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RE: The Price of Steem Will Always Go Down... It's Supposed To : The Magic of Steem Power

in #steem8 years ago

The steem backing SBD doesn't exist yet. SBD is a contract that guarantees enough Steem to equal 1 dollars worth of steem. When\If the contract is executed the steem necessary to make this happen are freshly created. So with a rising price the steem obligation to SBD is deflating; with a falling price it's inflating. Check pages 12-13 of the whitepaper for more info on "Sustainable Debt to Ownership Ratios"

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%