I understand how the inflation works, I just mean that converting the SBD to STEEM adds more liquid STEEM to the system which may be sold and reduce the market price of STEEM thereby nullifying any increase in the SBD market price from the reduced supply.
So I don't really think this whole conversion scheme really works and the only way to really make an impact would be to burn the SBD.
Mathematically what you wrote in the first paragraph simply doesn't work out. An informal proof: The supply of SBD has to decrease faster than the market price of STEEM, in part because if the price of STEEM did decline, the conversion rate would also decline (you get less value in STEEM for each unit of SBD; the haircut rule). Eventually, if SBD keeps getting converted, this has to result in reaching a state where all of the SBD is used up, and there is no SBD in circulation. (Of course sbdpotato would likely stop first, because SBD reaches $1, but that's okay, it means the amount of liquid STEEM added to circulation is less than it would be in the limit.)
In reality I'm pretty sure that there are multiple factors influencing the STEEM price and it isn't guaranteed to decline just because SBD is converted, as loosely assumed in the above example. It is absolutely possible for the price of STEEM to go up even as SBD is being converted, which would make the conversions even more effective. But even in the worst case, it does have to work.
Ok that makes sense...I didn't really think about it too deeply. I like the SBD potato idea, but I don't like taking funds from the Steem DAO to do it since I think there's a better chance of getting SBD to $1 by using those funds to help build good projects that encourage people to buy/hold STEEM.
In any event, I have another idea to help get the price of SBD up that I think might make more of an impact.
Definitely room for different ideas and approaches, and nothing wrong with disagreeing on a particular usage of DAO funds, that's sort of the whole idea of the DAO. I'm not personally sure it is the best possible use for DAO funds, but currently a lot of DAO funds are unused, the idea here is for a good portion of the funds to eventually be returned, and increasing the value of SBD actually increases the market value of the DAO treasury (so more funds available to fund the sorts of good projects you describe). So I personally see it as a reasonable use at this time. If there were more immediate contention for DAO funding then I might feel differently.
So I support your disagreement, even if we disagree. ;)
The DAO funds are largely unused at the moment so I don’t think it is a bad use case for them especially since they will be sent back after. At anytime should the DAO start to look short on funds I would be happy to send it back sooner. Also remember Steemit promised to donate some funds to the dao which is yet to be done.