You are viewing a single comment's thread from:

RE: Steemit For Investors #2 - How Steem Dollars Hold Their Peg to US Dollars - By Leon Fu Dot Com

in #steem • 8 years ago

$19 of Steem is generated to back 1 SD? Wouldn't that devalue the STEEM trading price because there are now at this time approx. 5 STEEM backing every SD?

8 years ago in #steem by
$0.00
    Reply 5
    Sort:  
  • Trending
    • [-]
     8 years ago (edited) 

    Yes, if there was a sudden collapse in the price of STEEM, and no recovery in price, the peg may break. Quote from the white paper:

    For every SMD Steem creates, $19.00 of STEEM is also created and converted to SP. This means that the highest possible debt-to-ownership in a stable market is 1:19 or about 5%. If Steem falls in value by 50% then the ratio could increase to 10%. An 88% fall in value of STEEM could cause the debt-to-ownership ratio to reach 40%. Assuming the value of STEEM eventually stabilizes, the debt-to-ownership ratio will naturally move back toward 5%.

    Leon Fu

    [-]
     8 years ago  

    Good read! @leon-fu its a good thing ive been follwing you at twitter. Very informative, perfect for crypto traders that are non technical like me

    [-]
     8 years ago  

    Don't forget, crypto being crypto, we will see the moon and we will watch it crash hard, many, many, many times :)

    [-]
     8 years ago  

    True, which is why Steem Dollars were created to protect Steem users.

    $0.00
      Reply