Except that your analysis ignores the cost of risk to the network associated with the unaddressed higher debt amount in the first state.
You are wrong because the cost of risk comes from high debt ratio instead of debt amount. And again, you still cannot prove that facilitating conversion has no negative influence on STEEM price.
As you indicate in your diagram, any version of the peg has a cost to the network. This is clear as a peg is a manipulated construct that is costly to maintain.
Wrong again. If there is no discount, there is no cost to the network.
I suggest that we follow the rules and see if they work, which they might.
Actually I am doing following the rules now. The white paper says, "If SMD trades for less than $1.00 USD and the debt-to-ownership ratio is over 10% then the feeds should be adjusted upward give more STEEM per SMD"
When Dan suggested feed discount, SBD price was $0.88 and the debt ratio was 2.8%, which already did not meet the rules, but the debt ratio seems to rusing to 10% so it could be a proactive movement. Now, however, SBD price is over $1.00 and the debt-to-ownership ratio is under 10%, which is totally opposite to the high discount condition. (Please be noticed that the rule is AND statement, so violating either of them can reject it)
My account just earned some SBD interest. Who paid that? Interest is a substitute (under certain circumstances) for a feed discount. Both carry a cost.
Yes, it was explained that the 5% goal and 10% rules in the white paper were not sufficiently safe, after the team had reviewed the SBD mechanism some more. The 2/5/10 cutoffs in SBD stability were written with this in mind as well, to ideally try to keep debt closer to 1% and slow things down should it reach 2-5% followed by the eventual haircut (although I'm personally not convinced any of these rules, including even the haircut, actually do what they intended, but that's what the blockchain is implementing now)
The debt ratio is higher now.