The dangerous reverse conversion proposal, and how to REALLY fix the peg
Hello, everyone! @lemony-cricket here with my feelings on an issue we've all been talking about. I know it's long, but please read it. It's important. It affects all of us.
Image from pixabay
The issue at hand
SBD, the blockchain-issued asset we all get paid in for our posts and comments, is trading much, much higher than it was originally supposed to. This means, among other things, that each "dollar" we see here on Steemit is actually worth more than that; as I write this post it's trading at a 740% premium ($7.40).
Now, I believe that most of this is due to the speculative activity surrounding SBD due to confusion from "dumb money" external to the platform, who failed to do their research before investing. It's effectively taking that dumb money and redistributing it to smart Steemians, who understand that their extremely-overvalued SBD should immediately be either offloaded for STEEM or cashed out at market value.
At first glance, as contributors, this is wonderful! We all love more money. However, there are a few problems with allowing SBD to continue trading above $1 for the foreseeable future:
It hurts our potential for an internal economy.
A peg to the U.S. dollar is valuable to us because it allows us to hold and exchange a stabilised asset on the blockchain within the community. Say I want to purchase a piece of artwork from a fellow Steemian. I can do one of two things:
- I can buy that artwork with STEEM or another, external cryptocurrency.
- In this case, the artist assumes the risk that the value of STEEM or other currency will go down before they can cash it out.
- I can buy that artwork with SBD.
- With a functioning SBD=USD peg, the artist can rest assured that the asset will retain its value relative to the dollar in perpetuity.
Without a functioning SBD=USD peg, this use case for SBD fails. Currently, anyone offering 1 SBD for 1 USD's worth of anything is, sadly, being quite foolish with their purchasing power.
It encourages stakeless behaviour.
Steem works as a content platform partially because the authors who create content are incentivised to make good decisions for the platform as a whole. The way we do this is by mandating that authors must accept, at most, 50% of their post's value as a liquid asset (SBD). The other 50% must be powered up to vesting shares.
Unfortunately, right now, due to the irrational price of SBD, the percentage of a post's value which is automatically powered up is only 12%. That is not a lot at all. It's so low, in fact, that several bad actors are, as we speak, hurting the platform for personal gain in various ways, and writing off that 12% stake as a lost cause. Some aren't even powering it down. They just leave it there and ignore it. 50% is much, much harder to ignore. We would see many of these bad actors disappear should the SBD price return to rationality.
It hurts Steem's credibility as a platform.
Steem purports to offer two blockchain-issued asset classes, STEEM and SBD. SBD is meant to represent exactly one U.S. dollar in value; no more, no less. To people who are not familiar with the social networking aspect of Steem and only care about its worth as a means of transfer and/or storage of wealth, this is a huge red flag.
The dangerous proposal
A majority of the top 20 witnesses appear to be in favour of introducing a reverse conversion operation. This means that instead of only being able to convert SBD to STEEM, we will also be able to convert STEEM to SBD. This would theoretically solve the problem with the peg, but it would also introduce a dangerous and imbalanced opportunity for bad actors to manipulate the market.
As I understand it, the lack of bidirectional conversion was originally conceived to protect small holders from a sort of unfair market manipulation. Take the following scenario:
- The price is currently 5 USD/STEEM.
- Mallory has 200,000 liquid STEEM. She wishes to manipulate the market.
- Mallory uses the new reverse conversion feature on half of her STEEM to (effectively) short 500,000 SBD into existence.
- Mallory sells the remainder of her liquid STEEM through large, market orders on various exchanges, most likely causing a dip or outright crash as buy orders evaporate from underneath the massive selloff.
- The price falls to 2.50 USD/STEEM over the next week.
- Mallory uses the conversion feature to convert her 500,000 SBD into 200,000 liquid STEEM.
- Lather, rinse, and repeat.
As you can see, a bidirectional conversion implemented outright would result in a huge wealth redistribution from the honest users to the dishonest users of the platform. Now, the high SBD is indeed also currently functioning very effectively as a wealth redistribution mechanism, but it is at least doing so in a way that benefits contributors to this platform, at the expense of those external to it.
I have devised a two-phase approach to the irrational SBD problem. Please do take the time to read my suggestion from a technical standpoint as I am still a new user of Steem and only recently began to understand the economics of the platform. If you believe it is impossible, irresponsible, or impractical, I would like to understand why.
My proposal on how to fix the the SBD peg
(a two-phase approach)
Phase One: fix the broken 50%/50% algorithm
Rationale
The high SBD price currently incentivises "eat, shit and leave" behaviour. People who do not believe in the platform or community come here to post simply to make money. Steem works because authors acquire sizeable stake in the platform which takes vesting time to power down. There is a reason we did not allow 100% SBD payout from the beginning, and yet the 50%/50% algorithm has become a lie. Instead, the percentage received as liquid SBD can currently be computed as:
sbd_price / (sbd_price + 1)
...which is a whopping ~88% as I write this post! This means that an extra, unintended 38% of each payout's value is being robbed from our economy. The above approach will solve this first problem, and many secondary problems will go with it, including the rampant abuse of voting bots-- who can currently provide reliable, per-post liquid returns, vested stake excluded, for little to no contribution to the platform. These abusers can effectively ignore their stake in our community as it is such a small percentage of what they make.
By rebalancing the 50%/50% algorithm, we can solve this half of the problem in short order.
Steps
- Have the witnesses create and maintain a feed of SBD price in U.S. dollars, distinct from and unrelated to the current exchange rate calculation.
- When awarding post rewards, compute the 3.5 day moving average of this price and factor this into the calculation of the 50%/50% rewards mode.
- Allow Phase One to continue for at least two full payout periods before moving on to Phase Two.
Phase Two: fix the broken SBD/USD peg
Rationale
At this point the impact of the high SBD price on stake has been mitigated, however, SBD is still useless as a shelter from volatile market conditions. This is disadvantageous, as SBD could provide real tangible value in the form of a means of exchange for risk-averse providers of goods and services.
Steps
Compute an "SBD Irrationality Quotient", or "SIQ":
(sbd_price - 1)/10Choose a block height at least two payout periods in the future.
At the chosen block height, enable a rate-limited reverse conversion (STEEM->SBD) using the SIQ to adjust the coefficient as follows:
steem_price * steem_converted * (1 + SIQ) sbd_received = ----------------------------------------- sbd_price
For example, if I have 10 STEEM, the SBD price is $10, and the STEEM price is $10, I should be able to gradually convert my liquid STEEM to 10.9 SBD.
This should create a distributed market force which forces the value of SBD in a controlled manner toward $1.
Conclusion
It's definitely scary to think about our payouts going down by a factor of 7. The concept makes me sad, too, especially as a new user. On a normal post of mine I can expect maybe $2-$3 of rewards. However, money is not everything. We are building a decentralised society here on Steemit. I hope that we can all put our short-term monetary goals aside and do what is right for that platform.
It's also important to note that the mitigation plan outlined above will most likely result in a higher STEEM price for several reasons. Firstly, as the new reverse conversion removes liquid STEEM from the market, decreased supply should result in a rise in STEEM's price. Speculative interests from "dumb money" will also cease to be split between our two asset classes and all that speculation will shift back to STEEM, bringing further volatility (for better or for worse) to STEEM. Finally, Steem can go back to showing off a fully-functional, stable, blockchain-issued dollar peg with faster transactions and higher capacity than all top coins combined.
That last one is going to bring a lot of attention our way. Especially with the way Bitcoin has been failing spectacularly under load. Our window to capitalise on this is coming to a close as Lightning gets closer to reality. Come on, folks. Let's do this. 🍋
How to get an upvote from me today: Do you agree with my conclusions about the state of SBD? Have your own ideas? Share my goals? Think I'm a dangerous lunatic? All comments are welcome-- especially those pointing out errors in this post that I've been staring at for four hours now!
Your theory about manipulation is incorrect.
The price is determined at the end of the conversion period, not the start (so the idea of Mallory being able to 'short' 500K SBD into existence is wrong; she doesn't know and can't unilaterally determine the number of SBD she will receive). Shorting is not exactly the same as converting, though they bear some resemblance, but the differences are important.
I won't get into the details of why alleged manipulation schemes do not work except to say that yours does not work because you have understood the mechanism incorrectly and the one in the white paper does not work because it assumes precognition about future price changes. Most manipulation schemes even if they could work to some possible extent, need to trade off gains from the manipulation against losses from the manipulative trading itself (and even worse from being traded against by those who can see the conversions queue, since it is entirely public). At best it is highly risky and at worst, a direct loser.
Not only most of the witnesses but also several major stakeholders who have a large direct interest in not damaging Steem have looked at this carefully and are not convinced by any of the manipulation stories.
Nevertheless your other ideas looked interesting at first glance, and perhaps useful. I didn't have time to consider them carefully just now but I will do so over the next day or two.
Have you run across the whales who are attempting to bring the price of sbd back down to what your suggesting? @smooth has always done what he could in terms of securing the future of this platform, though we would probably need many whales like him doing the same thing to make the difference that's needed. I would recommend voting him as witness since he won't push through anything that could possibly injure us as a whole, will most likely fight it. In fact I think I should find out from him who else would be against a reverse conversion...
Thanks for the information, I'm not great when it comes to mathematical formulaic things but I do get the gist :)
Edit: this post prompted me to take a harder look around- have you seen this one by @lukestokes?
Hey, @dreemit. Thanks for your suggestion. @smooth ended up paying a visit to this thread, and we had a really awesome and engaging discussion on the topic. I think he's done a good job of convincing me that the reverse conversion isn't the worst thing in the world. I'm not going to retract anything I said just yet, and I'm still cautiously pessimistic about it, like I am with pretty much everything like this.... but I did end up voting him as witness. I think it's a good choice.
I'm not sure if you summoned him here somehow... but if you did, thanks.
Hey! Ah, yes, actually I went to chat and dropped your link to him, haha. He's always been awesome about responding to people, one of the things that created my loyalty to him in the first place ;)
After some further consideration, your proposal is hardly different from the witnesses' proposal once we reach the intended/expected end state of SBD=$1. Consider your conversion formula:
sbd_received=steem_price*steem_converted*(1+SIQ)/sbd_price. Given that SBD=$1, SIQ=0 and therefore this reduces tosbd_received=steem_price*steem_convertedwhich is exactly what witnesses are considering!Since you wrote elsewhere that "Mallory's attack necessarily takes place once SBD has stabilised at $1", it would seem that your proposal adds nothing other than the rate-limited qualification which you have not fleshed out into an actual proposal. (FWIW, I have also considered rate-limiting, but as you note, the problem of how to establish the rate is quite difficult. Since the existing payout mechanism is a sort of STEEM-to-SBD conversion, we can say that this rate-limited conversion already exists, but the problem is simply that the rate is too low.)
One last comment. In a comment you mentioned this precondition for your Mallory attack scenario.
First of all, I would point out the need to clarify what is meant by 'the majority' of a market. In any market there is a mix of informed and uninformed traders. If there is too much capital deployed by uninformed traders, then prices will simply not be rational, until a new equilibrium is reached where: a) more informed traders are attracted to the market by profit opportunities; or b) uninformed traders have lost enough money such that they no longer are capable of setting prices.
Second, I can say that from experience the premise of at least informed traders being unaware of the conversion queue is completely false. There have been numerous occasions of large conversions using the existing SBD-to-STEEM mechanism that entered the queue and they were promptly noticed and discussed by traders. There even a few posts on this platform about them which can be found, if one cares enough to go dig them up.
I do recognize that none of these mechanisms are perfect, but we must also not let the perfect be the enemy of the good. Overall most of us who have looked closely at this do not find STEEM-to-SBD conversions to by significantly more dangerous than the existing SBD-to-STEEM conversions (which also raise the possibility of platform-provided liquidity being exploited), and further we find that the existing mechanism is reasonably effective (though, again, not perfect) in limiting these risks.
Considering a variety of factors including risks as well as complexity of implementation, it seems
STEEM-to-SBD conversions is the best plausible method in the short- to intermediate-term of remedying the clear and massive manipulation associated with SBD being pushed very far from its intended and most useful price of $1. If and when we are able to identify and even better mechanism, the possibility exists for swapping that in.
Please understand that I am reading your proposal with the utmost respect for your perspective and adversarial approach to analysis. In fact, my view is that we as a community need more of this, not less. I hope you are able to continue to contribute to these discussions.
Our discussion here aside, I have just discovered that you are, in addition to a top Steem witness, also a Monero core team member. Thank you for your work on Monero. After I send this post, I will cast my vote for your witness. I am convinced through others vouching for you as well as your involvement in Monero that you will represent me well.
Now, you were saying:
I agree, and you have provided sufficient argument that I am at least partially convinced STEEM->SBD conversion will not be the absolute end of the world. I do trust the existing and dominant stakeholders to solve the problem in a manner they believe to be safe after all this discussion. However, I'd also like to address this point you made:
My proposal doesn't only deal with Mallory's attack; it also proposes a gradual, controlled drop in SBD's price, and a fix to the 50%/50% algorithm in the meantime. You seem to have focused in on the attack aspect of my proposal, but it was to be taken as a whole. The attack was only part of the problem with the proposed conversion. The reason for fixing the 50%/50% algorithm first is:
The rate-limiting part is to prevent Mallory's attack and it is the only mechanism for doing so. You are correct that the attack mitigation aspect of my proposed solution is quite gutted without it. The closest thing to an actual proposal I have here is to rate-limit the entire platform to something we don't think could significantly impact the market, and divide that capacity according to vesting stake. Just as they are rewarded in other ways, those with high stake in the platform are rewarded with a higher profit potential from the big SBD sell-down.
More on point 2: Many have said that people who would not be here without the high SBD should not be here. I mostly agree. I think that anyone who is selling the excess SBD they receive and exiting the system with that value is stealing from the platform (to the extent that "theft" as a concept has meaning in a decentralised society). At least 50% of the "real value" of each post should re-enter the economy as vesting shares and any noncompliance with that mandate is an exploit and should be patched.
However, I also think that the high SBD has brought growth to our platform in the short term and I think it's silly to crash the value of SBD all at once. By winding it down over time, I believe the chances would be greater that more of that value would stay in the Steem ecosystem.
Thank you for your kind words. I appreciate the discussion we have had over the past couple of days. I am glad you see the value in this type of thinking, and will certainly continue to involve myself in discussions concerning the platform's direction as I see fit. Thanks for hearing out my concerns.
I'm not sure this would work. It might result in a gradual drop. But it also might lead to an immediate price collapse as soon as it is implemented, as speculators extrapolate the progressive effect of your 'gradually' discounted conversion (of course, this would require that they are actually paying attention, a questionable assumption as we have both previously noted). The only way I see to somewhat ensure a controlled drop would be to actually reset the peg higher and then gradually reduce it. Or perhaps to introduce rate limiting with a very low rate at first, and then slowly increase the rate (though the latter idea still risks a rapid price collapse). Both of those are somewhat complicated, and implementation complexity is definitely a consideration especially for code that in all likelihood would only ever be used once.
The ideal case here would be for the existing mechanism and/or changes to market dynamics to bring the price down on its own at least closer to $1, and then strengthen the peg from there. I'm not sure if or when that will actually happen but I wouldn't rule it out. A week ago SBD was trading at $3, having come down from $14. A huge amount of SBD is being created now. So we will see how this works out for now.
I see at least three issues with this idea. 1) It is difficult to determine how much of a rate will significantly impact the market (and this likely changes over time, mandating an ongoing monitoring and adjustment task); 2) In order for any real influence on the peg to be effective, it would have to at least have some effect on the market (in effect, what we see now is precisely the effect of excessive rate limiting); and 3) clearly many if not most stakeholders would not participate, therefore this mechanism would either result in a tiny rate being applied in practice, or would need a significant overcommit to allow those stakeholders who do participate to have any meaningful effect. I'm not sure how to apply that overcommit in a manner that doesn't allow larger stakeholders to perform extremely large conversions, and also that does not become extremely complicated to implement and understand.
That is a reasonable way of putting it, and I mostly agree. Again, though, we are somewhat confronted with the reality that code to patch it would in all likelihood only be used once if the upper peg issue is addressed, and that (including not only development, but review, testing, and deployment, all of which have significant associated costs and time lags) has to be traded off against the severity of the exploit. There also isn't really widespread recognition of this as an 'exploit', in fact as you have seen quite a few people see it as a benefit!
Thank you for the witness vote. Be assured I take those duties seriously and do my very best for the community both operationally and in terms of policy.
Hi @smooth, though I would much prefer a strong SBD, I'd just like to say how much of a relief it is getting your thoughts on this first hand.
Prior to reading this, I was under the impression you were aggressively dovish, seeking an instantaneous crash to $1. The prospects of this had me very worried, as IMO there would be collateral damage in the form of reciprocal panic selling on STEEM, and perhaps even a permanent hysteresis effect stemming from burned investor confidence.
Completely agree, if a peg must be enforced, this would be ideal. The problem is, that decline to $3 was in the context of a market-wide decline, and both STEEM and SBD rallied harder than BTC once the bottom was in. Both coins are not only tracking the market, but outperforming it.
What I'm seeing at the moment, on both STEEMUSD and SBDUSD, are Inverse Head and Shoulders reversal patterns. As such, if left well alone, I think we'd get a return to the highs when/if Bitcoin resumes higher. In all honesty, I think the chances of an unaltered SBD declining solo from here at virtually 0.
Therefore, if SBD must be pegged, I think we need to be looking at controlled decline scenarios.
This would make a whole lot of sense, though sounds like implementation could be quite the process. I've heard you've made a strong case against this , but is not the envisioned and most straight forward solution the price bias parameter?
Update
Though the market charts still look bullish, after looking at these supply charts from @buggedout, I think this thing will almost definitely sort itself out as STEEM trends higher. Matter of time. Still very interested to hear your argument against a price bias controlled decline though.
I have no arguments against a controlled decline but as I wrote above I don't think it can be reliably implemented without explicitly pegging higher than $1 and gradually reducing that target. Anything else (or doing nothing at all) still risks a price crash even though it may not force one on a particular schedule.
Apologies, I'd heard you'd made an argument against using the witness Bias parameter specifically? I note only one top 20 witness is currently applying a bias.
The bias parameter increases the supply of SBD with no compensating reduction in the supply of STEEM. Since SBD is ultimately converted back into STEEM, this results in higher (potentially much higher) inflation than is supposed to happen (currently about 8.5% with a slow decline down to 1%). This is not something that many stakeholders, particularly the larger ones, support, and therefore it is unlikely to happen.
By contrast a conversion mechanism creates SBD by converting the corresponding quantity of STEEM into it, with no net effect on the overall inflation rate.
Sorry about the delayed response. Makes perfect sense. Thanks mate.
After talking to you and Luke Stokes, I am confident we are in safe hands and will be re-voting the majority of witnesses I un-voted due to seemingly unfounded rumours of reckless intervention.
Finally got some time to day to sit and comment it here (and reread the post:) ) As we already talked earlier, I could not agree more to all of your things you bring here.
What crossed my mind during my reading was if it was possible to make some kind of restricted or limited bidirectional conversion. Well the point is to have it possible only with old members who contributed to this platform in some way and regular/well known and trusted witnesses who work for this platform and would on that way bring down the sbd price. But also then is the problem of staying at the $1 value.
What do you think is it possible to separate users on good steemians and regular steemians? In order to decrease the value of sbd?
cheers
That's the struggle. You and I both know what we're talking about. But maybe not everyone agrees. Blockchains are lawful neutral. They don't deal in good and evil. You have to figure out how to create market forces which incentivise the desired behaviour.
My proposal does contain a rate-limited conversion, but I'm not entirely sure how we would go about deciding who gets to convert how much. I didn't get that far.
Now I'm thinking of perhaps a weighted bid system kind of like the bidbots use for determining vote weight... so the entire platform is capable of converting say 10 STEEM per minute (maybe that is too fast or too slow-- we could leave this up to the witnesses). Everyone who wants to do the conversion allocates that amount of STEEM for that purpose, and every few minutes a weighted percentage of the available conversion bandwidth is executed. We could weight that per-user percentage by total amount of STEEM in conversion pool, number of vesting shares, or some combination of both. This is where my understanding of the economic implications breaks down a bit. There would have to be more discussion by stronger minds than mine.
The broken peg is why I can't sell the art. Selling proper printer ready digital files was part of my game plan early on. I'd like to see it fixed so sales don't turn into ripoffs. Unfortunately, I don't know enough about the ins and outs to be able say much more. I'll give this a vote to hopefully help with visibility, but I'd suggest trying to get the attention of a few of these witnesses as well.
It saddens me that you can't sell your art on here due to the failing peg. You're just one breathing example of how a high SBD is hurting our platform. As I said above, we are missing out on an entire internal economy here that could be flourishing. I believe vote-bot abuse would see a radical decline too, which I know is a pet issue of yours.
The key is to force contributors to invest more of their generated value in the platform. The more value (as a percentage of rewards) locked away as SP, the stronger the market force for contributors to do the right thing for all of us.
I'm trying... I've been commenting on discussions here and there and talking about it in chat, and have had one person resteem this already but without being rude and spamming it around I'm not really sure if it'll get where it needs to go.
I'll try more later tonight. It was a lot of work to think of all that and write it out. I'm a bit tired of writing for now. Thanks for your comment.
I don't have a problem with people using automation to vote for my work. That bot is fine with me. It's based on trust and they know I won't abuse their bot votes by posting shit every few minutes. They also come later, when they have time, and start chit chatting in the comments. Those bots are cool. They help people. The paid bots are literally pushing someone like me out the door. I can't turn my posts into paid programming, then turn around and talk about how brilliant the platform is like I did yesterday. If I bought my salary anywhere else, people would call me a con artist. I know you get where I'm coming from and I've said enough about it.
I also feel your pain. Work hard, don't get noticed. My last post highlights how well the platform actually works for people when they work hard. I was a minnow, I made 100k, at least. You'd think the community would be all over a success story like that. Instead, they vote for the fakes who bought their votes and said the place works great. So confusing....
I see a problem with your proposed attack, but I may be wrong. Assume that some people are rational actors (this seems reasonable). Given that you can redeem Steem for SBD at the price of $1, rational actors will convert some of their Steem in order to take advantage of arbitrage (Getting SBD > $1 for $1). This pushes the price to $1. Every time the price moves above $1, rational actors would convert to take advantage of a price. This should stabilize the price between some range ($1 +- alpha). For such an action to be effective, alpha would have to be large. Do we really expect such extreme manipulation to be possible after the initial reduction to $1? Even then, should we wait to implement such a peg when the SBD price is less extreme?
Second, I don't know if I am interpreting your 50/50 solution correctly, but wouldn't that reduce the number of SBDs entering the market and helping to combat the scarcity issue?
Thanks for your comment. Keep in mind that SBD would not be the instrument being manipulated here. I'm talking about whale manipulation of STEEM.
With the reverse conversion in place, whales could perform a sort of reverse pump-and-dump by first using the blockchain's conversion mechanism to generate infinite liquidity at the USD/STEEM spot price that isn't actually there.
After doing this, they could then manipulate the STEEM price downward, then use the normal conversion to do the same thing in the other direction, ending up with the same amount of STEEM, and a ton of other users' money. That isn't right, and it would kill our platform. In fact, the Steem whitepaper does mention this problem:
Emphasis mine.
As someone who is on Steam to enjoy the community and the opportunities it presents (and sure to learn about crypto) this is a welcome post... granted theres much of it that doesn't immediately cross into the realm of understanding; but thats all part of the experience.
Hopefully some of these 'money-hungry' folks can be dealt with in order to save the ultimate idea behind the platforms existence, and to enable others a proper shake of the stick at this!
Well if it isn't my good friend Marvin Gardens (lol). Hey, @monopolytile. Thanks for your comment.
Money-hungry folks can't be stopped, but their behaviours can be disincentivised by convincing witnesses to adopt new consensus rules.
I'd encourage you to read the Steem whitepaper, or at least the bluepaper, if you can find the time. I'm not sure if Steem is your first introduction to blockchain-based systems, but if you need to ask any questions I can probably get you some answers.
The crypto bug is much more captivating, and mentally stimulating, than the gold bug!
Love the ideas! Since you're newer to Steemit, what is your feeling towards legacy members who've become whales who have the power to upvote themselves and tend to abuse this? I for one would love to see an algorithm in place that requires momentum of quality content being uploaded, which tracks attention from users. This would force people who were early on the platform to keep contributing, otherwise, their wallet would slowly bleed out and put the money back in the pool. The community dies without engagement, but right now a good majority of Steemit feels like - post, get paid, doesn't matter who sees it or the engagement really, then rinse and repeat. Thanks for sharing!
Thank you for your contribution to the discussion!
I'm a big believer in decentralised systems, and Steem is built on an interesting extension of the proof-of-stake model called DPoS (delegated proof of stake). We all vote for witnesses based on how many vesting shares we own, and those witnesses make decisions and secure the blockchain on our behalf.
In any proof-of-stake system, the bad actors (I won't call all whales bad actors, because they really aren't; several whales are doing great things with their power) are limited to a degree by the fact that their continued prosperity depends upon that of the platform. If they mess up the place, the value of their investment will tank. If they slowly power down their stake and sell it, or they cash out everything and allow inflation to bring everyone else up to speed.... well, they're not a whale anymore. Problem solved.
It's pointless to lament about whales being whales. They got in early. They put their time and money at risk, and in exchange they got paid mostly in stake when that stake was worth a lot less. Remember that there was a time when STEEM was worthless. Still, these people put their effort and/or money into contributing for almost nothing in return.
On a technical level, any effort you make to redistribute voting power to the masses and take it away from the whales is just asking to be gamed. Never assume that each person only has one account. Computers are relatively easy to trick into doing things; they have no critical thinking skill or reasoning. Every proposal I have seen to do anything like what you're mentioning just ends up with a bunch of tiny spam accounts upvoting each other, instead of the big guys upvoting themselves.
i think that steem should also be pegged or lowered in some form, at-least it should not be able to go from 4$ to 7 and back all the time, last week for 15$ i bought 3 steem, this week that was double what i had to pay. I think that also your post has great meaning to those who just start out on steem, since it seem's most people i have ran into in between the reputation of 25-40 still have never bought a bitcoin, or some have basic information on charts and know how to watch. I think what it really takes is research and alot of people would rather just live in the moment, or do something else with there time, Having SBD prices at 7$ is making it hard for newer channel's to grow and come into the community as well. In my opinion it would take a newer channel 6months and 300usd before they can even start doing a little well here, with how high up sbd is. There content will only be shown for maybe 5min's unless they can promote or have friends, or money. Your post was excellent and was a learning process for me. Keep up the Great content and Steem-on! @lemony-cricket
Thanks for your contribution to the discussion. It's unlikely for STEEM itself to be pegged to anything in particular, and that's a good thing, because we're supposed to have SBD. I think you might be a little bit confused-- a high SBD doesn't prevent new users from doing well; quite differently, it actually helps those new users grow in a way, by increasing the amount of STEEM they can buy and power up as their first posts pay out.
The fluctuation of STEEM is just a natural thing that will happen because it's a representation of the valuation of the platform. SBD is supposed to be a stable asset that keeps its value and doesn't go up or down. It's basically the opposite of investment in the platform; it's a "bet" that the value will go down, or at least not up.
That's good for risk-averse people, but we're not going to change the fact that you need to sell your SBD for actual STEEM in order to get vesting shares, because that would defeat the point. You can't have vesting shares in something you refuse to invest in.
So the volatile STEEM is here to stay, and that's an okay thing. But the volatile SBD has to go.
It all stems like fuzzy math to me especially your calculations on the $10 example. I'm still very new to steemit.com but I think something should be done to keep SBD pegged to the USD. it would help in times of need to shelter what few bitcoin I have when the market is crashing. From what I gathered when I joined steem was to be the tradable token whos price would fluctuate with the market. SBD was supposed to be stable. Seems broken to me, backwards even. Also it seems to me that if SBD is stabilized as intended it would encourage investors to use SBD as a safe haven thereby keeping Steemit robust with their deposits. Steemit.com can certainly make enough money from interest and transaction fees. But what do I know I'm a plankter, not even a fish.