The peg mechanism is too simple. It doesn't take into account the extreme volatility of STEEM. The change from 5% to 9% was motivated by the mad SBD pump during the last bull market. That was too short sighted a measure.
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Actually it does.
This is the main reason that sbd stops being printed at a 10% debt ratio.
When the debt ratio is below 10% and the sbd price is below 1 USD, the it becomes profitable to buy sbd on the external market and use the conversion function inside the blockchain.
But the catch here is that the conversions,while it reduces the debt, it also increase the inflation.
That is why sbd conversion start to be less profitable (less steem paid for 1 sbd) when the debt is above 10%
I know all the basics. But they aren't enough.
I know.
Of course.
I know that. It was a strange mistake to make it so that the printing only slows down when the debt ratio hits 9%. It weakens the peg. But not as much as all SPS funds being paid out in newly minted SBD.
I believe the slowing down of the printing was moved to 9-10% instead of the old 5-10% because the mad SBD pump of 2017/2018 motivated the witnesses to see to it that it would never happen again. But the new rules are causing a lot of problems now. I think they should've postponed the percentage change until the prices of both STEEM and SBD have recovered.
Yeah, the SPS fund is another part of the equation that kind of make things worse, since they are increasing the debt, and making it even harder to get it back below 10%.
About the percentage changes, i didn't thought much about it at the time, but that indeed created a continuous SBD printing, when it was supposed to be reduced.
What they missed is that increasing the SBD supply by not having it start slowing down earlier (at 5%) would only worsen the problem once the market returned to a normal condition.
And now, another layer was added to the problem with the SPS paying is SBD.
I think the witness should have sticked with the plan described on the original whitepaper...
I'm afraid it will be very hard for STEEM to recover when the SBD debt burden is increasing at this rate.
It indeed severely weakens the peg. At 5% STEEM price needs to drop 50% at a relatively short time before the peg is broken. At 9% it only needs to drop 10%, which is very fucking common on crypto world. The change also come right before the massive bear market we have now making the change way worse. If anything needs to be learnt the chain needs to be more conservative than 5% debt not less.