We had 0% interest for some time and it only contributed to uncertainty. Now that we have a tiny interest rate of 0.01% APR (anual interest) people started to hold.
Note that new STEEM is generated every 3 seconds, it is deflationary like any currency so we have a perpetual down trend. Something should influence to hold STEEM and that is why we have an interest rate. Actually I think that 0.01% is too low IMHO!
What data are you using that people are "starting to hold" because I believe it is quite the opposite, most people are doing the trade to Steem as it has a huge potential payoff when and if Steem recovers to normal $1.50 price range.
0.01% is because it is a consensus and most people have the default 0% or use 0%. Now that SBD is stable, I see no reason for an interest rate to influence it.
I meant that people started to hold STEEM assets (SBD, SP, STEEM). Because, the more SP you have, the more SBD and STEEM you can earn and now you have interest on SBD! People might trade between STEEM assets but they have a little incentive of 0.01% SBD interest.
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Hi, @themarkymark I'm still kinda new to the steem platform so maybe this is a total noob question. But why do you feel like there is no need for interest on your SBD? Also, is this only a thing that witnesses can do or can anyone change their interest rate on SBD held?
Also, is this only a thing that witnesses can do or can anyone change their interest rate on SBD held?
Hi @kslo, only witnesses can set the interest rate on SBD, but to be clear they are not setting the interest rate on their own SBD, but the interest rate on SBD for everyone. I believe the actual interest rate given comes from a combination of the rates set by the top witnesses although I don't know the exact details of how that works.
But why do you feel like there is no need for interest on your SBD?
The whole point of SBD is that their value should be as close as possible to $1 USD and it's part of the job of the witnesses to keep it there. Setting the interest rate is one of the ways to do that. If the price of SBD falls below $1 then increasing the interest rate can make them more valuable and raise the price closer to $1. On the other hand if SBD are trading for more than $1 then interest rates can be lowered to try to bring the price down.
Currently SBD have been trading for over $1 so that's why @themarkymark is lowering his proposed rate.
Hope that helps explain things, let me know if you have any other questions!
Hey @yabapmatt this explains it perfectly. Thanks for taking the time to write a beautiful explination. I didn't know that the witnesses were in charge of keeping SBD at the $1USD mark. It makes a lot of sense.
I don't agree :P
We had 0% interest for some time and it only contributed to uncertainty. Now that we have a tiny interest rate of 0.01% APR (anual interest) people started to hold.
Note that new STEEM is generated every 3 seconds, it is deflationary like any currency so we have a perpetual down trend. Something should influence to hold STEEM and that is why we have an interest rate. Actually I think that 0.01% is too low IMHO!
What data are you using that people are "starting to hold" because I believe it is quite the opposite, most people are doing the trade to Steem as it has a huge potential payoff when and if Steem recovers to normal $1.50 price range.
0.01% is because it is a consensus and most people have the default 0% or use 0%. Now that SBD is stable, I see no reason for an interest rate to influence it.
I meant that people started to hold STEEM assets (SBD, SP, STEEM). Because, the more SP you have, the more SBD and STEEM you can earn and now you have interest on SBD! People might trade between STEEM assets but they have a little incentive of 0.01% SBD interest.
Kindly recommend you document yourself on economics science, for example this book: Inflation: What It Is and How It Works (Economics in the 21st Century)
Thank you for being open about your interest rate policy. You just got my (very small) witness vote.
Thanks
I simply like your article, great content, and explanation @themarkymark
@hatimbenya
Hi, @themarkymark I'm still kinda new to the steem platform so maybe this is a total noob question. But why do you feel like there is no need for interest on your SBD? Also, is this only a thing that witnesses can do or can anyone change their interest rate on SBD held?
Hi @kslo, only witnesses can set the interest rate on SBD, but to be clear they are not setting the interest rate on their own SBD, but the interest rate on SBD for everyone. I believe the actual interest rate given comes from a combination of the rates set by the top witnesses although I don't know the exact details of how that works.
The whole point of SBD is that their value should be as close as possible to $1 USD and it's part of the job of the witnesses to keep it there. Setting the interest rate is one of the ways to do that. If the price of SBD falls below $1 then increasing the interest rate can make them more valuable and raise the price closer to $1. On the other hand if SBD are trading for more than $1 then interest rates can be lowered to try to bring the price down.
Currently SBD have been trading for over $1 so that's why @themarkymark is lowering his proposed rate.
Hope that helps explain things, let me know if you have any other questions!
Hey @yabapmatt this explains it perfectly. Thanks for taking the time to write a beautiful explination. I didn't know that the witnesses were in charge of keeping SBD at the $1USD mark. It makes a lot of sense.
This is a great explanation; well done!
I think it would also be helpful if people understood that SBD actually means "Steem Backed Dollar."
Well said, the top 20 set the interest rate with their consensus.