if sbd drops to below $1 like $0.70 or less how is the price "pushed" back up to $1?
I also agree that the free market should decide the price instead of placed mechanisms to force the price peg. But I understand how it can quickly become unsustainable to have sbd at high prices.
The whole reason sbd spiked was because after the tether fud rumors started people flooded to sbd which they thought was also a tether style dollar coin
If the price drops below $1 then the witnesses will set an interest rate for held SBD. This encourages people to hold rather than sell, decreasing the SBD on the market. Lower supply puts upward pressure on the price.
You can always convert an SBD for $1 worth of STEEM (function in the blockchain). So when STEEM is 10 cent you can convert an SBD to 10 STEEM (over 7 days). This works even though an SBD might trade for 50 cent on the markets. This is how the peg is maintained on the underside.
Yea you are right, I always do that too
Exactly. That way - SBD is a lot more valuable in a bear market in comparison to STEEM.
EDIT: I did some extra research. I think I found some limitations in the whitepaper. I wrote about it in my blog.