If the market price of HBD is over $1.00 USD, then anyone converting instead of selling would be loosing money.
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If the market price of HBD is over $1.00 USD, then anyone converting instead of selling would be loosing money.
Yes, but when price is below $1, it leads to high inflation. As we have seen in the past if the price of Hive also goes low, inflation can go way above the rate described by the scheduled rate.
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Inflation is unaffected by the price of HBD other than the fact that people convert when SBD is <= $1.00 and they don't when it is above.
I don't know why you are being so flippant, that "other than" is a major source of inflation in Hive and Steem historically. When the price of HBD is below $1 AND the price of Hive is below the average rate at which the HBD was created - the virtual supply expands at the same time that conversions happen. This has been the cause of Steem and Hive inflation being in the range of 15-20% per year instead of as it is supposed to be below 9%.
Inflation has been a major problem in Steem and Hive. Right now times are good and inflation is low/reversed, but after created all this extra HBD to create selling pressure, witnesses and the ecosystem should be prepared to mitigate the inflation that will arise in a bear market as we have seen repeatedly in Steem/Hive history.
I am not trying to be flippant. I just don't 100% agree with your viewpoint.
Yes, if the price of HBD stays above $1.00 USD forever there will never be any (smart) HBD->HIVE conversions. But that is not now the system was designed to function. I don't agree if your premise is that we should try to keep HBD above $1.00 for as long as possible to prevent any conversions.
It will likely go below $1.00 at some point on it's own and then we will be in the same situation. More likely in the scenario when it happens on it's own though, it will be during a bear market and then the problem you are worried about will be worse than if we "cause" it to happen while a bull market is taking place.
We are also not trying to force HBD below $1.00. Just bring it down to where it is at $1.00, which is it's intended purpose.
Also, if you look at the actual data for what has been happening under this effort, HIVE has actually been being deflated as a result of the mechanics of the hbdstabilizer. We are actually trying to help fix the problem that you are concerned about, we are just going about it in a different way.
When the price goes below $1, the stabilizer will not be buying Hive, and Hive will be inflationary again (as normal). From there, there are two possibilities.
1). As it goes sufficiently below $1 enough to justify the risk of converting, private traders will start converting HBD for profit. All the profit goes to those private investors, and all the virtual Hive behind that HBD goes to the market as inflation.
2). As it goes sufficiently below $1, private traders and also the DHF start converting HBD for profit. In this case, some proportion of the profit still go to private traders, but a not insubstantial (and potentially the lion's share) of the profit goes to the DHF. A lot of the virtual Hive is still released as inflation, but a substantial portion is captured by the DHF, mitigating the inflation.
What is the reason we should choose option 1 over option 2?
Yeah, that makes sense. I would prefer 2 as well. Someone would need to setup a proposal to fund it though, as well as do the work to handle the conversions. IMO, it is outside the scope of the current proposals that are funding @hbdstabilizer. Stakeholders voted on the hbdstabilizer proposals assuming it would work a certain way. To change how the funds are used after the proposals have been approved does not seem like a good idea.
I don't run @hbdstabilizer. My only involvement with it is to create these @hbd.funder posts which send additional funds to the account. @smooth is the one who actually runs the stabilizer. You may want to reach out to him and see what his thoughts are on handling the conversions to add support on the other side of the peg.
No it isn't. The original proposal mentioned a LOW bound and doing conversions. I stated later that it wasn't being implemented right away but might be added later.
Already the stabilizer does use HIVE (mostly from power down of beneficiary HP) to buy HBD if HBD is <$1, and then sends that HBD back to the DHF instead of sending the HIVE. This helps take some HBD off the market and generates a profit for HBD. But it doesn't do conversions for now.
A reason to prefer (1 ) over (2) is that (2) puts DHF funds at risk, rather than people putting their own funds at risk.
Conversion is not a guaranteed profit. There is a judgement call to be made how much of a discount is needed to be worthwhile, and beyond that, the risk of theft exists too, which increases when the funds are locked up for 3.5 days instead of being returned promptly. None of these issues apply (at a systemic level) when people risk their own money.
I'm not saying we shouldn't do (2). It is included in the stabilizer proposals and can be implemented at any time, and I may well implement it. My actual hope (though certainly not a guarantee) is that we won't need it much because we can attract enough demand for HBD with an attractive but reasonable yield that it rarely (not saying never) goes below $1.