Introduction to Bid-Bots.

Source

Hi Steemians,
I spent a lot of time when I joined the platform learning how different people earned Steem on the platform. And I learned there many methods and one of the more famous is using the Bid Bots found on the website www.steembottracker.com

I have written this article to reveal all I know about using Bid Bots.
I will focus on:
How they work.
How you Bid.
How to calculate your return on your investment.
Steembottracker

How they work.
Voting Power
In order to understand how Bid Bots work we need to understand voting power. We all have ten votes per day at 100%, but making a vote reduces your voting power by about 2%. So while the power of your first vote is 100 percent the next votes are reduced by approximately 2% each vote, so in reality they are worth less then 100%. The math is like this: the first vote is 100%, the second is 98%, the third is 96%, etc until your at 80% and then it takes 24 hours to regenerate your voting power back to 100%. So ten votes, 2% drop in voting power with each vote and 24 hours to regenerate your voting power to a true 100%. So how do the bots give true 100% voting power votes each day? They wait 2.4 hours between each of their ten votes. So instead of voting ten times and waiting 24 hours, the bid-bots vote one time and wait the equivalent of 24 divided by ten or 2.4 hours. This waiting gives the bid-bot back their true 100% voting power every 2.4 hours. So that’s why the bid-bots wait 2.4 hours for the next vote.

How you Bid.
You read the information on www.steembottracker.com, which tells you the minimum and maximum amount you can bid on the bidbots you want to use that round. You take note of the post age limitations, most BidBots only bid on posts less then 3 days old. You check how much is already bidded to insure there’s still enough vote amount to profit in that round. You copy the link address of the post you want the BidBot to upvote. You need to know the exact spelling of the Bidbots name. You go into your wallet and transfer the minimum bid to the bidbot and past the web link or post address into the memo line, so the bidbots knows which of your posts to upvote. You must make sure you spell the bidbots name correctly, if you send it to the wrong account your Steem will be lost.

How to calculate your ROI
A bot has a maximal amount it can vote, a 100% vote based on its SP. The bots pay every “round” or 2.4 hours, according to how much is bid or sent to the bot that round. This reward is calculated using the value of one 100% vote in proportion to the total bids during that round. The greater the difference between the value of the 100% vote and the amount of the bids, the greater the reward per bidder. Conversely a large number of bids reduces the reward or return on investment, which is abbreviated ROI. Bids are accepted during the entire 2.4 hours. You can calculate your ROI based on the amount of bids at the time you bid, but you don’t really know the total amount of the bids and thus the ROI until the very end. Because many people wait until the last possible time to bid, the ROI often changes from the time of your bid until the end of the round. The amount the bidbots pays is added to your total post reward. Remember that this reward is further reduced by subtracting the 25% curation reward. So when you send your Steem to a bot the amount you earn has to be enough to provide enough profit to exceed the 25% your giving to curators. This’s is best explained by the examples below.

Biding Bot Bidding Process Examples:

Example#1

My bid-bot has a 100% vote equal to 100$
There are 5 bids during the round which total 50$
Each bidder gets paid the total value of the 100% vote or 100$ divided by the amount of the bids or 100$/50$ or 2$ per dollar invested. In this example the ROI is 2$-1$=1$ Profit per 1$ invested and 1/1 equals 100% Profit or 100% ROI. So the person who invested 2$ makes 4$ and the person who invested 20$ makes 40$. Every investor made money that round. But remember you don’t get 100% only 75%. Plus remember if you invest one dollar the whole dollar and the entire profit from the bot go to the total reward. So if you invest $1.00 and win 100% or $1.00, you don’t pay 25% of your profit, you pay 25% of the capitolinvested and 25% of the profit. So you have one dollar, your 100% ROI equals one dollar, so you total post reward increases by 1+1 or 2 dollars, but curation takes 25% or 50 cents and you get 75% or $1.50 for a 50 cents profit.

Example#2

My bid-bot has a 100% vote equal to 100$
There are 9 bids and the total of all bids are 90$
Each bidder gets 100$/90$ or 1.1$ per dollar invested.
In this example the ROI is 1.1$ -1$= 0.1 dollar, or 0.1/1= 10% profit or 10% ROI. The person who invested 1$ gets 1.10$ and the person who invest 10$ gets 11$. This sum $1.10 is added to total post reward. But you get 75% or 75 cents of your dollar invested and 7.5 cents of the ten cent bidbots reward. So 75 plus 7,5 equals 82.5 cents is what you get back on the 1.00 you invested. So you lost money that round even though your bid was profitable.

Example #3

My bid-bot has a 100% vote equal to 100$
. The total of all bids in the round is 100$.
Each bidder gets 100$/100$ or 1$ per dollar invested.
In this example the ROI is 1$-1$= 0 and 0/1 equals zero % profit or zero ROI. The dollar profit on $1.00 dollar spent is not the end. You got your dollar you spent on the bidbot added to your total post reward. But you only get 75% author reward on the post reward and 25% goes to curation. So you don’t get your dollar back, you get 75 cents. So you lost 25% of your investment.
Every investor in the round has lost 25% of their investment.

Example #4
My bid-bot has a 100% vote equal to 100$
There are 11 bids and the total of all bids is 110$. In this example the total bids are Greater then the value of the 100% vote. Each bidder gets 100$/110$ or 0.90$ per dollar invested. In this example the ROI is 0.9$ -1$= -0.1 and -0.1/1.0 equals -10% or a negative 10% ROI.
But it doesn’t end here. The 90 cents is added to your totalpost reward. But the post reward is split 75% to 25% between author and curator. So your upvote from the bidbots is split 75:25 also. So you lost 10% of your investment on the bid and now you lose an additional 25%. So you lost 35% of your investment.
Every investor lost money that round.

Exceptions, Rules and Quirks.

Some bid-bots pay out the entire vote, so 100% ROI is possible. But Some bid-bots limit ROI to 10% or 15%, so you can never make greater the 10%-15% regardless of the number & amount of bids. That is bad for you because you still have to pay 25% to curation. Some bid-bots limit your loss to minus 10% or zero loss. You need to know the rules for each bot. As you can see, because the bidbots reward goes into the totalpost reward and 25% is paid to curation, you lose 25% of every Steem you invest due to the 75/25 split. If you make an ROI of 25% you are only breaking even, no profit.

Steembottracker
The application steembottracker calculates the ROI for you at any given time during each round. If investors check the ROI they can be warned there are to many investors and a bid during that round will probably not be profitable or even cause a loss, so its good to check this page before sending your money. Unfortunately, your success or ROI with bid-bots depends on factors you can’t control and a bit of luck.

Are Bid Bots profitable for the users?
The short answer is it depends. To explain that answer let’s look at the math. There are certain facts we must remember and then compare the numbers.
Fact #1: You as the author get 75% of the total rewards on any post.
Fact #2: 25% of the rewards on any post go to curation. These two facts lead to Fact#3.
Fact#3: If you invest 1$ in a Bid Bot, you only get 75% of the money you invested because it all goes into the total post reward and is then distributed according to a 75/25 split.
Fact#4: Since 25% of your total post reward goes to curation you have to get a 25% profit or ROI on your money invested in the Bid Bot just to break even.

Those are the words, let’s look at the numbers.
Example:
You invest 80 (eighty) SBD in a Bid Bot.
You get a 25% ROI or Profit from the Bid Bot, 25% of 80=20 SBD, and 80 + 20 = 100 SBD
Now your probably dancing because you got a 25% profit!

However we are not done here.

The Bid Bot pays you 20 SBD in rewards.

The amount you invested was 80, you earn 20 more and 20+80 equals 100.
The 100 is the totalpost reward.
The total post reward is divided between authors and curators 75/25.
So 25% or 25 SBD goes to curation.

75% or 75 SBD gets paid to you.

So now you look at this investment again.

You invested 80 SBD
You got 20 SBD from the Bid Bot.

25% or 25 SBD went to curation.
75% or 75 SBD went to the author, you.

Your net return from your 80 SBD was 75 SBD

You lost 5 SBD or 5/80= 0.0625 or 6.25% loss!
You probably lost your urge to dance at this point and your wondering why people use Bid Bots.
Well you can make a profit if you make a larger ROI.
It’s just difficult and unpredictable.

Your best bet is to wait until the last 5 minutes and bid a fraction of the remaining payment.
So if their are ten Steem left I would Bid no more then 2 to 2.5 Steem.

Reasons People Use BidBots
Why do people use Bid Bots if the net reward just from the Bot is frequently less then the amount invested? I don’t know, but I can tell my opinions.

Visibility
In this context visibility means people find and read your post, the first step in it getting upvoted. Posts with large rewards go to the top of the list on the Trending Page, which is the first place many people go to find posts to read. So using Bots can get you near the top. If your near the top more people will read your post. Many believe that this leads to more upvotes and more follows. Also the visibility of high reward posts attracts people looking for curation rewards. Many believe that these increased votes make posts which use Bid Bots profitable.

Advertising.
The increased post reward improves a posts visibility.Sometimes people use Bid Bots to Advertise or diseminate the point of view or item in the post. The large rewards from the Bots push these posts up on the Trending list to where people will read them. In any list of articles the ones at the top get read and the ones at the bottom get ignored.

Pride

The other reason I think people use Bid Bots is pride. They think the post is full of valuable information or that the artwork is of good quality and deserves a large reward amount. So they use Bots to improve the perceived value of their posts. It’s a well established business concept that appealing to people’s vanity is profitable. The multi billion dollar cosmetic industry which appeals to the vanity of people wanting to look young is a good example. I am sure you can think of others.

Perception of Profit

I also think that Bid Bots give the perception of large profits. Unfortunately the rewards system for Steemit is complicated and I have just scratched the surface with my examples above. It is easy to look at the large rewards and be happy with the 10% or 15% ROI the Bid Bots generate. Unfortunately it’s only when you truly understand the reward systems math that you find out that what initially appeared to be a 20% gain is in reality a 6% loss.

Conclusion:

Bid Bots can be profitable if you can manage to get a high enough ROI > 25%.
But ROI is truly unpredictable due to the bidding process.
However there are other things then the initial ROI which can make posts profitable due increasing visibility and increasing potentially the number of upvotes your post receives.
Additionally there are other nonprofit motives which motivate people to use the bots.
The only guarantee is that the owner of the bot will make a very good profit off the Steem you pay and the 25% curation rewards.

What do you think? Comment below.