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RE: Steem post promotion: Past, present, and future

in #steem3 years ago

From this, it seems clear to me that investors should encourage the burning of SBD through the use and expansion of the promoted post feature by authors, curators, and developers.

Maybe this is just semantics, but I think it's a mistake to call this "burning". It's really unclear to me if burning, in-and-of-itself, actually does anything good for a token. You could even make the case that someone burning a token is sending a signal to the world "This is worth $0". But the promoted post feature isn't necessarily doing that, it's you buying something from the blockchain, so the signal is "Having extra visibility is worth X SBD to me".

As I understand it, the usual argument in favor of burning is the assumption that overall market cap represents the total valuation, so eliminating some tokens from the supply should increase the price because overall valuation won't change. The analogy is presumably a stock buyback (or maybe some things that central banks do). But I think the key there is the buy in the buyback, the price goes up because there are buyers in the market. So sure, the thing disappears from the market, but I wonder if that's more of a side effect than a causal factor. (If we wanted something similar, with a central agent buying tokens and disappearing them, a DAO-funded bot could do that).

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As I understand it, the usual argument in favor of burning is the assumption that overall market cap represents the total valuation, so eliminating some tokens from the supply should increase the price because overall valuation won't change.

That's my understanding too. The market cap remains unchanged but the number of tokens in circulation decreases, therefore increasing the unit price of each token.

(If we wanted something similar, with a central agent buying tokens and disappearing them, a DAO-funded bot could do that).

I have (and you probably have too) seen a lot of discussion about the SBD that go to the DAO get burned - I think that this idea is being seriously discussed by those that can make it happen but I haven't been following it closely.

I have (and you probably have too) seen a lot of discussion about the SBD that go to the DAO get burned - I think that this idea is being seriously discussed by those that can make it happen but I haven't been following it closely.

I haven't seen much actual discussion, I've seen some vague references to things happening behind the scenes (although maybe I'm not looking in the right places). So my (perhaps cynical) expectation is that at some point a half-thought-through change will be sprung on everybody at which point it will be too late to ask questions or point out problems.

Personally I think it would make sense for those Steem DAO SBDs to be used to buy Steem, thus raising the price of Steem and dropping the price of SBDs. Burning the Steem at that point might not be terrible (although seems wasteful to me, seems like it would be better if it ended up as SteemPower in the hands of people who use it to make the chain a better place, but finding a fair way to identify who that would be is not a simple question).

Personally I think it would make sense for those Steem DAO SBDs to be used to buy Steem, thus raising the price of Steem and dropping the price of SBDs.

This rings a bell and might be what's being discussed. It feels like a long time since I last heard about it though - hopefully it's still a possibility.

Burning the Steem at that point might not be terrible (although seems wasteful to me, seems like it would be better if it ended up as SteemPower in the hands of people who use it to make the chain a better place, but finding a fair way to identify who that would be is not a simple question).

That's always been my mindset too but there will always be problems finding the people who improve the chain. So often, it's the people who earn their way into Steemit's trust and get access to booming support or steemcurator accounts who find the temptation too much and start creating and upvoting their own accounts.

As I understand it, the usual argument in favor of burning is the assumption that overall market cap represents the total valuation, so eliminating some tokens from the supply should increase the price because overall valuation won't change.

That's my understanding too. The market cap remains unchanged but the number of tokens in circulation decreases, therefore increasing the unit price of each token.

Yes, I would say that too.
But it improves the ratio to the STEEM, which then has an impact on the debt ratio.

The best thing for the debt ratio would probably be for the price of SBDs to drop below $1 USD so it makes sense for people to do conversions.

If SBD falls under $1, there would be bots buying SBD from the open market, wait for the 3-day conversion window and repeat the same. Like, no one would let the opportunity like that pass. I think we need to get it to be stable at the dollar price.

buying SBD from the open market

Regardless of the source, when there is buy pressure what happens to the price? This is the mechanism that keeps the price near $1 (from below, at least): SBDs priced at <$1 are valuable, so people should want them (slight caveat: the haircut rule is also a factor). It is a distributed, decentralized mechanism. It doesn't work when the price is >$1 because there's no reason to do conversions. Doing conversions would take the SBDs out of circulation and the debt ratio would get better.

Maybe this is just semantics, but I think it's a mistake to call this "burning". It's really unclear to me if burning, in-and-of-itself, actually does anything good for a token. You could even make the case that someone burning a token is sending a signal to the world "This is worth $0". But the promoted post feature isn't necessarily doing that, it's you buying something from the blockchain, so the signal is "Having extra visibility is worth X SBD to me".

Yeah, the language is tricky. It's the same thing with "burning" on TRX. If I understand, that's actually transaction fees and something to do with USDD minting. So the account owners are actually paying for a service from the blockchain. On the other hand, in both cases, I guess the blockchain really is burning them.

If we wanted something similar, with a central agent buying tokens and disappearing them, a DAO-funded bot could do that

It's ironic that promoted post usage died out when the @burnpost experiment had so much curator support.

Technically, the SBD "disappear" from the system. Whether you want to call this "burning" or "booking out" is probably a matter of preference.
All transferred SBD are set back to 0 with the next block. In addition, current_sbd_supply is reduced by the amount and virtual_supply is reduced accordingly.
In the current phase, this would be particularly important, as it would then reduce the debt ratio again.
However, for this to have a noticeable effect, quite a lot of SBD would have to be "burnt"...
If the price rises as a result, this has an additional positive effect on the debt ratio.