However, this will cause the SBD peg to be abandoned
Wrong. If we set enough high discount in downtrend markets to compensate loss in conversion, we can keep the peg.
You misunderstood the context of that comment. It wasn't about a downtrend. It was about what happens when 10% is reached. At (what would be) >10% debt ratio, the blockchain code will break the peg. Instead of using the price feed, SBD is converted into STEEM as a fixed ratio of market cap. In effect, the debt ratio is capped at 10%, but SBD is "dropped off the peg". Dan's original post
This is plausible. But will under 20% debt ratio trigger the bank-run?
As I said earlier, we simply have no way to know. The 2/5/10 limits were implemented by the developers because they viewed these levels as increasingly dangerous. I do not believe we should run a live test of the danger level at 10+.
Unless the bank run causes over 70% STEEM price decrease, the network is still fungible.
Maybe I'm misunderstanding but if you are suggesting that a bank run should be risked because the system would survive it, I would greatly differ. SBD certainly would not survive it, at least not the existing holders who would lose a large portion of their supposedly stable-value wealth. This would cause huge damage to the platform in terms of reputation and trust, even if STEEM did literally continue to have a value >0 and the blockchain continued to function. (On the plus side, I imagine Steem would get a fair bit of attention, as NuBits did during its liquidity crisis last year. It is sometimes said there is no such thing as bad publicity.)
You are totally misunderstanding and distorting my opinion. I did not propose to sacrifice the peg.
Sorry if that was not clear, I wasn't claiming otherwise. I was simply making a point that witnesses (as feed providers, and, while the white paper doesn't say so, interest rate setters) are charged with protecting the peg. That can and will incur costs to stakeholders. Our mission is serve stakeholders by protecting the long-term value to the platform supposedly offered by the stability of SBD even if that incurs costs (and at times those costs may be large). I'm certainly open to considering the point of view that the costs are not worth it and SBD should be dropped (or scaled back or modified in some manner).
I do not think you propose sacrificing the peg, but you do propose measures (or express reluctance to take measures due to cost) which I believe increase the risk that the peg will be broken. That is largely a judgement call since there are multiple considerations to balance and many of the actual factors being balanced such as actual risks and actual effects of actions taken (or considered) can not be fully known.
Actually your previous stance will break the peg to greater than $1 with more costs.
No! I never proposed to break the peg by accepting that it would be worth more than $1. I proposed to reduce the value of SBD to $1 by reducing the interest rate, perhaps by a lot (including possibly to the point of "stop all interest" as the white paper states), though we must make more gradual adjustments to assess. A lower interest rate along with an unchanged discount should result in a lower SBD price (ideally bringing it to $1) while retaining incentives to continue conversions. One can never be sure a particular measure will work, but that was what I proposed, not to deliberately keep SBD above $1.
Right, I also misunderstood (and forgot) what you proposed. The heated point was whether high discount+low interest to keep the peg is desirable or not. Anyway, I think we all agree that our intention is to protect the peg and to benefit the network and stakeholders. I will be more aware of potential dangers of high debt-to-ownership rates.