RE: Thoughts on a Proposal to Buy and Burn STEEM using the DAO
Let me make one caveat. Imagine an asset that investors have bought in the hope that it will increase in value and they will make a profit. Then they see an announcement that the price of that asset will be purposefully reduced to a certain point. What will investors do? They will get rid of the asset as soon as possible. The start of your initiative can trigger a sell off of SBD and it will hit $1 faster than we can transfer any value to STEEM.
In my opinion, your initiative should be linked to the start of charging interest on savings in SBD, say 30% per annum, to be more than competing blockchains. You probably have a question, why create additional inflation of an asset that is already being actively sold off?
Even if SBD will be worth $1, it means that investors will be able to get 30% per annum in dollars. No other banking institution can provide such profitability. SBD will become an attractive investment asset, and we will post-fin its excess value to STEEM.
Over time, STEEM will easily grow in value higher than HIVE, which will lead to a mass migration of users from that blockchain to this one. Most will come here to earn author rewards, but there will be those who will sell their HIVE and buy STEEM or SBD. In this way, we will receive a transfer of value from competitors to the Steem blockchain.
After seeing the stable growth of the price of STEEM and the large annual percentage of SBD, I think other investors will also be interested in investing in STEEM/SBD.
It makes sense. @jondoe what do you think about that?
I would assume increasing the interest rate on savings we would have to do a hardfork, no?
No, it is not needed. This opportunity is always available to witnesses. @remlaps wrote about this in detail in his post: Thinking out loud: When should the witnesses start paying interest on SBDs in savings?
I was misremembering the interest rules. It's possible to pay interest on SBDs without a hardfork, but as I understand it now, interest would probably go for all SBDs, not just the ones in savings. @danmaruschak brought this point to my attention, here.
It still might be worth considering, but it changes things up a bit. I guess SBDs on exchanges and SBDs in the SPS would also earn interest.
How would we pay interest without a hard fork? Wouldn't this adjust the inflation rate, or at least redirect it?
AFAIK, it's managed by a witness parameter. I don't know the exact details, but I guess it's basically just an average of the value that's set by the 21 witnesses who validate blocks in each cycle. The blockchain was paying 10 or 15% interest on SBDs when I first got here.
To the best of my knowledge, the capability was never removed. It's just that the witnesses all set their parameters to 0 when prices went down.
Ah, this explains why my SBDs did nothing when I put them in Savings.
Wow that is really interesting. I have been here since 2016 and I never remember SBDs paying an interest rate... Perhaps it was coded but never actually run? I feel like I would have remembered SBDs paying interest...
I created an infographic back in November, 2016. Here's what I posted at the time:
Obviously, I'm hazy on details, but maybe interest accumulated and paid out once per month? No time now, but maybe I'll check later to see if I can find any payment transactions from the time period.
Update: Found one
Right!
#define STEEM_SBD_INTEREST_COMPOUND_INTERVAL_SEC (60*60*24*30)Once per 30 days and only if the SBD balance has to by modified.
Upvoted by soulfuldreamer through sc03 account
Yes, the interest rate is determined by us witnesses with the property
sbd_interest_rate.The interest rate contained in
dynamic_global_properties.sbd_interest_rateis calculated as the median of the props of the 21 witnesses who validate the blocks in the respective round.The SBD paid as interest are additionally produced. So even if no SBD are printed. This would of course be counterproductive (currently) .
The inflation rate would be increased by this measure (at least in the current situation), as the current SBD supply would increase and thus also the virtual supply.
There may be "sweet spots" where printing SBDs causes STEEM prices to rise enough that the virtual supply goes down, even though sbd supply goes up. But, I have no idea how to predict where they are, if that's even possible.
Yes, if the price rises above the printing threshold, things can look very different. The mechanisms in this situation are not quite clear to me either... but who really understands the market :-)
Sorry to bother you again. I am not against your proposal, but since we are already exchanging ideas here, I wanted to say something. The economy is a very complex thing, which is influenced by many factors. Often, actions with even the best intentions can cause harm. As I already wrote, I am afraid that the sale of SBD followed by the purchase of STEEM will not be able to bring the expected benefit. With your bot building capabilities, I would consider another option.
From an economic point of view, the ideal would be for someone to buy STEEM on the market and burn it. But no one wants to burn their own money. Maybe you should think about starting a grid bot (or DCA bot):
I am sure you are well aware of the functionality of these tools. After receiving funding from the DAO in SBD, you could run a bot that would trade the SBD/USDT pair. The resulting income could be used to buy and burn STEEM.
The advantages of this method are obvious:
I am not following exactly what you are saying here... If a proposal was created for SBDs that were then sold for USDT (instead of sold for STEEM on the internal market), the end result would be the same as our proposal of sell pressure being put on SBDs no?!
The grid bot operation mechanism is shown in the animated picture:
In this way, the bot not only sells, but also buys back at a lower price. That is, it many times buys at a lower price and sells at a higher price, thus generating profit. The profit generated can be used to buy STEEM and burn it further.