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RE: STEEM DOLLAR Will Fall To $1 USD : Here’s Why
All they have to do to secure the value of Steem Dollars long term is re-introduce yield. If yield is added again then people will want to hold Steem Dollars over alternatives at least until Dai becomes more known. Steem Dollars are actually backed by something.
The other element is SMTs. How will people buy into SMTs? If Steem Dollars are involved this could lock in Steem Dollars.
Do you mean the interest rate? I doubt that's something the witnesses would consider at this time.
What's Dai?
The Dai is a stable token from the Maker project which is basically the bitUSD token equivalent for the Ethereum blockchain and I understand it is backed by ETH as collateral. My TODO list has it near the top to investigate as a place to park some crypto wealth now that SBD has become speculative. Stay tuned because I will probably write about it soon.
The Dai is likely to be the biggest competitor to SBD as a stable token going forward.
Looking forward to it.
Speaking of this, I was thinking about taking some SBD and parking it in bitUSD. Then I realized I'm not sure if that's any different than any current holdings I have on the USD, so maybe I should just buy steem with it :). But supposing I wanted a USD token, why not bitUSD?
I like bitUSD too though the liquidity is not great there and the underlying collateralised asset (BTS) is more volatile so the black swan event risk is higher. With ETH having more stability and more liquidity I think Dai could really be a winner.
That said, I'd prefer the collateral underneath the peg be something value producing like the STEEM Reward Pool rather than a raw crypto, but I'm one who will take the best stable coin on the market at the time. That looks to me like it will be Dai.
The issue is not securing the value, it is providing enough supply quickly enough that it does not de-peg to the upside, as has happened twice now. Yield will not help, it only makes SBD even more valuable to hold. What is needed is more supply, exactly what this post explains is happening, but it does not happen in a manner that responds dynamically to demand, so can easily fail (as it has).
I thought this way too when this first happened but now I'm skeptical that it can ever hold a peg. If it ever goes below $1 people will buy it as free money. If it even is at $1 people will buy it up as free money. How will it ever get below $2?
It will (probably) get below $2 because at $2 (or even in principle at $1.01) supply will keep being produced essentially without bound as the graphs in this post illustrate, until there is just no more incremental demand to keep buying more of of it, and then the price will fall.
Look at the price chart for last year. Just as it has proven that it doesn't reliably hold a peg, it is also proven that it is possible to return to $1 after being too high (once supply with its slow-but-relentless climb catches up).
It all sort of works, but not consistently.