debt) is being cashed out. This reduces the supply of SBD. A reduction of SBD supply will support SBD price floating back up to $1.00 on the exchanges. 
![](https://cdn.steemitimages.com/DQmNqPyYwKTw4iqeGuRh149ngbaQXnXJB6TecwPfmMjJwsT/image.png)

# I hope you enjoyed reading my Blog. Please remember to Upvote, Resteem, and Follow. Thank you.
# ---------------------------------------
#### For a breakdown of how Steemit Rewards system works:
https://steemit.com/steemit/@socky/steemit-rewards-breakdown-a-simplified-explanation-with-illustrations

#### For a breakdown of Steemit Keys:
https://steemit.com/life/@socky/do-you-understand-your-steemit-key

#### For a breakdown of why Steem Power is Important:
https://steemit.com/steemit/@socky/why-is-steem-power-important-beginners-read

<center>[![](https://steemitimages.com/50x60/http://steemitboard.com/@socky/commented.png)](http://steemitboard.com/board.html?user=socky) [![](https://steemitimages.com/60x70/http://steemitboard.com/@socky/votes.png)](http://steemitboard.com/board.html?user=socky) [![](https://steemitimages.com/70x80/http://steemitboard.com/@socky/posts.png)](http://steemitboard.com/board.html?user=socky) [![](https://steemitimages.com/100x80/http://steemitboard.com/@socky/level.png)](http://steemitboard.com/board.html?user=socky) [![](https://steemitimages.com/70x80/http://steemitboard.com/@socky/comments.png)](http://steemitboard.com/board.html?user=socky) [![](https://steemitimages.com/60x70/http://steemitboard.com/@socky/voted.png)](http://steemitboard.com/board.html?user=socky) [![](https://steemitimages.com/50x60/http://steemitboard.com/@socky/payout.png)](http://steemitboard.com/board.html?user=socky)</center>