I'm not so sure it needs fixing, especially if it required any kind of inflation, but your idea about being able to put STEEM up as collateral for SBD that you could sell on the open market (which would be a naked short, by the way) is interesting - while not exactly "fixing" anything, it would help mitigate the extremes to the upside. The downside is already covered, of course.
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Naked short means a sell without backing.
When you put Steem as collateral it is no longer "naked"
Are you aware of how BitUSD is created? By putting BTS as collateral. There is no inflation involved.
It's naked for the seller of the SBD obtained by putting up STEEM as collateral. If price continues higher, the seller is out of luck and liable for the losses up to and until the point where he/she covers. If he/she still has funds enough left, the SBD can then be repurchased and used to redeem the STEEM originally put up as collateral. Otherwise the lender, who has the collateral, takes possession. Do you see how there is a possible gap in funding here? Everything between the sales price and the cover price is third party risk, that is unless there are exchange like rules in place that also monitor the seller's ability to cover losses and automatically liquidates when participants positions put them into the red, like BitShares, for example. Without that, selling STEEM collateralized SBD would introduce a nasty 3rd party risk element that would be unacceptable.
When BitUSD is borrowed/created it is backed by at least double it's value in BTS. If value of BTS collateral drops below 175% of borrowed BitUSD more collateral has to be added or there could be automatic position liquidation, so no 3rd party risk is created. Similar mechanism can be used for SBD.
That's my point. BitShares is an exchange. STEEM isn't. It's more easily said than done, and without those mechanisms, you would introduce 3rd party risk. As I've already overly expressed and reasoned in this thread (and most certainly shouldn't complicate more with unnecessary repetition), I don't think it's in our best interest either. Why should we worry about other people's bad decisions, especially when it means a cost for us which at best only minimally mitigates? That's not our responsibility, nor a reasonable way to invest our time, in my opinion, of course.
Steem is an evolution of Bitshares, built with the same graphene blockchain toolkit, so it has the same capabilities, if enabled. It already acts as a simplified exchange and with addition of SMTs it sure will get more advanced exchange functionality.
It may or may not make sense to add ability to create SBD by the same mechanism as BitUSD is created, I wont argue, but it could be done and it may help improve USD peg.
I will leave it at that. If people find this proposal worthy it will get done, if not, so be it.
Thanks for this discussion.
No, the truth be told, the only way to really have a true dollar pegged asset is to not permit outside exchange trading. If BitUSD was traded somewhere else other than on BitShares, you could bet your bottom dollar that the same thing would be happening to it that is happening to SBD, until BitShares was arbitraged dry, or they stopped it. With a limit cap + limited annual inflation on STEEM, there is no way SBD could ever be a true dollar pegged asset as long as it is traded on outside exchanges. In other words, the only way to make SBD a true dollar peg, is by only allowing an internal market. Of course, there are those who will say that you can't stop offsite trading between individuals, or even exchanges, if they want. That would be the equivalent of a black market, and we all know that black markets charge premiums. Nonetheless, the internal market could peg at $1.00USD, and all you'd need to do is buy STEEM to be able to do that, so there wouldn't be too much incentive to pay a premium on the black market anyway.
It's not like I'm arguing against your proposal; more like I'm just sharing my views and ideas, thinking out loud so to speak - as I started by first saying, I've found your ideas interesting, and as our conversation has grown, challenging as well.
Cheers
It remains to be seen if your theory is correct. However we don't have to wait much longer to find out.
The exchange AEX.com has opened BitCNY and BitUSD trading pairs this week.
https://www.aex.com/page/trade.html?mk_type=BitUSD
https://www.aex.com/page/trade.html?mk_type=BitCNY