The way it works is that there's a set amount of steem in the rewards pool. When payout comes, and sbd is printed, instead of giving you all of the steem, it converts the steem it would have given you into SBD via the price feed.
So to answer your question, steem is not being created "on top". It is a deferred creation. Instead of creating it on reward time, it gave you SBD, and whenever you decide to convert it , it gets created then instead.
So in this view SBD really is backed by a set amount of steem. (at the time of conversion).
Concerning your point about price. It will go down as steem price sustains or goes up. The supply is increasing at greater and greater rates! It's just a matter of time.
As long as Steem keeps growing in user base and Steem Dollars keep being held it is going to be harder and harder to see it coming back to $1. Something would have to happen because demand for Steem Dollars doesn't seem to be reducing. The only thing I can see happening is Dai becoming more in demand.
Greater supply as the graph in the original post shows you would think would result in a crash in price for Steem Dollars but do we really know how much demand there is for a stable token? Do we know how much demand exists for Steem Dollars? If demand outpaces supply then even if more Steem Dollars get created, in a market with 500 billion total floating around it's not so easy to know what will happen or when it will happen.
Also there are the SMTs which are coming. Who knows what influence that could have on Steem Dollars?
You raise a good point, but the problem with this line of thinking is that the demand needs to keep up with supply. Right now we are printing steem at 5 times the rate that we did before (proportional to STEEM feed price). I really don't think we've seen the effects of this just yet, as this is a recent phenomenon.
Even if we were to do nothing, you need to keep this demand increasing, no? Where do we expect this demand to keep coming from? The population is finite, but SBD supply grows without anything else changing. The only way demand has a chance is if STEEM price goes back down, which I admit is also a possibility.
I agree that for now it doesn't look like it will hold. I just don't know the long term value of SBD. It could be worth much more than $1 but I don't know exactly what. It depends on how SBD is used and whether it gets locked up, burned, etc.
With current parameters and nothing else changing, assuming demand does not keep up with supply (I know this is not a widely accepted assumption) this is what happens:
The reason 1 USD is the threshold is because of the conversion rate of 1 SBD to 1 USD worth of steem based on price feed.
Note if the witnesses change the price feed to be against some other asset, the peg would then be towards that asset instead.
Nailed it. Good job :)
The problem is many people are hopelessly confused by this Steem Dollar have no idea they can convert it to STEEM at market rates then use it to increase their rewards via self voting and curation.
Thanks, so if I understand it correctly. SBD are part of the ~9,5% yearly inflation of steem.
Yes, that is correct.
Thanks for the great answer!