I think it's a great idea and it's worth trying. But I do worry about the haircut rule. Like in steem days when steem dropped from +$7, the haircut was in place for a very long time.
Especially with introducing higher interest rates on HBD, the demand will rise and the price of HBD might go up but with the new HIVE to HBD conversion, people might convert HIVE to HBD and try to take profit but what if we can't keep the price under 1.05 with all the possible HIVE to HBD conversions and reach the haircut limit? I think we can maybe take HBD from DAO and convert it to HIVE but that's very limited.
TL;DR; the haircut is easy to reach and if that happens we don't have many options.
Yes, but once the haircut rule is reached, there's an additional reason why HBD value should drop: it's no longer pegged to at least one dollar worth of Hive.
Then peg fails downward and what can we do next?
This proposal isn't meant to address downward failure of peg, but that hasn't been much of problem, since HBD holders tend to increase conversions to Hive as haircut is approached.
But if the concern is that this mechanism would get us to the haircut ratio too quickly, another option I've thought of is to stop allowing conversions at some point before the haircut ratio even. I'm just not sure that it's necessary. I don't think it would be advantageous for a Hive->HBD converter to approach the haircut limit, because it increases the chance that the HBD they are creating for themself would lose value due to the haircut taking effect.
If it gets to the haircut ratio too quickly on a regular basis I think that just tells us we should increase the haircut ratio (within reason). This means there is more demand for HBD, which can be transmitted into demand for HIVE, and we shouldn't be arbitrarily capping that at 10%. This is the value of yield farmers in capitalizing a token. If it turns out that the demand mix is such that people want to invest in Hive more for yield than for speculative appreciation, we should let them.
Yes, I agree.
stop conversion before haircut ratio is reached,
stop conversion if result of 3 day average results in a loss for the trader (protecting noobs). Maybe start activation at 1.07$ for the last 3 days average.
Yeah, it's not very likely but I had worries about it mainly because of seeing under $1 SBD for too long. Thanks for the explanation.
As a side note, one way to prevent downward failure of the peg would be to implement an additional mechanism for creating HBD via Hive collateral. But that's a much more complicated mechanism, and I think it's better to make the simple change now, and see if anything more complicated is really needed later.
I would like to have the option to create HBD from HIVE as a collateral :)