Witness Discussion – SBD price and reverse peg
There is currently a discussion about the SBD between the witnesses. This post aims to get the community informed about both sides of the argument and to start a brouder discussion about it, as it affects all of us.
Some Background information
Steem post payout is done 50% in STEEM POWER (SP) and 50% in SBD. You can choose to get 100% SP but in the current market condition that is not recommended. That is because the SBD is designed to always be worth roughly $1 in STEEM. And at the moment one SBD is worth about $6. So when you write a post that displays $100 then you get:
• $50 worth of STEEM, say at $5 per STEEM means 10 STEEM
• 50 SBD worth $300
so your $100 became $350. That is a nice thing for you.
The more one STEEM is worth, the more SBD gets printed. So the general idea is that with more SBD being created, the SBD price slowly moves back to $1. And slowly means over the time of a few months. This is a good thing for posters, but it is a bad thing for services using SBD as what it was initially intended to be: A currency backed by STEEM that is worth one USD.
A shop accepting SBD can price their items in SBD instead of USD and has the security of knowing that the price will not halve over the few days that shipping takes. A credit card company could let you store SBD on the card and convert them 1:1 to USD without any risk. And you could use SBD as a save deposit of value that does not fluctuate like crypto does. All without converting to fiat and all the nightmare associated with that.
So this discussion is about what we as the steem community want. A volatile SBD with high posting rewards, or a stable, pegged SBD with normal posting rewards. There are pros and cons to this and I will try to cater both sides of the argument. A personally am pro peg, if you want a con side, check out @aggroed.
What do you want to implement?
There is a one way conversion on the SBD. You can always convert one SBD into $1 worth of STEEM. So if STEEM is worth $5 then one SBD can be converted into 0.2 STEEM (over 3.5 days), regardless if SBD is worth $0.01 or $100.
The proposal would be to add a second conversion, so $1 worth of STEEM can be converted into one SBD. So if STEEM is at $5, you can convert one STEEM into 5 SBD, regardless of SBD price.
We would add a small spread to it, so thet you can convert to $0.99 and $1.01, to prevent abuse through conversion. So through this measure, SBD will stay around $1 with up to 2% of difference.
Implementing this will take time. Sheduling a fork will take two weeks. And before that, we have to implement it and test it. So my personal guess is at least one month till we can do it. Maybe till then SBD is down from $6 already, maybe it is at $15 then.
If SBD is at a high price when we 'flip the switch' then that could lead to the price crashing and to a panic. But if the change is announced beforehand, maybe that will not happen.
Here are all the arguments I could find pro and con this change. Please tell me if I missed your argument and I add it:
Pro:
- A safe store of value as a cryptocurrency
- A low risk crypto payment option for businesses, if SBD tracks USD, this
- Can allow market applications like ebay or etsy for steem without the platform risking the hit of price volatility
- Can allow a paypal for steem that normal businesses can adapt without those big fees middlemans take (as there is less risk and no fees)
- Can allow for a low risk credit card charged with SBD without having to sell them or convert them to USD
- Post payouts are now exactly as much as displayed
- Demand for STEEM could rise from users wanting to buy STEEM and convert to SBD when the SBD price is over $1
- People in countries with broken currencies could adopt SBD as a stable currency
Con:
- Post payouts could decrease 4 days after implementation (to 1/4 of what they are currently if SBD stays at $6)
- Currently author rewards are partially outsourced to SBD investors. The Steem community pays a higher share with low SBD.
- Platform growth could slow as post payouts decrease
- Demand for Steem could decrease as ability to print high SBD is removed
- User retention could drop as post rewards fall
- Steem doesn't have a market cap large enough to support as many SBD as there are USD and thus the stability implied is not guaranteed
Outlook
This post is intended to get feedback from the community and no changes are planned at this time.
Please discuss this in the comments, write posts on your opinion and check out the other witnesses and the posts they write:
- (I will add posts here if they are posted)
If you feel strong about this topic, adapting your witness votes can be a way to make your voice heard.
Since @aggroed added the con points, I will donate the liquid part of this post to MSP. This post is still flavored pro peg and I suggest you to read multiple posts on this matter.
I spent much of today coming up with my thoughts on this topic and recording it as a video as well. The video ended up being more than 21 minutes long (!) but here it is for those that are interested:
Should SBD Be a Pegged Asset? If So, When Should We Peg It?
Good information, thanks to the 2 for their time, dedication and for sharing ...
regards @lukestokes and @reggaemuffin
There's absolutely no point having two volatile tokens on one blockchain, with one of them representing a debt on the other. This is a two-token system with an explicit purpose for each of them. If we're not going to even attempt to peg SBDs as intended, then we should just get rid of them altogether.
The argument that "It will reduce post rewards!" is a piss-poor one. There's more to growth and stabilization of a blockchain and its tokens than "Let's reward all the minnows!"
We have tools available for pegging. We need to use them. There's no sense in asking for more parameters/functions when the current ones aren't even being used by most witnesses. Try actually using the current tools. If that doesn't work, we can try adding new ones. If those don't work, then we'll have our answers about whether or not a peg is realistic.
If we don't want to be bothered with any of that, then get rid of SBDs. That is not my preference. I think there is great value/utility in having a stable currency/asset for this blockchain. But if nobody cares about that, then we don't need to waste time and effort trying to peg it and we don't need the added risk of a debt instrument.
There is no real tool for downward pegging, other than waiting it out, which is what was done the last time SBD went higher, and did eventually work. That will likely work this too, but it makes SBD useless (essentially "disabled"; right now nearly all of it is on exchanges being traded by speculators) as a stable currency much of the time.
The only conceivable method that exists (outside of reward-based initiative such as my @burnpost) would be a positive bias on the price feed, and that is not a good one because it amounts to increasing inflation above the defined paramaters, with not even any future remedy to absord the newly created coins. It is neither widely supported by stakeholders nor recommended by the white paper (which admits that in the original, flawed design, little if anything can be done if SBD is valued about $1).
The proposed improvement of adding a method of converting STEEM to SBD does not increase inflation, and can be reversed later if it becomes necessary due to changing market conditions by converting SBD to STEEM.
I don't necessarily agree with this. The tool for downward pressure when SBDs move off the peg is to reduce or eliminate the incentives to buy/hold (interest rates) and to increase the supply to meet the higher demand (bias). The increase in supply obviously takes time to reach the markets, but it would still provide downward pressure (assuming the parameters are actually changed by enough witnesses to reflect market conditions, which currently doesn't happen).
I think that consensus changes for increased supply is actually a good mechanism and the preferable one if we're talking about token inflation. Even if the new supply ends up creating more than the market demands (which would be the obvious goal for short- to mid-term price spikes anyway, in order to bring prices back down to the desired peg), parameters can then be adjusted to incentivize holding or converting SBDs to STEEM if SBD prices happen to over-correct.
But this is why witnesses should be well-versed in the blockchain protocols and price/token parameters and at least have a basic understanding of currencies/markets/economics. This can't happen if people don't care or don't understand and if they're not paying attention to the markets (or if they're completely absent witnesses altogether). We can have any tool imaginable at our disposal but it won't mean much if people don't know how to or just don't care enough to use them. If the problem is simply that witnesses don't care about pegging or don't know how it works, then none of this even matters and this should be a consideration for our witness votes.
Why doesn't it increase? Whether we use bias or use a conversion function, more SBDs will be created. The former at least allows consensus protocols to manage the increase of supply, but both serve the same purpose, which is to meet market demand for SBDs.
I'm not necessarily opposed to a new conversion function. I'd just like to see the current tools actually tried before we condemn them for being useless. In any case, we probably still have quite a bit of time to figure this out and there's no reason why we can't test both or either method - and whatever we try won't be a quick fix. Unless we're assuming that SBD speculators are always up-to-date on the internal mechanics/sentiments/changes of or with Steem, which I believe is rarely ever the case, there's no reason to expect that any immediate changes to protocols or parameters will yield immediate results. I'm OK with a slow return to the peg via slow increase in supply to meet demand, if it can be done.
This is something I'd like to see more of when making protocol changes that yield bad results. But I think I'm dreaming a bit there.
The interest rate has been 0% for a long time.
Because it is a conversion. STEEM is converted into SBD which means STEEM is destroyed and SBD is created, so the net inflation is zero. A conversion from STEEM to SBD and back to STEEM would result in the same amount of STEEM that we started with (assuming no price change, or alternately, averaged across the range of positive and negative price changes). That is not the case for a bias, which permanently prints and distributes more rewards (because the blockchain in that case believes, incorrectly, that its market cap is higher and can therefore 'afford' to distribute more according to the predetermined schedule, currently about 9%/year).
Overall it is not a well-targeted method for dealing with the SBD value due to this distorting of the assumed market cap and the resulting permanent net increase in rewards/inflation. It also screws over people who perform conversions from SBD to STEEM by shorting them on the STEEM received (since it is assumed to have a higher price). Of course, no one should rationally be doing these conversions now, since it converts a $6 SBD into 1 USD worth of STEEM, but some users have anyway. This has become less of an issue now that SBD conversion was removed from the GUI.
The undesirable side-effects are the reason most witnesses and stakeholders don't support it.
What about allowing 100 pct Sbd payouts? This would allow the natural stabilizers to work twice as fast and is a minor change.
I see an amazing opportunity to dominate store of value coins if we increase the cap of Sbd. A stable coin at 6x the cap would be a great addition the the landscape. “ the stable value coin” of crypto should be backed by something decentralized like ether or steem.
But we can only win this battle if we straighten out Sbd quickly!
Imagine the ability to print the dominant stable value coin (through steem power). This would surpass blogging influence as the reason to own steem power.
I agree. If the purpose of SBD is to act as a stable peg, then it should function as such. This notion of "let it ride" is short-sighted. There have been plenty of arguments made down this thread about the advantages of an SBD peg, including the ones @reggaemuffin mentioned in this post. However, if we're not going to have it function as a peg, why have it at all? SBDs are simply a second token from the same blockchain. As designed, they serve a specific function. If that function isn't necessary or even desirable, it should be done away with. I'd rather not do that, as there are very good reasons for having a stable token alongside a more volatile one, but if that's not of concern, then let's abolish them.
Getting rid of SBDs is a horrible idea. Obviously we are in a bullish market right now, but we need it for the flip side if SBD starts to become under 1 USD, and there are many tools at our disposal to encourage its usage (not the least which is the fact that you can redeem them for 1 USD worth of steem at steem market prices)
I don't understand what the rush is. We are still a premature market, as long as there is promise that the peg can be held when everything matures, I don't really see why we can't simply wait. At 4$ USD, we are printing SBD at 4x the rate than we were before.
Are people saying that the reason we aren't getting full blown adoption is that the SBD is not stable? I feel that this is backwards-- SBD can't be stable until STEEM has proven to be successful. And the way this is designed, that's how it works: STEEM's price / marketcap being high will allow the peg to work much more easily.
Edit:
Actually, I take this back: we don't absolutely need it. But it would be very nice to have a token that behaves more predictably once the STEEM ecosystem has proven itself.
Agreed. Steem has to mature more before things like making sure it is pegged to a dollar even become warranted. The unintended consequences of a switch now would be bad for steem and steemit as a whole. There is a psychological factor behind all this as well.
The creation fee of Smart Media Tokens will be correlated with the nominal value of SBDs, interchangeable with an equivalent dollar amount of steem per the SMT White Paper:
"Issuing a smt_create_operation requires payment of smt_creation_fee. The amount required is set by the smt_creation_fee field of dynamic_global_properties_object. This field may contain a value in STEEM or SBD. If specified in SBD, an equivalent amount of STEEM will be accepted, at the current price feed. Initially, smt_creation_fee will be set to 1 SBD, and no means will be provided to update it."
The originally envisioned characterization of SBDs being pegged to the US dollar when the steem blockchain was first developed two years ago has been unquestionably disproved by free market supply and demand forces.
Perhaps deep pocketed buyers are accumulating SBDs to raise their nominal value as a means of increasing the cost of entry into the SMT creation market whenever SMTs are ultimately launched.
SBDs are akin to scarcity tokens on the steem blockchain. The free market should determine their value.
That won't work because "an equivalent amount of STEEM will be accepted at the current price feed" means that 1 USD worth of STEEM can be used regardless of the value of SBD. That is a little unclear in how it is written, I agree.
It is indeed unclear. As I read it, the USD value of 1 SBD will determine the SMT creation fee. If 1 SBD is $10 USD for example, and steem is $5 USD, then an equivalent amount of steem would be two. Therefore, as the nominal value of one SBD rises due to demand, then the associated number of steem to match that value would change accordingly.
I just don't understand how any blockchain can assure that the value of a token derived from it can be pegged to some external asset. Therein lies the main issue with SBDs. Unless Steemit Inc. has $1 USD in the bank for every SBD created by the blockchain to assure that the value of SBDs cannot fall below the $1 USD amount, then the claim of a peg is unavailing.
SBDs are described as an experimental asset in the SMT white paper and I think it's time to admit that the free market is telling us all that the experiment of trying to fix their value to $1 USD is quashed and cannot be sustained in the face of random supply and demand forces.
Other stable coin designs have been shown to work better, so simply inferring something from 'the free market' response to this one flawed design is taking a misleadingly narrow view. That said, you are not alone in believing that stable coins are impossible and won't work.
Thank you for the exchange of ideas.
It is the exchange of ideas that I am ultimately driven by. Thanks for the discussion as well.
And I appreciate both of you and everyone in this thread! It helps me understand whats going on more clearly!
Thank you!
And I appreciate both of you and everyone in this thread! It helps me understand whats going on more clearly!
Thank you!
Short of them delisting SBD and being personal guarantee of 1 SBD = $1 USD it will always have volatile on the open market. Even junk coins in the cryptocurrency market sky rock and boom all the time.
Even with break points/line in the sand of when certain market condition is met witness deploy mechanism to counter. That will only have some success at best some times which has always been clear in forex. Even long withstanding policy bends and breaks over passage of time. Even more so in smaller market caps.
As well if the Dollar collapses does that mean SBD will collapse at the same time??
That is always the issue with fixed exchange rates.
As it stands everything is too connected with BTC every time it takes a dump majority of crypto markets bleed in value.
There was some earlier discussion on this where it was observed that stakeholders via their elected witnesses can choose to switch the peg to something else (gold, silver, basket of commodities, etc.) if that did happen.
As smooth noted - the peg can be to any asset, really. It's just a matter of choosing which one and adjusting the protocols/parameters to reflect that. Some have asked for a peg to BTC or gold. But I think the most stable would be the widely-accepted currencies like USD. Even their fluctuations in price/value is far less volatile than nearly all other assets/commodities, and certainly cryptocurrencies.
This is not quite true. In the regime where STEEM is successful, STEEM's supply will simply send SBD prices down, and we will need the other tool to prop up SBD (interest rates), or simply just the conversion mechanism itself that burns SBD's for the equivalent of STEEM. Yes, it may still be slightly volatile, but it will be much easier to control.
Agreed on the point about smaller market caps. That's just makes it easy for manipulation.
If you want to have stability on this blockchain, making a drastic change on how it works is the last thing you want. The suggested change here is drastic and tells the investors who have invested in our blockchain that it's not to be trusted. If the tools that we have are not working, then the intended purpose of the instrument was not though out well enough. But since the market has found a use for it anyway, it doesn't make sense to me to go against the market.
I resteemed this to show I support the discussion and put a 1% flag on it to show that I'm not in favor of adding the SBD-->Steem conversion.
This seems like a highly speculative plan to capture a market we've shown no ability to capture at all at the risk of substantially dropping post rewards which I believe are responsible for increasing growth on the platform.
That said I'm in favor of this down the road if we can substantially grow our user base and thus our marketcap to the point where SBD can actually serve it's function as a stable asset.
Thank you @aggroed - while I understand the reasons for a peg. An enforcement would f* outside traders pretty hard. Which will hurt STEEM as result.
On the other hand, this would give an opportunity to inside traders. But still - I'm against enforcement of the peg.
Edit:
But on the other hand - @reggaemuffin has some good points.
A peg will result in a lot more usecases than two volatile currencies.
Damn. It's difficult.
I am currently in favor of letting SBD price die slowly as it will and we can have the peg ready when it is at $1 anyway. And while aggroed thinks the SBD price will stay up, he agrees that should it come down, adding a peg will be good. (I hope I have not laid words in his mouth here, but that is my take away for the moment)
I think we have our solution here. I came back in time to read, will be visiting other witnesses to check their take on this issue.
Thanks, very good post !!!!
Awesome Work!
Keep it up!!!
@cryptoinvestinfo
What is your favorite Hardware Wallet?
I appreciate that! We need both sides to have a discussion.
Hi @reggaemuffin, I am very confused since I got 2 messages stating "Your delegation request for 4 weeks 1000.081 SP was filled by @eeks.", but my SP did not rise by 2k SP. It stayed the same. Is there some kind of bug on MB where a delegator can take the offer but the SP actually does not get delegated? The above mentioned message only appears on the steemit.com site, not steemd.com. Thank you in advance for looking into this.
I won't respond on this here, please talk to me on discord or related posts. Keep this peg related.
Will do. Thank you.
Hi guys! I sent you 1$ 3 hours ago. Where is my resteem?
lol
Resteemed and upvoted your post. All is done manually, hence the delay at times.
On the topic of the peg, I think the floor should be pegged to $1 for now, but the ceiling should remain unpegged.
@reggaemuffin, thank you for bringing such an important issue for discussion close to our hearts and pockets. Wasn't really discussed during the latest witness forum. I concur with @aggroed. At this time, the jello analogy may be appropriate on trying to address the SBD/SP issues (although I am still a pupil here). I do see the need of ongoing assessment of such. Strongly agree re substantially growing and as important, retaining user base.
This is how I'd vote as well. No reverse conversion. Besides, did anyone address the main concern brought up in the white paper about the reason we don't have a reverse conversion in the first place? I haven't seen it, quoted below:
In my eyes, the market is not mature enough to deserve having a functional peg. It will work out eventually. And let's not forget that right now we are printing SBD at 5 times the rate that we were before. What's the rush anyway? Let it go back down naturally.
I want to remind everyone that SBD is intended as a debt instrument first and foremost, and right now the market is (stupidly) valuing this debt highly, but hey, supply and demand right? What will happen if we implement this reverse conversion and SBD price slams down below 1 USD, and people actually use the "conversion" function to flood the STEEM supply? The blockchain also makes assumptions about not printing too much SBD, and will stop printing SBD if the debt ratio is too large. What happens then?
The system right now is easy to understand. Let the peg go down by itself, because it will. And note that when STEEM price is higher, and the supply of SBD has become much larger, it makes it much more difficult for people to continue stupidly propping the price of SBD up in speculation.
Thank you for listening.
Yes, many witnesses and stakeholders have discussed it and hardly anyone finds it credible. Literally no one has provided as specific concrete example of how this would work without superhuman market timing skill on the part of the alleged abuser. The 3.5 day price averaging window addresses it. To quote the white paper:
This is what requires totally unrealistic and superhuman market timing skill to actually work. The conversion in each direction takes 3.5 days which means the person attempting this strategy would need to not only "see a massive run up", but also know that the price will stay high for most of the 3.5 days, and quickly fall, and then remain lower for the 3.5 days necessary to convert back. If the timing is off, or of the market instead moves in the opposite direction, the strategy will experience large losses. Overall the entire story is implausible. Furthermore, if the strategy described did work, the existing one-way conversion mechanism could be already be used to do the same thing at about half the rate (convert after a spike down, wait for recovery, then sell).
I remain open to the possibility that the may introduce some subtle vehicles for abuse, most likely limited in magnitude, which is why I support including a spread between the conversions (essentially equivalent to a fee charged by the blockchain) as a safety measure, at least initially. Doing so would make most if not all methods of abuse unprofitable (of course, a large enough spread would certainly make all methods unprofitable, at the cost of a sloppier peg, so some reasonable middle ground is appropriate). Given more experience we can narrow or remove the spread later, and to be clear it is not necessarily needed at all (some witnesses do not agree with the need).
Clearly the original design in the white paper does not work correctly, even by comparison to other blockchain-based stable coin designs (which have generally worked quite a bit better), or we would not be having this conversation with SBD sitting at $6 or higher for months. The white paper got this wrong (just as it got other things on Steem wrong which have since been changed). It is not a holy book.
Yes, I also could never understand the reasons against reverse conversion brough up in the white paper.
However I'm pro introducing some little fee on conversions, that would definetly remove any hipotetical possibility for 'abuse'.
See comments here (in original post and replies) about 'spread'. That is equivalent to a fee.
Yet anothet reason for implementing spread/fee is that the money collected could be returned back to the system in some useful way.
Like for example Steem mining could be reintroduced and 'fee-pool' could be used to pay miners.
Or maybe delegates outside of top-20 could be paid a little more.
Ah, that makes sense, thank you for your thorough explanation! I suppose I was imagining a pump and dump scenario for this timing, though having 3.5 days warning for monitoring the conversion requests should be ample time to react or make it difficult.
I should check out the design of other stable coin designs to see if one is mature enough. I would be worried though still. I would assume the way the others work is by having enough liquidity to use the market to push the price, not by changing the role of the stable coin token. The role it plays as a debt instrument is the part that makes me hesitant. Maybe the fee is enough to cover, but somehow I don't think that will cover larger long term concerns about price movement.
I very much agree with @aggroed here. The key point that I am taking away is that, unless the market cap for STEEM/SBD increases SIGNIFICANTLY, we have no assurances that, once that conversion is in place, that we will have an SBD that is tracking with the USD. You flood the market with easily converted SBD and you will crash it. I am all for having stable reward currency that can easily be accepted and converted to fiat or used as fiat it'self, but not at the risk of destroying the very system we love. Leave it as is until crypto volatility can be contained or at least minimized by adoption across the economic system. If SBD can be eventually contained to within 2% of the USD, then by all means, convert away. Til then, don't remove the most attractive feature about the platform at the moment. It is my firm belief that the high price of SBD on the open market is the main reason Steemit has attracted so many people.
Completely agree with @demonsthenes - for the moment it is bringing a lot of people to the platform in the context that they can earn a lot of money. Of course this is not necessarily a good thing, there has been an increase in spam accounts but amongst them there has been some amazing content created from new members. Lets at least see out the hype until we get mass adoption and in the meantime enjoy the ride!
I agree with aggroed, leave as is. Post payout decrease (SBD) would have a huge negative impact on the platform.
No, only on those that are here only for the money.
Which is everyone.
No, not everyone here is only for the money.
I agree with you, lets leave it as it is.
Lets free markets do their thing.
Implementing SBD-->Steem conversion to me is trying to artificially suppress natural market moves.
Let's not start acting like fed and try to micro manage everything.
Edit, have 5 witness votes left. Going to check and vote for you if I don't yet already.
Maybe would be a good idea we get a lit of witness who support what, so we can vote for change/no change ;-)
(Just checked, already voting for you, apparently did a good pick lol)
Yes, DOWN THE road. I don't think introducing something like this now is a good idea.
Amennnn @aggroed
Totally agree with you. The other argument benefits few at the cost of many. Seems like they are trying to control this little ecosystem. It's a free market let the prices fluctuate as they go. Businesses can easily display pricing information in real-time digitally. When the price of SBD fluctuates, the digital price will compensate and change.
Businesses care about no fees and speed.
Let the SBD prices fluctuate as the market sees fit. It's odd people in favor of control are also for decentralization. Hmmm.
It also says sbd is not meant to have an upper peg in the white paper, I believe.
This would also be a dramatic change for marketing. I am finally able to tell people I am making income here. So are others I know of. I finally see friends coming after 7 months here. If rewards drop substantially in 4 days - I do know what to think. The people who think this place is a scam will be sure now!
Yes and no. The white paper design is not intended to has a mechanism for an upper peg, but it is also assumed by the authors of the white paper that no such mechanism would be needed:
This is clearly not the case, therefore the assumptions made by the authors of the white paper are proven incorrect, not only here, but also on Golos (Steem clone/fork) which has experienced similar or worse de-pegging. The mechanism is deficient to meet the stated (and reasonable) goals and needs to be revised.
True, i second that
Like what you said you are doing good with steem. The propose change is to support long term existence of STEEM that will benefit all of us.
This is great about the community, we address issues that matter to all of us. Whatever the choice maybe, we are in good hand.
I'm in agreement with this as well
ReAdding? It was there before and now it is gone.
What was suggested was Steem --> SBD conversion.
Currently I have to say I am in agreement with @aggroed here and @clayop below. The discussion needs to be started now, and it is good that it is happening, but I don't think that now is the time to implement such drastic measures (yet). The growth that is happening at this time, because of this situation, can't be ignored. There are enough skeptics out there still who don't believe in steem, or call it a scam, and we really don't need to give them a reason to justify that. I think caution, discussion and a close eye on the issue are what we need at this moment.
In the grand scheme a peg is likely more beneficial as to the opportunities it will create for currency use.
Of course in the short-term there will be a little pain and impact users directly. Unfortunately not many people are willing to sacrifice for the greater good. In fact I have not seen that since my grandfather's generation.
SBD was designed to be a $1 peg, I will always look at it that way.
I agree with keeping the peg. It's what it is designed for, if not used for that then why have it? I have been designing and coding a point of sale system for brick and mortar merchants that would greatly benefit from a stable SBD (which I think steem would benefit from brick and mortar merchants using it) but I've put the project on hold until this is worked out..
I have not fully looked into all the aspects of this topic, I hope to find some more posts on the matter, but I will say 2 things here now before I head over to @aggroed's post:
I am looking at this under long term prospects in terms of economic viability rather than short term growth and immediate rewards of the community.
From that POV it absolutely makes sense to implement a "down-peg", possibly as described by yourself above.
I know this sounds a bit #circlejerk -ish but I must applaud your open stance, community orientation and call to action on the matter. Kudos!
P.S.: After looking into aggroed's post, I think I am now even more pro down-peg. Thanks for getting me thinking!
Never change a running system. LEAVE IT AS IT IS. 12k new accounts per day is a sign that everything is just fine. No need for stupid experiments that could lead to enormous regret afterwards.
If I could pay 5k USD to show this post to every steemian 5 times a day, I WOULD DO IT. Seriously...
As an active Korean community support, I personally experience high SBD price is very effective and helpful to authors more attention and engage to the community.
The implication of high (e.g. $6) SBD price is like, Steem pays $1 for authors and the investors(or speculators) pay the rest of $5. So it can be considered as outsourced support on behalf of authors.
Despite the high SBD price, its usage is growing in Korean community. I believe this is due to the fact that the adoption of currency is not only dependent to its stability, but also highly dependent to how many people are engaged in the ecosystem and how much they trust the economy.
Also, I am highly against the suggested conversion model, since it cause very high vulnerability to Steem economy. The nature of SBD is a derivative, being backed by at least x20 STEEM in order to deal with STEEM price fluctuation. Theoretically, if STEEM price goes down by 95%, SBD becomes broken.
But the suggested model requires only $1 value of STEEM to create 1 SBD. This will decrease the STEEM reserve ratio that backs SBD. In bullish market, this may be not a big deal. But in bearish market, it can be a huge weakness of our economic system.
In my opinion, SBD is mainly for contexts creators. Specifically, it is aimed to secure author's income in terms of USD value. Its high price obviously benefits the authors now, while does not harm any others except poor speculators. I also saw many authors who like Steem sell their SBD then buy STEEM, in that way high SBD price still contribute STEEM price. I really like this golden goose, and want to keep alive as long as possible.
Agreed, the Korean speculation money is literally subsidizing the entire steemit community at this moment, hopefully there are not too many angry bag-holders when they discover you can just print more at the push of a button. I hope not too many new users here believe the SBD price is a new norm, as they will be in for a shock when they realize what SBD are really supposed to trade near. Currency pegs never really work as intended, and take too much to keep going.
This is not how SBD works since the 10% of market cap hard limit was implemented. In fact STEEM only needs to decline 50% from the 5% level for SBD to start to take a haircut, but the haircut is gradual, and the broader Steem/STEEM/SP economy is never threatened. No matter what happens to the price or ratio, SBD never represents a claim on more than 10% of the total value of STEEM/SP (a relatively small amount which is within what we see in one-day price fluctations on a regular basis).
This is a fundamentally different design with much lower (if any) risks to Steem/STEEM than a hard collateral-based system. In effect SBD is not defined unconditionally as $1, but as the lesser of: a) $1; or b) STEEM market cap divided by 10 divided by SBD supply. Essentially all of the price risk is shifted to SBD. That may or may not be a problem for SBD but it is something we can safely try, and if things don't work out then Steem/STEEM/SP is not harmed at all (and SBD is only harmed incrementally by a fractional haircut).
Agree. Same as Chinese community.
I agree
Well said friend, you represent my interests, and thusly you have earned a vote from me.
The way I see it, the SBD pump was a bonus. We hoped it would be transient, but it wasn't. SBD was meant to be pegged at $1, but the current situation has demonstrated its failure to achieve that purpose. Also, it failed back in May 2017 when it reached $22. Since many witnesses aren't in favor of increasing their bias (to increase SBD issuance and hopefully reduce its market price), I think it's worth a try to implement a reverse STEEM->SBD conversion and see what happens. Cause that's what the current attitude is, 'let it ride and see what happens' with the high SBD price, and so far nothing has happened 😔
I don't think SBD going back to $1 will hinder Steemit's growth at all. It was already growing when SBD was pegged, right? All the altcoins went up in 2018, STEEM too, and it's not because SBD was high, it's because STEEM was following the market's move. Additionally, when SBD pumped to $10-$15, it took a while for STEEM to increase too, so their market values aren't that much linked as some may think. Besides, even if user retention drops, this is a good thing, we get rid of the gold diggers and retain the quality people that love and believe in the platform.
There will always be pros and cons for any major decision like this, we won't know the result until we try.
Insanity Is Doing the Same Thing Over and Over Again and Expecting Different Results
Increasing the bias seems like a safer and more reasonable tool for trying to fix the peg than adding a reverse convert function. I need to come up with numbers on what kind of volume it would take to peg sbd, then again, we bring sbd to $1 that could cause a dump and bring us to a lower value than $1 for sbd.
Smooth weighted in on bias: https://steemit.com/witness-category/@reggaemuffin/witness-discussion-sbd-price-and-reverse-peg#@smooth/re-ats-david-re-reggaemuffin-witness-discussion-sbd-price-and-reverse-peg-20180124t044257100z
Basically it is a slow way and increases inflation, so not the best option.
ok, can you explain this?
"The proposal would be to add a second conversion, so $1 worth of STEEM can be converted into one SBD. So if STEEM is at $5, you can convert one STEEM into 5 SBD, regardless of SBD price.
We would add a small spread to it, so thet you can convert to $0.99 and $1.01, to prevent abuse through conversion. So through this measure, SBD will stay around $1 with up to 2% of difference."
I really don't understand what you mean by adding a spread, and how this reverse conversion would even help. Basically folk would be inflating sbd, and deflating steem. do we know how much liquid steem it would take to do this?
it'd be great to have a bigger article explaining exactly how this would work.
right now, we have mostly pros and cons, but the proposal itself could use some serious fleshing out, imo.
of course, as others have noted, a massive "correction" on sbd in 3.5 days is an unsettling thought.
We have one conversion and tge other one will work the same. It can only devalue sbd if it is above one dollar. And it burns steem, so should increase the steem price.
Also it takes weeks to get to a point of a hard fork. By then the market knows what will happen and should have already adapted.
Code wise the proposal clear. How I said it is exactly how it works. If you tell me your questions, I can answer them but the proposal is fleshed out in how it will work.
What will happen and when to do the fork, that are the big questions.
Edit: the spreadfee is just a safeguard should there be issues with users converting back and forth. The lower we have that, the tighter the spread.
the biggest part I don't understand is: a small spread that would prevent abuse of conversion.
the 3.5 day correction I referred to is the amount of time a conversion would take.
Basically you can buy sbd for 1.01 in steem and sell for 0.99. That way each back and forth conversion costs you 2 cent. So if there is a chance of you being able to abuse the conversion (which we don't think there is) you have to make 2% profit to break even.
And yes, 3.5 days for the conversion.
I believe that, in such a rapidly changing market, taking plenty of time to consider and learn how the markets behave is the best bet. I'm grateful to know that most of the witnesses are cautious and slow in making major decisions like this.
Thank you for the more detailed explanation.
"SBD was meant to be pegged at $1"
You are misinformed. The ogirinal white paper specifically states that the peg is only for the down side and that the upside was not an issue to be fixed it it happened.
I think this is all being triggered by the way the porn deal fell apart. It needs to be nipped in the bud and focus on helping the flood of new bloggers and other content creators succeed instead.
It's the Alexa ranking dropping into the top 500 and none of the big guys even have seemed to have even noticed.
This is really the core argument in my thinking! Peg SBD down, watch STEEM take a hit, take a good breather and solidify community values in this economy!
Hi @aggroed and @reggaemuffin thanks for bringing this topic up!
Honestly, what do we have currently? in terms of userbase? I read it somewhere here, let it be 60 k users and some more or less working apps and services.
This SBD pump and some other actions have brought us alot users in the last weeks, the german discord we just brought up a few weeks ago is bristling with activity.
This broadening in the userbase is what we need, even if i sincerely fear that the code that is currently in use is by far not able to handle a mass adoption, even not a very tiny one ...
So yes we need that pegging, do we need it now ? Definetly not, there are so many bigger problems to take care of!
Is there a list of witnesses divided by sides ? Would make my decision easy.
Thanks alot!
Kind regards
Jan
It isn't only the increase in SBD that has brought users, it is also the price of STEEM and the general crypto market. STEEM is up about 30x in the past year (and despite that has underperformed many of its crypto competitors). SBD is only up 6x (was 14x). The main value and attention driver here is the gain in STEEM, not SBD, though one can't deny that increased reward value is a nice bonus.
I don't think you are right there. The main drive for new users are the high rewards they get from posting and commenting atm. And those result from the price of both currencies. Taking away 75% from the current reward level will definitely lead to a massive drop of interst in activity.
Especially for big content creators who depend on the money.
Users being dependent on their Steem "income" shouldn't be the basis for making protocol/economic changes. Network and currency stability should always be the priority. If we're claiming to have a pegged token and the pegged token is never pegged, despite the resources being wasted on it, then we and the tokens lose credibility.
I get that people like money, but making sure content creators continue to make hundreds or thousands of dollars per week/month for publishing mostly unappealing or unpopular blog posts on a relatively obscure website isn't really a concern for me, personally. Stabilizing the economics and having a useful token for commerce represents vastly larger upside potential for both growth and value.
I think you are right with
However having a large community also is important for that.
What speaks against waiting 2-3 months till SBD is closer to 1 and the implementing it?
Nothing at all. That's certainly an option. I just happen to think that testing the robustness of protocols/parameters in extreme market conditions can provide useful feedback for decision-making.
Let's say that a STEEM --> SBD conversion is implemented and the markets quickly correct to a relatively stable peg near $1.00 after trading at 500%+ for a couple of months. I'd say that the function worked very well and could be further tested/tweaked for larger-scale adoption/use.
It's the extreme market conditions that create the pegging issues. So to me, there doesn't seem to be much sense in waiting for things to return to low volume and less interest to then test the robustness of protocols and parameters. If we can test when the market is highly active and volatile and find success, then we can mostly be assured that the new implementations could work fairly well against similar future scenarios.
Steem is already difficult enough to explain and understand with SBD being worth about 1 USD.
With SBD being worth any random number based on speculator behaviors, confusion is added to the system. That doesn't help for mass adoption.
SBD's should be worth around 1 USD. But a smooth transition would always be preferred over a crash. Humans are emotional beings and herd behaviour is very much a real thing.
I'd say an announcement with a 60-day period before downward peg action is executed should suffice.
Becoming wealthier> Being confused.
So "being confused" is reason enough for you to make everyone on a 50 000-user platform SEVEN TIMES poorer?
Gotcha...
No one gets poorer when 1 SBD will equal 1 USD. With a headsup in advance, people will convert SBD to Steem. In all likelihood the value of 1 Steem will rise as a consequence, which makes the users of the Steem platform wealthier.
The speculators that hold SBD's on exchanges will become poorer, but I don't care about them to be honest. I care more about the Steem eco-system and its users.