If you think Steemit rewards are a mystery and want to get a hang of them, look no further. It is common knowledge that newcomers have a hard time figuring out what all these rewards mean. And they are not alone. Many veterans have the confusion as well. People join Steemit and start posting. But then, there comes a new challenge when they start earning rewards on their posts.

How does the reward system work?
What does the amount on my posts and comments with the $ sign mean?
How much will I get? How do I know what my earnings are worth?
If it's money, how can I withdraw and use it?

These are some of the questions which confuse new Steemians. Well, wait no more because the simplest explanation is here.

Please note that this post not only explains reward system but also contains links to greatest content on Steemit currencies. Many associated issues, such as buying Steem, will also be addressed in this exceptional Steemit resource.

Digtal Currencies of Steemit Network

There are three currencies in your Steemit wallet; Steem, Steem Power and Steem Dollars. Let's see what the official FAQ says about each of them.

Steem

It is a cryptocurrency token, similar to bitcoin. It can be powered up into Steem Power, traded for Steem Dollars, and transferred to other accounts.

Steem Power

Steem Power (abbreviated SP) is a measurement of how much influence a user has in the Steem network. The more Steem Power a user holds, the more they can influence the value of posts and comments.

Steem Dollars

Steem Dollars (commonly abbreviated SBD) are liquid stable-value currency tokens designed to be pegged to $1 USD. Steem Dollars can be traded with Steem, and transferred to other accounts for commerce or exchange.

If you want to know more about these currencies, this video by @andrarchy will help you.

https://youtu.be/z-V6HnfbGUA

Steemit Rewards Decoded, Finally!

Let's decode these confusing little buggers. Well, to begin with, there are three things you should know about rewards.

1. Rewards are Shown in One Currency Only

This is simple. All the rewards on your posts and comments are shown with an amount preceded by $ sign. This $ does not mean US dollars (USD) and is mentioned only for the sake of ease, probably because the whole globe recognizes the $ symbol (and loves it?).

The amount mentioned with $ sign is actually Steem Dollars (SBD), not US dollars. You will not be paid out in just SBD though. Your rewards will be converted to Steem Power (SP) and Steem Dollars (SBD) depending on whether you want both or just the SP (explained later in the post).

Note: - SBD stands for Steem Backed Dollars.

2. Rewards are Paid in Two Currencies

This is where things get a little complicated for innocent minnows and new fishes. The rewards, which are shown in Steem Dollars, are paid (sent to your wallet) in two currencies; Steem dollars (SBD) and Steem Power (SP). How this division is done will be explained a little later in this post.

3. Rewards Can be Converted to All Three Currencies

Things get way complicated here but it's basically pretty simple. You get SBD and SP as reward from posts, comments and curation (from your upvotes on others' posts/comments). The only currency that remains is Steem.

Well, you can buy Steem directly from the internal market against SBD. You pay in SBD and get Steem in your wallet.
To convert SP into SBD or Steem, you'll have to go through a process called Powering Down. It is so named because powering down decreases the influence of your upvotes.
When you start power down, SP is converted to Steem in 13 installments over a period of 13 weeks, starting one week from the time the operation starts. It can be cancelled any time.
To convert SP into SBD, first you'll have to power down to Steem and then sell Steem for SBD in the market.

Related Post: 9 Things You Can Do With Your Steemit Earnings

How Rewards are Distributed?

If you think you had enough twisting already, think again. You're in for another round of clarifying your doubts about rewards. Let's get over with this reward thing once and for all.

Rewards are Shared Between Authors and Curators

The amount in $ that you seen on your posts and comments is divided as follows.

75 % of the amount goes to the author i.e. you.
25 % of the amount is distributed among the curators; the people who upvoted on your content.

Seems simple and straightforward? Ok. Let's see. You'll probably need to awake the sleeping mathematician in you from this point onward.

Clearing the Fuss over US Dollars ($) and Steem Dollars (SBD)

There have been some serious discussions regarding the $ sign in post payouts and its meaning. Some Steemians believe the $ sign meant USD, not SBD. However, the $ sign does not mean USD. The amount is the number of SBD that you will earn. I thought it necessary to include an example here. See the image below.

You can see that the the final payout is $169 (SBD) for the author. 50 % of it is 84.5 SBD. Now look at the final payout that I received in my wallet (distribution system explained in the post just a few lines later).

That's it. The fuss is clear. We will not confuse ourselves with the $ sign's meanings anymore. It is SBD. Period.

How The Share of Authors is Paid?

There are two important facts that we established till now about rewards.

Steemit rewards are paid in two currencies; SBD and SP.
75 % reward from the posts or comments goes to the author.

Keep these in mind.

How Author's Share Tranlates to SBD and SP?

When you write a post, you may have noticed a small option with the name of Rewards. After it is a box normally saying 'Default (50 %/50 %). Look at the image below.

When you click the box, some options come up. See the image below.

The default option is most common as it distributes the whole reward into SBD and SP. Let's start doing the maths now.

Suppose (just like in all those math books), one of your post shows $100 reward. Now, if you're using default option, the distribution will be as follows.
Reward gets divided into authors and curators in 75 % / 25 % ratio. You have $75 left. This $75 will be paid out as Steem Dollars and Steem Power. The process is explained later.

Now, if you're using default option, your $75 will be divided in to two equal parts; in SBD and SP. Let's study each of them.

SBD

Default option means you'll get 37.5 SBD (50 % of $75) in your wallet. So, your payout will be 37.5 SBD, other than the SP. Let's look at SP now.

SP

The other $37.5 will be converted into SP. SP isn't equal in value to SBD so you won't get 37.5 SBD straight away. As per the current price on BlockTrades, 1 SBD = 0.754 SP

Taking the value of SBD/SP into consideration, we can calculate the amount of SP in our example.

We know that the other 50 % (37.5 SBD) will be converted into SP.
Therefore, 37.5 SBD = 37.5 x 0.754 SP = 28.275 SP

Important: It is important to note that Steem Power = Steem.

Note: The price of SP (basically Steem) keeps fluctuating. If you use 'Power Up 100 %' option, all your Steem Dollars will be paid out as Steem Power as per the formula given above. Rewards will however be distributed between author and curators.

Additional Note: If you see that the value of SBD and SP is more than 75 % of final payout, it is because you must have received a portion of curation reward as well (yes, you can, see the curation heading below). Your share, however, will never be less than 75 % until policies are changed (which will only increase the share, I perceive).

How is Curation Reward Paid?

There needs to be a detailed post about how curation works but here are some points pertaining to this blog post.

Curation reward is paid in SP only.
If a post is upvoted immediately after posting, 100 % curation reward goes to the author; you.
If it is upvoted 30 minutes after publishing, 100 % curation reward goes to the curator.
Curation reward depends on the value of upvote and its timing.

Note: You can earn curation reward from others' posts as others can earn it from your posts. I haven't touched curation much due to it being a different subject. You can also earn a share of curation reward from your own posts as mentioned in bullet points.

Reminder: This post is not focused on curation rewards. The tilt is towards what authors earn from their posts. To know more about curation rewards, go to the post of @calamus056 in which he explained curation rewards in great detail.

Is One SBD Equal to One USD?

No. And let the math begin again. The value of one SBD remains close to one US Dollar but doesn't have to be equal or constant. To find the current value of one SBD in USD, go to CryptoCurrency Market Capitalizations website and search SBD there. Click SBD and you'll see its current value and other stats. See the image below.

As you can see, 1 SBD = $0.964 (and it can and will change). Now, when you go to your wallet and see the estimated account value in USD, you will understand how the amount was calculated and why it keeps fluctuating.

Interesting Service: To know the price of Steem, just type @steemprice (a bot service created by @blueorgy) in your comments or posts.

Interesting Information on Rewards

Once posted, payouts against a post are finalized within 7 days (actually 6 and a half days). After payout, that post earns nothing! So your outreach or marketing efforts must be focused accordingly. Promote the fresh content only.
To know about reward pool, open the post by @dan-atstarlite in a new window for studying. (How Big is The Rewards Pool? and How Much STEEM is Paid Out Everyday?)
To improve the chances of earning more rewards, @charles1 has some advice for you in this post.

How to Withdraw Steemit Earnings?

A big question that I have been asked regularly is about the withdrawal process. I took time to figure it out for all the Steemians and came out with a thorough tutorial. It was posted two days ago so if you find it useful, your generous upvote can add to my rewards.

Cashing Out Tutorial: How to Cash Out Steemit Rewards as Real Money? {Steemit Withdrawal Guide}

Mystery = Solved

I've put a lot of effort and brain into this post to solve the mystery of rewards for the community. If you have any question, do share it in the comments. It would be kind of you to support this post through your valuable upvote and resteem.