I've been thinking about SBD lately and how we should deal with it. Clearly the intention in the white paper of a stable currency that reflects the USD price is not working.
As a recap directly from the white paper:
"....Steem Dollars were designed as an attempt to bring stability to the world of cryptocurrency and to the individuals who use the Steem network....."
Assumption
So I am going forward with the assumption that SBD is to be a
- Stable currency, pegged to some other currency (in this case the USD)
- The purpose of such is to protect users from price fluctuations (i.e. money earned should not have to be sold to protect its value)
- there is a bigger vision for steem than just blogging and SBD are to be useful as cryptocurrency to entire industry and not just steem content creators
A design flaw that makes everyone money
There has been quite some debate about SBD on Steem in the past and it will likely be hard to change anything at this moment.
The reason is that any price of SBD above the $1 brings value into the ecosystem, without any direct cost (other than the loss of SBD utility). Everyone that gets any sort of rewards in SBD has been overpaid dramatically. Specifically content creators have had their rewards multiply.
This money basically is coming from the market. As people on the market overpay for SBD people who earn and sell SBD benefit. So in a way this is free money flowing into the Steem ecosystem paid for by traders/investors. That makes steem grow at no cost. No wonder everyone loves this idea.
High SBD is good short term and bad long term
Because the value that is flowing into steem from the high price of SBD is really good for content creators this is really good for growth of new users and keeping existing users active. it also helps with wealth distribution. So this is simply fantastic.
In the longterm however the objective of SBDs is stability and without it they have no utility. Even worse the advantages that they are supposed to bring are not available to users. So while the there seems to be no cost for not having working SBDs there clearly is one. It is just not as noticeable in the short term, while the advantages of high sbd price is clearly felt by everyone. Immediately.
But imagine how great it would be if you could trust that SBD's are stable and one could use it to park value. Essentially the entire value of TUSD could be captured by SBD and flow into steem. If that were the case the steem blockchain would be more than twice as valuable.
Fix it in the long term and in a way that increases the price of steem
So I would suggest to let SBD go on as it has right now until its value comes down to its peg or at least close. Then however I would suggest to fix the design flaw that it has and make sure a volatile SBD price cannot happen again.
Allow people to create SBD
One of the great things of Steem and SBD is that the debt ratio can never be more than 10%. As such there is no problem creating unlimited amount of SBD. Therefore we can come up with a solution like @timcliff suggested
- Allow users to buy SBD by converting STEEM into SBD
- The conversion from STEEM to SBD should have a fee that is set by the witnesses (it would be their job to make this so high that the system cannot be exploited)
- This fee can either be burned or used for marketing or development purposes
- Steem used to buy SBD should also be burned
How this would increase the value of steem
If the utility of SBD would create lots of demand for it, the price of steem would increase. At first price of SBD would go up, this would then trigger arbitrage opportunities, which would increase demand for steem, which then would increase the price of steem.
Imagine the entire crypto market using steem as stable currency instead of USD, this would catapult the price of steem. I think the value of a stable currency is still vastly understated by most people in the space. In the end no cryptocurrency is money or currency as the most important attribute of such (that most often is omitted) is stable value. As such steem could be the only real currency in the space, if only we would get it right.
I think it is better to fix a faulty design than to forget a good vision. SBD are essential for making steem more than just a simple blogging site but a whole financial system that can change the world. In order for that we need working SBD.
Bounty
I am sure many of you will have interesting ideas about this so I look forward to your thoughts. In order to encourage you to share them I have put a 20 Steem bounty on this post, which will be shared among the top level comments, depending on how much upvotes you will get from me (80%) and from the community (20%).
This is from the bounty project we are working on with out witness steem-bounty, which we will announce in the short future.
Please vote for us
For now, thank you very much for your attention and we hope you will vote for us!
We announced our witness here: https://steemit.com/witness-category/@steem-bounty/announcing-our-new-steem-bounty-witness
If you like this content please consider voting for our witness. In order to vote for us you can go to:
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Thank you for your attention
I can see how a stable SBD would attract resources that just want to be parked for a period of time without the extreme volatility. The crypto market is in desperate need of more stable options for sure. But, is stability the unique mechanism the STEEM ecosystem is trying to offer? For me, I don’t think so. Cash flow is STEEMs unique mechanism. Selling dreams of cash flow is much more attractive in my opinion then stability. I didn’t get into crypto for stable prices. I got into it for big gains and cash flow. The way the SBD is currently “broken” creates the most amazing opportunity for income growth I’ve ever seen. To change this and opt for stability would be a huge mistake from where I’m sitting today. Over time my mind may change, but for now I want the highest levels of cash flow possible without much weight being put on stability. Thanks for the post and getting this important conversation started! Resteem
Correct. We're still at our infancy stage for me and we need more and more sustainable income. If steem attracts more people joining the platform (including big whales/players), then that's the time a fork or change needs to happen.
So I'm admittedly new. But why would new people on the platform mean needing some sort of change? Maybe a better question of why specifically a fork or other change in case of growth?
Well put Brett! I was going to put in my 2 cents about this but you have taken the words right out of my mouth so all I will say is... Ditto!
This comment right here. The two trails of thought I'm seeing sum up cryptocurrencies perfectly atm. On the one hand we have those seeking a useful tool (a stable currency), and on the other we get those looking for the next big thing in investment. This is why the chaos we have coming from so many different currencies is actually a really good thing - just like with many other things, there is not one method to suit everybody, so I'm just glad that we do have so many (in time the ones with true value will stick around). In the context of Steem, however, it would make sense for SBD to have a stable price - this would boost the price of Steem greatly over time (and, I imagine, quite reliably because, as it's been said, stability is a genuinely useful commodity that we need in the crypto market), and in this way benefit both investors (those looking into Steem could simply invest and know safely that their investment will grow as more people join this genuinely great website) as well as those looking for that stability to make sure that the money they spent a week ago doesn't suddenly become worth all of what they own now or anything like that. Just my thoughts as a crypto newbie :3
I'm new to steemit, and steem in general, like some of the commenters below. I read this post and replies with interest, and I appreciate the reasoned discussion from both points of view. I don't yet have a good enough understanding the system to have an opinion, but hope to be able to offer useful input soon.
Thanks for your work in developing this community!
Thx for help :)
I totally agree with your opinion👏👍
Nicely said Brett I'm agreeing with you
Forcing the peg back is anti-free-market and pro-regulation. It's everything crypto is against.
Witnesses arguing for a repeg should be unvoted. They are literally attacking your wallet while printing 100+ Steem a day.
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Please help me I’m new
It takes time . You have to keep reading and studying.
Same here, follow me, then, will follow you :)
Hi, bosslui. I'm new too. I would like to introduce Korean culture, K-Pop, and food etc. Please follow me then I will follow you :)
How about dinamically controlling SBD inflation based on an SBD price algorithm?
LMAO
That is EXACTLY what they are doing!!! I've been watching...
You don't seem to understand how SBD works.
That is normal inflation. SBD in circulation is increasing with every post paid out.
Built in adjustment. Even Better! Which was totally LEFT OUT and overlooked by the OP.
;)
I didn't see this comment before I posted my response below but this run along the same lines as my solution proposed below. Basically all thats needed is to create an algorithm that can influence the price of SBD according to the monetary price of SBD at any future time point (x). There any many ways in which this algorithm can be written. @lightproject just proposed one and I proposed another in my comment below.
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Correct me if I'm wrong but SBD merely guarantees you a dollar's worth of STEEM if you choose to redeem it with the blockchain correct?
So it's merely a price floor. By holding SBD you are guaranteed the purchasing power of a USD. Nothing more!
If traders are driving the price of the SBD up, that's merely a bonus. The instrument doesn't promise you that at all.
Would I be correct in saying SBD has a price floor at 1USD but no ceiling?
Yes. What I am saying is that this is a design flaw relative to its purpose which is to represent USD
Right. If I had to pic a flaw.. that's the one I would pic! haha.
For Muse, this design flaw is good. Since we need to guarantee that artists and rights holders get the purchasing power to pay their bills to allow them to continue focusing on their music career.
I'm new to the environment and I think this question right here is one that is helpful for newcomers to understand. I admitily need to look into it more but this entire post sounds intriguing.
I agree with you, we cannot predict the Market globe that control by trading market. It depend on how many trader use sbd as payment tool. When the moment sbd many use it will up, otherwise when this sbd rarrely use, it will fown. It is system.
Yes, at least to an extent. That doesn't mean it can't trade below $1 for long periods of time. We've seen that happen multiple times.
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I don't disagree with your proposal for addressing it, but I would add that even in the short term, it seems to me that the only stakeholders who really benefit from high SBD prices are authors. I think other stakeholders are harmed in both the short and long term. I wrote about it from a stakeholder perspective a few months ago: About those high SBD prices.
Two questions that no one seems to be asking:
i. Does restoring the SBD peg reduce the whale self-voting/voting-clique problem?
ii. For a healthy platform, what are the desired ratios of voters/authors, investors/authors, and even readers/authors?
Authors are the ones with the megaphones, so these discussions usually assume that every Steem user is an author, but is that really the way the platform works best? It seems to me that the platform would be healthier with many more voters, and investors than authors (who have the smallest incentive to hold steem). The high SBD price does nothing to encourage that dynamic.
Correct me if I'm wrong but is this platform's Intention to be used as simply another form of open and free social media? If so then it is in the hands and interests of all users to Inherently become authors by Posting content they find meaningful and being rewarded for doing so. Given the underlying intention of creating a community of meaningful content via rewards.
Refocusing on the intensions of the coin produced and witnessed on this block chain network, If it has been define as a stability seeking method should be not strive to maintain that original purpose?
This is in the whitepaper (page 27):
So yes, anyone can earn rewards by posting content, but voters are needed too, and you need many votes per post (on average) to achieve effective curation. High SBD prices tip the balance in the opposite direction, reducing the relative value of voting, since curation rewards are paid in SP.
And yes, if I understand you, I agree with your second point. SBDs were designed with one purpose in mind, to have a stable value. If they're not doing that, then they are failing.
The whitepaper also has 52+ week power downs and exponential whale voting.
The repeated appeals to it are fallacious appeals to authority.
Actually, it doesn't. The copy I pulled that from was rewritten last year to match the current state of the block chain. The link is here - https://steem.io/SteemWhitePaper.pdf
And it says:
And
And even if it had been obsolete, that wouldn't change the thrust of my comment which is that high SBD prices incentivize authors at the expense of voters and other stakeholders in a way that discourages quality content discovery.
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Personally, I believe whatever is best for Steem then that should be the option moving forward, I dont think we will see it drop to $1 in the short term.
Although looking at BTC it could happen sooner than expected if the price continues to fall.
Can I ask - Do you think new people to the platform actually understand that the payout that is shown in a $ value is wrong?
I had no idea when I first joined, and many people I speak to don't either.
It was only after watching many videos and looking at articles that I started to understand this.
Conclusion - Long live Steem and Steemit :-)
I had a suspicion the displayed $ value couldn't be accurate. Do you have any references or could you go into as to how that is calculated versus what the returns really are?
@prlndra I use this online tool - http://steem.supply/rewards
Just make sure you change the Steem price and also SBD to the actual price and it will show you your earining per post.
Very good
What is the best place to track the steem/SBD prices? Within the steem platform itself or an external exchange?
I use Coin Market Cap - https://coinmarketcap.com/
On the righthand side is a search box - Type Steem or SBD in there and it will give you the price.
Basically, 1/2 is paid in SBD. The other half is paid in enough Steem to equal the USD value. So, if you see that your post pays $2.00 in rewards, you get ONE SBD. and one dollar's worth of Steem.
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That is AWESOME :-)
Thank you for letting me know @steem-bounty.
Can you let me know where to find out more information about the bounty and how this works as I would like to learn more please.
Thanks
We are still testing and will announce more soon.
If SBD can not be pegged to 1 $, there will be no reason for it to stay. Why don't we just remove it from the whole system? It confuses newbie.
Lol... Removing it means no stable value for the volatile Steem. That's a good way to think about it but it's impossible. Fixing what is broken is better than throwing away.
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I favor a SBD 100% pegged to the dollar, it is a no brainer. We already have a volatile crypto that is the Steem and all the others around. We miss a stable coin in the cryptosphere. Monstrous volatility is useful only for speculation purposes, but not for regular people.
You got a 25.03% upvote from @mitsuko courtesy of @discernente!
Except, it's actually not a no-brainer, because the natural mechanism to fix this situation is already working.
You armchair Keynesians need to sit the fuck back down.
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There is no reason to intervene now as we don't have any bussineses or projects running that would benefit from a stable 1$ SBD. Leave it as is and it will just serve as a jet engine propelling us forward.
It will go back to 1 on it's own when steem goes to 100 after SMT and HF 20 are successfully implemented. It will balance itself back to 1 as a ton of new SBD will be created every day.
Yeah but when?you think it will go down to 1$ just like that. People don’t understand that SBD is only mined in this platform. And only by authors. steemit is actuve 2 years now and we have only mined 10mill sbd. The number is really small. AAnd I don’t think that anyone can interfere in the protocol just like that. If it was so easy we could also change the circulation supply of Steem which-i don’t know how many of you have noticed- but out of the 269mil we are standing at around 253 as we speak. And judging by how quickly it escalates i assume within 4-5 months there wont be any more steem for mining.
At that point things will take their way. Steem will roll while sbd will return to the price it was originally designed
Steem does not have a hardcap, from page 26 of the White Paper:
"It will go back to 1 on it's own"
It's already doing that, even while other top-upvoted comments in this thread "lie" and say that it's price isn't normalizing.
Literally, many of the top comments in this thread are boldly lying about SBD not reverting to normal from normal market activity.
Derp? Which way does the line go? I think it goes from $12 to $2 (83% loss) in under 3 months.
Bueller?
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My opinion is SBD should definitely be pegged 1USD because there’s no such thing as a dollar constantly fluctuating and being volatile 24/7 it’s unpredictable how much your SBDs would be worth, won’t make it as a Steem currency unless it’s stable like USD fiat.
That or just change the whitepaper so people don’t get confused and spread lies to the community that SBD is pegged and promised to be a stable crypto when its not!
Great post!
The whitepaper is obsolete. Stop obsessing over it.
What is a "steem currency"?
The white paper shouldn’t be obsolete due to it explaining in detail what the company is about. Which for people that are serious in investing/using the platform or crypto like to know.
And “Steem cryptocurrency” same thing.
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We should just use the BitUSD model, and allow people to issue steem-backed dollars. BitUSD has tracked the peg extremely well over the years.
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No!
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If it ain't broke, don't fix it
nice
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The only logical solution to this is to leave SBD as an asset that can beat the value of a QE fiat dollar, and create a new asset pegged to the price of gold. Steem Gold (SG). That way we keep SBD as it is working, and get to have our pegged asset.
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SBD should not exist if it does not maintain a stable unit of currency pegged to some asset that does not fluctuate as much as Crypto. When SBD was wroth $1 it added value to Steem and Crypto community by providing a safe harbor during uncertain times. In its current form it just creates unnecessary complication for all participates. It is crazy that and asset which is supposed to be worth $1 could ever go to $12+.
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Yes, the higher SBD price is definitely great for content creators and it's making this blockchain much more popular, I'm sure of it. But I see that it's not doing us any good in the long run. I think it's best if we wait until SBD comes down to 1$ on it's on, and when this happenes, it's time to fix it and make sure it never goes up like that again.
Sure, it's nice to have those big rewards. But it's always better to go with the long-term plan that will make this blockchain the best one there is!
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How would a bunch of money being parked into the Steem Backed Dollar, as opposed to the Tether or United States Dollar raise the price of Steem... did I miss that part or something?
No, nobody here has provided any logic to that effect. They just assume people are going to flock to some no-name, 200-ranked crypto because some weirdos promise to peg it.
Hmm, that's what I figured, and thank you sir.
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Nice!
People don't seem to understand that you can't have it both ways. You can't hold a fixed 10% limit of SBD/Steem and then hold the peg. You could hold the peg temporarily if you had unlimited ability to print SBD, but as a debt instrument if you printed too much then after some downward movement if everyone called them at once for conversion to get their 1 USD worth of Steem , it would collapse the value of Steem. A hard pegged SBD is a stability problem for the instrument which has to underwrite the stability. This is why it was designed as a soft peg in the first place with a limit on supply as a % of the market cap of Steem. SBD goes down interest rates can bring it back up , in contrast if the SBD goes up it will increase author rewards value and increase conversion of user SBD into Steem, which in turn as the steem price goes up further increases the supply of SBD in payouts up which puts more downward pressure on SBD.
Fixed pegs just don't work; unless you match them directly with the underling asset (ie this would involve banking one USD in an fiat based account for every SBD , just look at the conjecture about Tether and if they are actually doing this). You can't just print money on a real world pair without having something backing it (just look at the relative value of a USD denominated bank account in Zimbabwe held with the new USD pegged Zimbabwe dollars) . Financial systems have to be stress tested for extreme fluctuation so the whole system does not collapse. The recent price spike and subsequent increase in supply of SBD and lowering of the price of SBD is a system that is working, not broken. This is how it was designed to work. Stability in currencies comes from having large stable GDP being transacted in that currency. Its the incredible volume of regular nominal monetary transactions and flows which creates the stability. You can't create a stable currency then invite commerce. You have to bring commerce to the currency, then when the nominal transaction based flows dwarf the speculative flows you will end up with a stable currency. So unfortunately its a little chicken and egg, and simply takes a long time to develop those transaction based monetary flows.
Finally! Someone who gets it.
Nice to have someone understand what I am trying to say!
Thank god someone with economics knowledge.
I cannot believe how many idiots are yelling about how the SBD "peg" is broken and not working, and it must be forcibly re-fixed.
Yeah, because it's not rapidly doing EXACTLY WHAT IT'S DESIGNED TO OR ANYTHING:
Fucking liars, all of them.
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You are suggesting making SBD "stable" and pegged to the U.S. Dollar; however, what's to guarantee it won't go LOWER than the U.S. Dollar in value. Is there going to be an algorithm that secures this? I think if you tried to restrain SBD that would be a bad idea, that would be like restraining Bitcoin to never raise above $1000 so that people would think it was stable (would Bitcoin have grown as big as it has if this was the case?). I think we should let the market run its course and decide what SBD are worth in the short term and the long term. I thought cryptocurrency was about decentralization. The rules of the Steemit platform have been made and have worked wonderfully, we should be coming up with ways to market the app to go mainstream, and concentrate less on restraining it. This reminds me of the Federal Reserve creating monetary policy and artificially messing with interest rates. I think if we start artificially messing with the Steemit, then that will actually cause it to lose "it's stability" and faith as you suggest it. I believe letting the market decide what SBD's value should be in the short term and long term is what's best. Just my 2 satoshis.
@jfltmisc You bring up a very point. How can this cryptocurrency reflect that of an actual already centralized physical currency and also hope to have a future with in the digital currencies space? What I mean by this Is if theo original purpose and intention of bitcoin is carried out and the collapse of physical money takes place then where would the value in SBD Lie moving forward?
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You might remember our post announcing a huge 20 steem bounty for what seemed like a little, easy to fix bug. Many people suggested to use multi threading to deal with discord. py API's problems, and while I was hard at work trying to make it happen, someone submitted a pull request with a much easier, better fix, which also made the bot much faster.
It was no other than @mys with his contribution that handled the issue by... refusing to use python-steem API. Turns out, all of the big websites ditch JS, Python and PHP APIs in favor of api.steemit.com. He made use of that, and with a simple json request use made the bot not only magnitudes faster, but fixed the infamous freeze that was stopping SockoBot from ever being deployed to big Discord servers. This solution (along with a new look for our response message you can see above!) has now been merged into the project and is the official solution to the issue.
Thank You for remembering me!
That was about 3 months age when all the python-based bots just stopped working.. Sometimes it is better to search for an alternative than trying to workaround bugged part :/
What the hell does this have to do with anything, you fake-accounting ID thief?
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thank you sir
I don't think there is anything wrong with SBD. Given the ratios rewarded in the 50/50 split, this is a self correcting problem. It may take a while but it will correct itself. In any investment when the number of investors are relatively limited (like with steem/sbd) there will be volatility. It's unavoidable but will also be self correcting if and when the community is large enough. There is already a market for buying and selling sbd built right into steemit.
It isn't clear to my why SBD rose so much in value but I suspect it happened in large part due to the fact that it was generally encouraged that people power up 100% instead of taking the 50/50 split. Maybe then the "fix" is simply to not even allow this as an option? If users want steem for their SBD then they have to use the currency market to convert it. More SBD means a lower price for each SBD after all...
Yes, self correcting is right:
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Having the SBD price high is a huge benefit for authors, a huge opportunity for visibility on exchanges, and consistently puts buying pressure on Steem which is very good for all of us. We might be unwise to try and force the price down because "we think it should be lower" while most of our community is very excited to be where it is. After reading this post I am going to ask both witnesses biasing feeds to remove the bias.
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I strongly agree with you and thanks for informing I already think about this that where this money is come from so you explain it well I appereciate you you confrm about my this question and i agree with you that the real way to increase the value of STEEM you explained it well
I also appereciate and agree with you that Fix it in the long term and in a way that increases the price of steem
So I would suggest to let SBD go on as it has right now until its value comes down to its peg or at least close. Then however I would suggest to fix the design flaw that it has and make sure a volatile SBD price cannot happen again.
Have you ever considered the use of the period?
It is a very friendly piece of punctuation.
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Brilliant! Amazing people with smart ideas continue to emerge from this community and I am loving it :)
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I agree with you, how SBD are actually created. Let's think this through:
SBD price goes down further
People start to use "convert" instead of selling into the market
A week later, they get STEEM
Steem are sold
The market cap of Steem goes down
Less SBD are created from posts (because the market cap went down)
Less sell pressure due to SBD sell-off and convertion due to less amounts available
Meanwhile people start to understand the implications of SBD (free instant micropayments, interest)
Buy Pressure for SBD starts to build up again
Meanwhile the network grows and demand for SP grows aswell
People buy into Steem to get SteemPower to obtain more VotingPower and higher rewards
Marketcap rises
Rinse and repeat until sufficient market traction slows down the process
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To truly create a stable currency, SBD included, it needs to be backed by something or multiple somethings that are stable...more stable than USD. If SBDs were backed by a portfolio of gold, silver, Carbon, Bronze, oil and other natural resources across the globe it would be stable and could be used as global store of value. The systems holding it would also need to be secure (NO HACKING!), easy to use and accessible by all.
Ding ding ding! An asset will not have stable value just because you want it to be stable.
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short term good for everyone who does Power Up!
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I hope that you will make Steemit better than Facebook!
I agree with your idea. The uncertainty is unhealthy for Steem community. What's the point of having SBD if it's not pegged to USD? Why don't we just use STEEM? It's pointless to have 2 volatile currencies on Steem community. SBD and STEEM should serve different purposes.
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Great proposal. I do believe we need some change on SBD, if it's not working as supposed to. Although it seems the problem is due to the irrational, ignorant market. How you would control that I don't know, but whish you the best. Cheers!
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Follow you and also vote for you as a witness
Thank you!
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Very good post
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So price of sbd is down right now but I think that this is good for investors on steemit as they invest less money to get more benefits from steemit
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I just think back to the the 12 dollar SBD days of December and I miss them. Pegging it might be good for stores using them but I am not sold on the idea being great for everyone.
Yeah, for bloggers, more money is better than less money. If Steem INC. is increasing the supply of SBD to drive the price down, I sort of feel pumped and dumped. I mean, I understand the promise of a higher Steem value in the future, but those are just predictions.
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I'm not sure why it needs to be pegged to $1.
Currencies like tether which have a visible peg, need to be backed by dollars. While SBD is just a token that floats.
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Consideration is key. I bought SBD when it was at $10USD/sbd.... Today it is below $3. My idea of SBD (without looking at the white paper) is that it is the currency used to give out reward in steemit. In trying to change the Ecosystem and driving SBD to 1USD it makes SBD week. In my little understanding of Forex, strong currency shows a stronger Nation. I think SBD should be encouraged to be Higher than the USD. I may just have to change my SBD to Steem.
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To my view, stability in crypto market will attract less investors and bring down the market. The competitive grounds we are looking at is the banks and master card users. They provide stable prices hence have great competition with crypto because of big gains. Perfect Money, Skrill have less popularity in the market but very old as compare to blockchain technology.
Again charging fees on Steem to SBD conversion will not make the market attractive.
What will make the market attractive and boost Steem and SBD is to make it more localized and easy exchange with our Local Banks, Mobile Money, and other Transfers. Most people love the idea but it seems more difficult to fund your account as a start up. One have to Fund alternative currency first before transferring it to Buy STEEM/SBD which increase cost of transactions.
Also, Education and marketing is a great key. Education on how to buy STEEM/SBD in a form of video tutorials will increase the market for Steem/ Blockchain. @jeffrybanfield is doing well in the marketing but it should be more.
Steem/SBD market price regulation should be an alternative. This will not makes it fall too bad and raise to high. Moderate price movement will be more preferable. Thank you
Good thoughts. Why anyone around here wants to compete with Chase Manhattan is beyond me.
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I agree. Of course is greate to have that extra value flowing into Steem and into the Steemians acounts but the cryptocurrency market lacks a more stable option to scure and store value. SBD could be that one. Maybe in the future they'll stabalize, but, as is the nature of the crypto market, the currencies value depends on how much someone is able to pay for it, be it 1$ or 10$. We'll see in the future.
Keep these nice ideas a flowin'!
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sbd was an extremely puzzling design flaw. The truth is that at this point there is no reason for it to exist. Why not just use steem? a "stable" coin is a very difficult thing to do and seemingly is tangential to the steem platform.
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great post my dear friend please support me dear💕
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I really am not smart enough in this to offer ideas but know when I hear a good one. I watch the steem and sbd every day and while I don't have much I don't plan on it always being that way. But I like what I read in your post and will follow and watch......
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Comparing SBD to USD is an Apples to Oranges Comparison
The problem with the system is with the utility of SBD, not the price. The US government can print more money to cause inflation to devalue the dollar if needed because the dollar is used to buy EVERYTHING. There is an infinite demand for the dollar and a limited supply, so printing money causes the price of the dollar to go down.
The same is NOT true for SBD. SBD is only used to pay bots and buy Steem. Therefore, creating more supply when the utility is not there does not solve the problem.
My 2¢
To address this problem, you need to fix the utility problem. By leaving the problem to the open market, you let the price fluctuate. To me, I'd rather have SBD than steem because I can buy upvotes which will give me steem and steem power. If you can get a 2x upvote with your SBD, then (after accounting for curation fees) you've profited from the payment which means your SBD is worth more than a dollar.
To fix this problem, you need to create an infinite supply of $1 SBD. On Steemit, the defacto conversion system is blocktrades. If blocktrades permanently values SBD at $1 and any conversion through blocktrades used the $1 price instead of market price, you are removing the incentive for anyone to price SBD at anything other than a dollar. Why pay $1.10 for your SBD when you can get as much of it as you want for $1? As long as blocktrades is supplied with enough SBD to meet all the demand, the price should be pegged to $1 or at least very close to it
Good point! An infinite supply and demand at $1 should peg the price to $1. Backing SBD by any asset will fix the supply of SBD and we will run into the same problems the US government ran into when the dollar was backed by the gold standard. You just can't scale to where you want to be if there is a fixed supply.
The problem is that it is backed by Steem (thats how it gets its floor) . So an infinite supply creates stability issues for Steem when people want to get their 1USD which can bring Steem crashing down and SBD with it.
SBD shouldn't be backed by anything. It should just be a flat $1 currency. Steem tokens can be backed by the blockchain and can get market rates for its value
You cant have a fixed 1$ valuation of SBD backed by nothing; SBD are by definition exchangeable (aka backed) to Steem at 1$ market value thats what gives it its floor value. Otherwise its just another coin floating freely on the market. It seems there is little understanding in this debate of how market pegs for a currency actually work. The only people that can unilaterally issue 1$ of true USD currency is the US reserve. The SBD peg (its really a floor) to the USD only works because its convertible to 1$ worth of Steem regardless of the steem price. You can think of it as a financial derivative of Steem. A limit is kept for SBD's issued at 10% of the Steem market cap so Steem could go in theory go down 90% before the SBD conversion liability would almost double the total market supply of Steem (and all things being equal halve its price on the market). Falls far beyond the 90% become dangerous as they can risk the collapse the entire value of the steem blockchain if there is a run on SBD (ie when the Steem price tends towards zero you need exponentially more steem to hit the market to generate the 1USD required per SBD, as this in tern comes on to the market it lowers the value of steem further initialing a downward spiral asymptoting at an effective value of zero). I wrote a more detailed comment below which might help explain further.
Thanks, @intrepidphotos for your response. I have a very good understanding of market pegs. I welcome debate but please keep the debate to the facts instead of whether or not one side understands economics.
I can tell you that no asset, priced to the USD stays constant in value. Look at oil, gold, and anything on the market. The reason for this is because the market value of the dollar changes as well as the market value of the asset priced to the dollar.
"all else being equal" statements are not reflective of the real world. They are textbook economics answers that reflect how the should world work instead of reflecting how it actually works.
If you want to peg SBD to always be worth $1, creating an infinite supply and demand at $1 will maintain the price. Any fluctuations in price will be arbitraged back to the $1 mark. If you price a free market asset in terms of another free market asset, you will not get a fixed price, regardless of how much you manipulate the SBD supply.
I welcome the debate as well; I am not trying to offend anyone, I am simply referring to the fact there is not a good understanding on this forum that SBD is a financial derivative of Steem, its not a primary currency like Steem. And to peg anything to a fixed value, it needs something to underwrite the value.
The simple fact is that one can't simply create an asset that has a price of 1USD out of thin air unless you can print USD themselves (ie the US Fed). If you want to attempt to tie the price of one good (eg 1 SBD ) to another good (1USD) you need to have a mechanism to do that, which requires something to underwrite the price (ie you can always exchange good A for a variable amount of good B equal to a fixed amount of good C - this links A to C though the market value of B) . There is simply no other way to do that. You cant just create "infinite demand " of an asset as you suggest. If that was the case one could just ICO a new new currency to themselves and fix its price as one ounce of gold . The obvioius issue here is without any demand at the fixed price no one will buy my new currency from me no matter how much I insist its worth an ounce of gold per token. The only inherent value SBD has comes from its algorithmic underwriting by Steem, in that it converts to 1SBD worth of Steem at any market price of Steem. If you have infinite supply of SBD (which is in your control unlike demand) then it will collapse the value of Steem to zero and essentially break the algorithmic link. This is why they cap it at 10% of the total value of Steem.
Lets look at a comparison between SBD's and treasury bonds. Both are a potentially interest bearing derivatives of a primary currency. If the government issued an infinite number of bonds and then there was a run on the bonds they could always just print money and pay all the bonds back. This would lower the currency value relative to other currencies but not necessarily collapse it as their liability is held in the currency that they have control over and can print.
Now lets compare that to the situation with SBD. The SBD mechanism would be equivalent to if the US government issued interest bearing bonds that were redeemable not in a fixed amount of US dollars but in a variable amount of US dollars linked to a fixed amount of a currency they have no control over such as Euros. So to make that clear the bonds would be redeemable not in a fixed amount of USD but by a variable amount of USD that was equal to the amount of Euro at the time you purchased the bond ( just like 1SBD is an interest bearing derivative of Steem that is redeemable for a variable amount of Steem equal to the 1USD at the time of redemption). In our analogy this would let European investors by US bonds with a direct hedge to the euro and take no currency risk. Similar to what SBD tries to achieve in eliminating fluctuations in the underlying asset though a peg to an external asset.
The issue if the US prints a large number of these bonds relative to the size of the total money supply it creates a stability risk for the underwriting asset which in this case is USD. When the price fluctuates down and some people start to want to redeem their bonds the US Fed will have to pay the bond holders back in an increasing amount of USD. This is due to the conversion of the bond to an amount of the underwriting asset (in this case USD), to get the fixed amount of Euro that the peg was against. So they can simply print more USD as that is in their control, then they sell it on the open market to buy Euro (in the same way the Steem block-chain can produce more 1USD worth of Steem on converting a SBD which can then be sold on the open market to obtain the physical 1USD). The issue here is that this lowers the price of USD relative to Euro (or Steem relative to USD) as more supply comes on, so the next bond holder that wants to convert they would have to print more USD to redeem the same amount of Euro (or issue more Steem to create 1USD).
This is not an huge issue if you only have a small amount of these financial derivatives outstanding relative to the money supply from which they are derived (which is why SBD are capped at 10% of the total market value of Steem). However if there is a large amount this quickly becomes a self reinforcing downward spiral where the price quickly asymptotes to zero.
If you have a look at my other post in these comments list it might be a little more clear.
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Could this be the reason why SBD as fall apart lately?
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I hope SBD will 2x-10x in 2018............
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I think we should leave it. I think problems will eventually work themselves out.
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Looks like a great idea ...
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The idea go let the value of SBD float until it hits somewhere close enough to the peg is probably the best compromise. I'm in favor of keeping it stable after that.
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will be a debate that will bring a huge crowd
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I cannot help but appreciate your content. I am new in the community, and I will apply the information you've shared.
I also read an article about the principles on how to be successful in Steemit. First, is to create a content that adds value to other people lives. It's your personal perspective. It should be Authentic, honest, open and sincere. . Second, It is a network with like minded creators so that you can work together and what was that enable you to do? It enables you to create content that adds value to other people's lives and so we have this positive feedback loop and follows and upvotes which are basically SBD. In my opinion, If you pursue this two principles that will help you become successful in Steemit.
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