RE: APR anyone?
The original white paper had none of these rules (print rate limit, 10% haircut rule, etc.). Clearly it doesn't apply directly to what is now a much different asset. And even the original white paper stated that the price would only be close to $1 most of the time, not always. Under the current rule set, SBD is not pegged to USD once the ratio exceeds 10%, it is effectively pegged to STEEM (this explanation may not appear in even the current white paper, though it probably should, but it does appear in the blockchain and/or github discussion that took place when the change was made). In fact, the last time I checked several hours ago, it was in line with its intended STEEM peg and therefore can't be considered as significantly undervalued.
The problem here is that the print rate is only cutting off right on the haircut line
I would point you to some of my other replies to @buggedout rather than retyping them here. In fact, printing or not makes hardly any difference. The full SBD print rate is only about 2.9% per year. Sustained for a year, whether on or off, that has about as much effect on the debt ratio as one quarter of a typical one day's volatility in the STEEM price. For all practical purposes, all of the meaningful changes occur due to changes in the STEEM and SBD prices (the latter due to its influence on conversions), not whether or not it is being printed.
We could debate the merits of stopping printing at the various different points but given the above observation I don't think it is worth the effort. In practice it hardly matters with respect this (it may, however, still matter with respect to supply dynamics during a pump, which in general would argue in favor of more printing).
perhaps a price feed bias should have already been implemented to soften the blow, and allow conversions to still be effective to bring the debt ratio down without loss?
I believe the prevailing view (as well as the white paper itself) is that bias should be considered if conversions aren't occurring, as well as if the price is not near the peg target (currently based on STEEM). They are still occurring and the price is reasonably near the target. Also (and again this agrees with the white paper) most witnesses prefer to make such adjustments in response to sustained imbalances and not short term market movements.
I'm reading the August 2017 Whitepaper. Is there a newer one out?
I understand that above the 10% debt ratio, STEEM and SBD are pegged together in an attempt to maintain the ration at no more than 10. Part of the mitigation process is to dry up SBD supply before reaching the 10% threshold, and produce more STEEM, which in theory would be produced at a higher rate than the price of STEEM going down, and therefore lowering the Debt ratio, which on-platform is calculated at the SBD-USD peg.
By drying up SBD much later than previously, the mitigation process is starting later, and so the debt ratio is going to be a fair bit more than 10% before the process kicks in, unless STEEM price feed biases are introduced to incentivize conversion, which @themarkymark has told people to stop doing already.
Unless I am misreading, or not reading the current version of the whitepaper, maintaining the SBD -USD peg (or getting SBD back to the 1USD mark) is still important even above the 10% debt ratio. Another problem here is the external markets have a huge impact on the SBD price. General sentiment is down, so it's an uphill battle whichever way you look at it.
You're probably reading the current version. It might need some further edits.
What I'm saying is that printing or not printing doesn't really help significantly in terms of 'drying up SBD'. Numerically it just doesn't. 2.9% per year is the difference between printing and not priting. Normal volatility overwhelms that.
The 'drying up' process has to involve conversions, and conversions require that SBD be (at least close to) at or below $1. If SBD pumps, in part because the supply has been cut off, then the conversion mechanism fails and the SBD supply can't adjust, even when the STEEM price declines. That's what happened over the past year when the supply pumped and then the print cutoff was reached.
There are other ways of accomplishing the goal of preventing such sustained pumps (to in turn avoid preventing conversions from bringing down the SBD supply in a responsive manner), such as reverse conversions, but they have the same issue of potentially getting blocked by a print limit.
That makes no sense. You can't prevent the market cap of an asset from declining by printing more of it (inflation) without adding value in some other way. It is just dilutive (neutral to market cap at best; worse than neutral if the market doesn't absorb the newly-printed STEEM smoothly).
That literally makes no sense. It would block all conversions (certainly not desired) since the SBD price if kept at $1 would be well above the conversion target. It would also become increasing impossible/impractical if or when the STEEM price continued to decline. There is simply no way to peg to $1 as the STEEM market cap falls. The capacity to do so within a system of declining value just isn't there.
As I noted, the intent is to peg to STEEM rather than USD once beyond the limit. Again the white paper might need some edits.
It probably does need a bunch of edits after the last fork.
If the 2.9% is insignificant, why even stop printing SBD then? Right now SBD is at about 4.4% of the total "Virtual" Steem supply, so I don't know how we to get to 2.9% from there. Do you have something you can link me to to see? Looking at the FAQs (which I can see need some updates...) 75% of STEEM produced goes into the rewards pool. 75% of that goes to authors, and 25% to curators. Of the 75% that goes to authors, that could be split 50/50 SBD/SP, or 100% SP. If half of post rewards are powered up 100%, my calculations show that SBD accounts for 0.750.750.5*0.5 = 14% of the total $ value of STEEM produced at the time of post reward payout. When STEEM is up, like it was in December, we got lots of SBD, when it's down, like now, we get less SBD, but still more than 2.9% of the value of STEEM produce. Have I got that wrong too?
LOL! I'm going from the perspective that SBD primary designed and function to be a USD-SBD $1 peg, and so one of the many roles of a Wintess is to try and maintain a stable $1 peg as close as possible. It wouldn't block conversion from SBD to STEEM, but would potentially see an increased debt ratio at some point. Price feed biases are one of the tools mentioned to maintain the peg, and to make conversion still attractive at high debt ratios. I must be missing some link somewhere... or my explanation doesn't clearly convey what is in my head.
Reverse conversion.... is there such a thing, where where has it been hiding?
I'm enjoying this conversation. I'm here to learn, so if I'm wrong, at least I may learn something from this. Thanks for trying to explain things to me... as you roll your eyes again!! LOL!
Steem inflation is about 8.5% per year (declines by 0.5% per year). 75% of that goes to reward pool. Of that 75% goes to authors. Of that 50% (max) goes to SBD. This comes out to 2.39% per year (my citing of 2.9% earlier was a mistake) inflation emitted in the form of SBD.
This works out to 0.19% per month. If the debt ratio is 5% and we emit for a month and the STEEM price doesn't change then the debt ratio goes to 5.19%. Or 5% if we don't emit. Plus, in both cases, whatever change is attributable to the change in STEEM market cap. So the difference between emitting and not emitting is going to be very small, almost always much smaller than the change due to price, and often if not usually less than the change due to conversions. As to your question why bother stopping, I don't have an answer. Some people feel it makes things 'more safe' is the only answer I can give. But numerically, it really can't matter much.
When possible. When STEEM's value is too low it is no longer possible. As STEEM's price goes lower and lower this could quickly become absurd, where you convert 1 SBD into STEEM and you get 1 million STEEM back. There is no way that can work.
Of course it would. Let's say the SBD price were maintained at $1 but conversion would only pay you 50c worth of STEEM. Who in the hell would convert? There would be no shrinkage of the SBD supply (just as happens during a pump), which is certainly not desired when the SBD supply is viewed as too high. You certainly want to shrink it.
A bias could be used to shift the conversion target back to $1, but why would this make sense? It would completely erase the function of the 10% cap rule! If we're going to do that we might as well remove the rule.
There isn't. It is a proposal that has been discussed but no such feature exists. The only way to get new SBD into the system is to create them via rewards.
Ah! But that 2.39% translates to 28.1% of all newly created supply, so stopping it means you would be producing 28% more STEEM, and no SBD, which is fairly significant. Yes, the longer we go, the less overall significance it has, but considering the likelihood that more than half the STEEM supply is locked up in SP and not on the market, that 28% reduction in supply rate could have an effect if carried on for a prolonged period.
I get the conversion dilemma, so it's a case of reduce the debt ratio first, and then look at returning SBD to the peg.
The next item would then need to be how to prevent the debt ratio getting back up over 10% again, while maintaining a stable $1 SBD peg. If that can't be done, we may as well not have SBD at all. Get rid of it....Problem solved.
The denominator of the (debt or SBD) ratio refers to total market cap. The total amount of STEEM produced per year has no relevance. As I noted, in a month, the ratio of 5% either goes to 5.19% or stays at 5%. Or if you want to add the 0.19% to the denominator, sure, then the ratio goes to 4.99%. Still very litltle difference. If you want to let it play out for a year, then it either goes to 7.39% or stays at 5% (4.88% if the STEEM is added to the denominator). That starts to sound somewhat significant but remember this ignores all conversions, which in a well functioning system (no big pumps) would certainly be happening over the course of a year, and certainly there would almost always be huge price changes in a year.
Also, producing SBD does not mean producing less STEEM! The STEEM is still produced, just in the form of SBD (which, in general, is later converted into STEEM). It is the same as producing the STEEM but then temporarily locking it up.
No such luck.
There is no satisfactory way to get rid of it. You can't simply erase the tokens (obviously) and you can't eliminate the conversion option that current holders paid for without severe damage to any sort of social contract. You can't eliminate printing because that would give SBD holders a huge one way bet on a pump that is backstopped by (and therefore at the expense of) the rest of the Steem economy. Anyway, if it did pump then just not printing for no good reason is rather stupid because creating new overpriced-at-birth SBDs allows SP holders to extract revenue from SBD speculators.
We're stuck with it. We do the best we can to make it work as well as possible, but that isn't likely to be perfection, just a set of useful compromises (and IMO this is good enough to add a lot of value even being imperfect). Perhaps in the future there may be some sensible way to get rid of it, such as converting it to an SMT with a suitable dedicated reserve fund. This would require the SBD supply to become naturally very small, which might happen.
That is starting to make sense in some ways. So the longer the platform goes on, and the more STEEM and SBD is produced, the less power we (witnesses) have over the overall economy, and influencing anything via APR of feed biases?
I see where you're coming from with SBD. It's kinda broken being unable to fulfill its primary role consistently, but as you say, we're stuck with it anyways.
Thanks for taking the time to converse with me on this.
Concuerdo con eso último que escribiste..
I did have to LOL pretty hard at this one. I almost spat coffee out through my nose.
You realize that many (most?) crypto projects never update their white paper, right?. The original white paper is simply a launch tool and statement of purpose, and further changes via hard forks, etc. are considered outside of the scope.
Steem has updated its white paper but it hasn't been carefully kept up to date with each and every change. That probably a bad combination.