STEEMIT CRYPTO ACADEMY WEEK -6 LECTURE ON STABLE COINS BY @yohan2on || Power up 100%

Hello great people of steemit, this is should be my second post in the platform after writing my Introduction post Achievement-1 task. It is good to join this wonderful community. I have taken time to be reading some of the lectures from sideline before joining the community. Without wasting so much of our time, I will want to attempt this homework task by professor @yohan2on. My choice of which to answer is basically on pre-knowledge from my mentor in this platform who always talk about the price rise today, or the price decline the next day... STEEM BACKED DOLLAR (SBD)

THE HOMEWORK TASK BELOW:
Write about any one of the following stable coins:
Tether
Steem Backed Dollar
DAI

source

STEEM BACKED DOLLAR (SBD)

Steem Backed Dollar is one of the digital tokens found in the Steem-Blockchain. The Steem-blockchain is an open source and decentralized platform which allows users to post quality content and also curate on this content in expectation of a reward to the authors and curators. This Reward from the reward pool can be seen to either come from 100% power-up or 50:50 ratio of Steem Backed Dollar/Steem-power.

Basically in the steem-blockchain, steemit has continued to reward its users who post quality and original contents void of plagiarism with the following native digital coins;

• Steem
• Steem Power
• Steem Backed Dollars
  This three different tokens in the steemit community serve three (3) different purposes for the sustenance and existence of the blockchain network. These are the individual stance of this coins as perceived in the community;
• Steem - Stands for Maximum Freedom
• Steem Power - Stands for Maximum Influencer
• Steem Backed Dollar - Stands for Maximum Stabilizer

Due to the unstable nature of cryptocurrencies in the market and its high volatility, it is sometimes quite unsure to maximize profits and Return On Investment on traded assets. Because of this market volatility, this was why stablecoins were created to pegged this tokens/assets to avoid unnecessary loss of assets. SBD is a stablecoin pegged to the steem native coin at $1. Let us remember that every other coin in the steem-blockchain derives its value from the STEEM native coin. The Steem-Blockchain program is one which produce SBD in relation to every Steem and SteemPower generated daily to help keep the blockchain functional.

SBD is mined by in the steem-blockchain by means of rewards. For every upvote that pays out after 7days (If on 50:50 ratio settings) gets rewarded with SBD & SP. So SBD are liquid and also stablecoins produced to stabilize the market volatility which affects the steem value. SBD can be traded just like steem in some exchanges, it can also be transferred to other users in the community or can be converted or swapped into the native coin (STEEM) by swap.app. SBD is one of those stablecoins which its exchange and swap rate s second to non. Any coin that has this flexibility in exchanges only signifies its efficient and trustworthy aspect that is geared towards customer satisfaction.

The main aim of using a stablecoin just like the SBD is to peg the value of Steem to $1, which is primarily to insure the native coin against market unpredictability and perceptions. So, as a stablecoin in the steem-blockchain, risk from market volatility are transferred from SBD to Steem, hence leaving the fate of steem to demand of supply of traded assets. But when Steem increases, investors profit tears from it but when it crashes, investors also loose from this trade and loss of value is also transferred to SBD.

For a example, if the price of steem is $0.5 in the trade, which means additional 2steem coins worth is needed to peg the value of steem to $1 SBD agreement. But when there is an increase in the value of steem to $1, this only requires 1 steem coin to settle off this arrangement. This is a two way drive which simply means when steem drops in value lower than $1, SBD becomes pegged to the Steem but when steem grows, SBD contributes to boosting the gains.

There's also a silent point I need to make known to us, this has to do with the continued stay of SBD as a stable coin to the Steem blockchain. It is seen that 10% of Steem is used as a collateral for all outstanding SBD. This means 10% is the maximum threshold mapped out in debt as regards its contract agreement with SBD. There would likely be a bridge or pull out when this percentage of expected loss is exceeded.

There is no infinite dilution caused by SBD; instead there is a hard upper limit.

Practically, this is what happens when the percentage debt loss either increases or decreases. When the debt loss is below 2%, the blockchain is seen to reward her users in SBD/SteemPower. When it is between 2 - 5%, it still allows payment of SteemPower/SBD or SteemPower/Steem. Steem/SteemPower is paid when its between 5-10% and when it exceeds 10%, this invariably contravenes the contract agreement with SBD. This may likely lead to an end of contract which invariably means bad business for SBD.

CONCLUSION
It will be quite difficult to manage and see through that the debt loss is kept below 2% but this should be a heinous task to be kept especially for the continued existence of SBD. SBD as a stablecoin would continue to provide stability in the trade arena irrespective of the market volatility and perceptions. Steem would continue to maintain higher investor level if market confidence is maintain assured by the role of its stablecoin (SBD).

This is my entry professor @yohan2on.
Thank you very much @kinkyamiee and @xkool24 for the guide so far.