Personally I would continue printing SBD forever. I don't think there is a need to limit supply when the market is overvaluing it. Let's say someone will buy $1 bills from you for $2. So you sell them as many as you can get your hands on, or do you sell some limited number and then stop?
The purpose of the 10% limit is to cap the backing of all of the outstanding SBD at 10% of STEEM's market cap (considered a 'safe' amount) regardless of the amount of SBD in circulation. So if the market wants lots and lots of SBD with less and less backing, why not give it to them?
Yep!
LOL. Good questions!
However, imagine how whales of Nubits feel now that the per unit value is 0.44 Usd. Some of the owners of the Steem Dollar are not responsible for this problem. If I can just convince high schoolers here to start blogging, I bet I can buy Steem Dollars for one peso each.
NuBits promises a value of $1 and it hasn't delivered. SBD doesn't really promise that any more (since I think it was HF14), it promises a peg price that is conditional on the value of STEEM. If STEEM's market cap isn't enough to support the amount of SBD that exists, SBD holders are explicitly taking price risk. If they don't like that they should exit SBD. I find SBD's promises to be a lot more honest and reasonable than most of the other pegged coins which don't make explicit when they will no longer sustain a fixed price.
NuBits didn't have another coin to shit on. I agree with you that SBDs can be printed indefinitely. It just results in downwards pressure on STEEM. I have no issue with anyone at Upbit or elsewhere buying SBDs over a dollar if they're just using it as a fast trade. The peg is really only maintained to the downside as long as STEEM's ability to trade over $0 remains.
That's not correct. NuBits has NuShares which is the staking token and much of the backing for NuBits, much like STEEM/SP (though there are also important differences).
If the alternative were printing nothing, then I would agree. But it is not, so I don't. The alternative is printing STEEM to pay rewards. Instead of some of the SBD being used to buy STEEM and power up (which channels the overvaluation of SBD into the STEEM price through added buying power), some of the printed STEEM is sold, resulting in downward pressure on the STEEM price.
Not printing SBD (and instead printing STEEM) when SBD is overvalued is pretty clearly a negative for STEEM. More selling of STEEM, less buying of STEEM, less/no 'bonus' buying power for STEEM due to the SBD overvaluation. There is no advantage to it, except to SBD speculators. Steem itself pays the price to enrich them. That's a foolish course of action for Steem stakeholders.
I see, I didn't look into nubits too much, just thought their dumb bot attempted to buy things, and I assumed it was with more nubits, which just seemed idiotic. That sounds about as dumb as I first assumed though.
I mean, people are going to prefer whatever benefits them, and I don't have a large stake in steem so...
Simply put, because I don't trust the market's risk management skills. In the medium-to-long term, undercollateralization almost certainly leads to peg discounts when the price of STEEM falls.
Peg discounts are otherwise handled by the system and indeed if you look at the price history there have not been significant sustained discounts ever (apart from a short time 2016 when few people understood how it worked). Premiums are not otherwise handled by the system. The only way to resolve a premium (which do put a very high degree of risk onto SBD holders; someone buying/receiving SBD at $5 is at risk of easily losing 80% of their money, and indeed this has happened) is by issuing/selling more of it.
Furthermore there is no real 'risk' here, in the sense of risk to the overall system. SBD regardless of the amount issued is capped at 10% of STEEM's value period, which is so small it is actually less than many one-day price moves. Any additional issuance of SBD just means that SBD buyers are voluntarily accepting some of STEEM's price risk. I see no harm in that. It actually addresses one of the frequent criticisms of pegged assets, which is that they are making an unkeepable promise to always maintain a price. SBD doesn't do that. It promises to maintain a price as long as STEEM's price/marketcap is high enough.
That's exactly right, and the missing piece I was forgetting about. It's not like SBD is at risk of a total collapse if too much is printed.
Is this idea feasible?
https://steemit.com/steem/@freebornangel/we-can-t-go-to-the-moon-without-creating-demand
I'm not entirely sure I understood it correctly but to me it looked very much like the STEEM-to-SBD (also known as 'reverse') conversion idea which has been proposed by others (perhaps you were not aware of this and reinvented it. I believe it is feasible, but: a) The coding for it is somewhat involved as it requires both designing the details of how it would work in every situation as well as coding it, which requires a new operation and other code changes (along with associated testing); and b) I'm not sure it has enough support to get adopted at this time (though it might).
Except its not a conversion, its a sale.
The steem is not burned, but added to/replaces the inflation created by block production.
We could burn an amount equal to what the blocks produced to lower overall inflation to match demand, if that is desirable.
The procedes from sales goes to the sp holders, witnesses, and authors in the percentages now used.
This turbocharges sbd creation buy selling them directly to anybody with one usd of steem.
As determined by the x day average.
In order for sbd to be adopted there needs to be enough of them to matter.
15m barely makes payroll at one pro hockey game.
With none left over to use for concession sales.
Nobody can buy a jersey because all the sbd went to the players.
By selling them directly supply can meet demand.
Tether has ~2.5b? in circulation, with luck we can match that.
By putting the steem derived from sales into the inflation pool, all stakeholders benefit.
I know there isnt an actual pool, and i dont know how to tie sales to block production like regular inflation, but i was thinking a bot to power up the 25% that gets paid in sp, and adding the balance to the rewards pool.
What i am unsure about is what happens when demand drops and the price of steem goes down.
Existing sbd would have been paid for with one usd of steem, except those paid out as author rewards which have time value attached.
Does the peg hold or does steem defaulting cause sbd to crash, too?
Right now the usd is down 98% but it is still accepted more places than silver.
I guess the trick would be to get enough into circulation that sbd holders refuse to take the loss and continue to use them in commerce on par with the usd.
Okay so you are proposing something like the hyperinflationary model which existed earlier in Steem. That is, greater STEEM supply, but a lot of it distributed back to stakeholders so they don't lose ground.
The three problems I see with this are:
Overall I think destroying STEEM to create new SBD demanded by the market is better (sending the price of STEEM on an attractive upward trajectory instead of downward, reducing inflation instead of increasing it, and encouraging, or at least being neutral with respect to, speculation rather than punishing it), though both may still have some issues.
If there is not enough demand for STEEM and its market cap drops, the peg will not hold. There is no substitute for a platform that attracts and retains investor interest.
I wasn't here long enough to have a feel for the math when steem was hyperinflationary, but i sure liked watching my sp grow.
Yes, many moving parts to steem.
Inflation would be in sbd, provided the debt ratio is maintained author payouts are in sbd, the only steem created is witness pay and sp interest, both initially locked in sp.
Increasing pressure to hold sbd?
If the use case for sbd is as a dollar/euro substitute there needs to be enough of them to capture even 1% of the market.
Current inflation will never provide enough sbd to do that.
Let alone provide enough to put pressure on the dollar.
15m is puny in a 100t market.
As crypto matures as a market speculators will leave anyway.
The question is the condition they leave the price in.
If demand for a pegged asset exceeds current liquid steem supply then the pressure is upwards.
That demand will cool at some point so switching from sales to conversions will likely have to occur.
Provided we are open about the current inflation being temporary, and that at some future point we flip to deflationary, the speculators can plan accordingly.
I guess the math to be done is demand for sbd divided by current liquid steem.
Can we sell enough sbd to exceed the speculator's selling?
This will always be the case?
Holding liquid steem is a guaranteed loss in a stable price environment?
Even holding in sp gets diluted, too.
Lol, if we are gonna play crapitalism, its good that we have some of the best in the world batting for our team.
I would think that, given the changes i propose, opening the sbd spigot would give the speculators the best chance of selling at the top.
If they hold too long, that is on them.
Presuming we can sell sbd as a dollar substitute, i think this plan puts more upward pressure on the price than doing nothing.
Yes, at some point, we have to change from inflating to burning, perhaps we can build that into the code.
Say when the debt ratio is too high steem are burned and when the ratio is under x% the steem from sales augments rewards?
We can make it a linear mix of the two.
I think sbd competes favorably against the dollar.
It eliminates banks, and backlash against the banksters is growing.
Even in a greenback environment sbd moves nearly instantly and without fees.
Banks would have to match that condition or lose market share.
I really like the idea of alternating burning and augmenting rewards.
Opening a spigot gives us a chance to create enough coins to compete on a global scale, and burning proceeds from sales keeps the price from dropping, while augmenting rewards puts upward pressure on sales.
My problem with crapitalism is that it is a fraud designed to impoverish workers and enrich money changers that contribute nothing to the production.
Just like it is mathematically impossible to repay the fiat debt, it is impossible for wages to buy back their product.
The way to profit from these is to exploit the ignorance of the masses.
Shameful, if you ask me.
Like taking candy from a baby.