Should We Keep SBD or Remove It?
Background
There has been debates on SBD initiated by @ned (in @krnel's post) followed by @dantheman (post) and @ats-david (post)
Advantages of SBD
SBD has a great potential. SBD is very special cryptocurrency since it does not need any trust unlike IOUs and has fixed value at around 1 US dollar. Due to the pegged value, SBD can easily penetrate into already existing ecosystems, like micropayment, merchants, tipping, etc. Customers and merchants do not worry about volatility of their account balance, so that they comfortably stay in SBD-bsed ecosystem.
Additioanlly, having more SBD is benefitial when STEEM is rising. As @dantheman noted, SBD has a leverage effect when STEEM is growing. If more SBD is created then STEEM price increases, the Steem network will pay less for SBD holders (e.g. 1 SBD was 10 STEEM but now 1 STEEM. The network earned 9 STEEM)
But Limitations
However, SBD exacerbates loss when STEEM is falling. When STEEM price is decreasing, SBD will add more burdens to the network (e.g. 1 SBD was 10 STEEM but now 50 STEEM. The network lost 40 STEEM), and this is what we saw in the past months before the hardfork 16.
More fundamentally, SBD has two flaws. First, SBD is a bottomless vessle that has no meaningful usage at this moment, and therefore the demand needs to be artificially created. Currently, SBD is nothing but a way of hedging (avoiding volatility of STEEM), however, investors prefer to real USD or BTC for hedging because they are completely independent with STEEM while SBD is associated with STEEM (e.g. STEEM price decrease more that 20 times, SBD can be harmed too). Secondly and more importantly, more use of SBD does not always benefit STEEM holders, except burning SBD (e.g. promoting contents). I think this issue is more important than "simplicity" thing and we need to cope with it seriously.
SBD is Good but Not Yet
Although SBD is a promising item for Steem, it is not generating benefits now given no associated merchants and services. Additionally, usage of SBD is not designated to benefit STEEM holders. In these aspects, I think maintaining SBD with lots of efforts is too early and waste of our energy for us. However, I also against removing SBD since it is too extreme. Instead I suggest to stop to create more SBD by;
- Changing SBD printing rate to zero (no reward is paid in SBD)
- Changing the interest rate to zero
When we have strategic merchant partners or other services, we can revive SBD. Before that, we need to modify the design of SBD in order to more benefit STEEM along with more uses of SBD.
I don't agree there is no usage. It was used extensively by and for steemfest (registration, travel fund, etc.). It is used on peerhub. It is used by steemsports, including their plans to offer more real-money games using SBD now that they have launched their own UI platform (in beta). It is used for many sponsorships, donations, fundraisers and other things going on within the Steem ecosystem. As you mentioned, it is used for the Promotions feature. And finally it is simply used by users for holding small amounts of rewards, casual payments, tips, etc.
I agree it is not a huge economy, but the entire user base of Steem/it is just not very large. Relative to the rest, SBD has what I would consider a reasonable-size role. In fact, I would guess that of the amount of transactional use that does occur on this system, the majority of it uses SBD. That is because SBD is just better suited for these purposes than a volatile crypto/equity asset. Without SBD, we would have even less transactional use, and less development of the (early stage) usages that I described above, and less growth. For any system to grow, it has to start on a small scale, and that's exactly what we have now. And we also have to take care to not undermine the efforts of those who have been building these businesses and use cases in order to serve users who receive SBD for their rewards.
Where I completely agree we have too much SBD, and stopping creation of it temporarily might be a good idea. Much of the SBD we have is simply being hoarded for the purpose of holding long term and earning interest. That adds a lot of risk (and therefore cost to manage) to the system and does not add significant value.
Perhaps a good approach would be to stop printing entirely until the debt ratio reaches 1% and then have it restart, which at current market cap (which could rise; we will see) would be about 300 thousand SBD, not 1.2 million. Meanwhile, continue to reduce interest rates to reduce hoarding and refocus the SBD on the transactional uses (including new ones which develop over time). Witnesses can then undertake to maintain the supply reasonably close to that level (1-2%), which as I have discussed elsewhere can be done at relatively modest cost (something well under 1% of STEEM market cap per year, possibly as low as 0.1%). While I prefer to see payouts entirely in SBD (not the mix of SBD+STEEM that is confusing to users), this pause in printing might be a better approach to get there than what we have now, which is mixed payouts going on indefinitely while we struggle to reduce the excess supply.
Given less hoarding and long-term holding for the purpose of earning interest, 300K is probably plenty of SBD for the size of the economy we have now. As the economy grows the market cap will grow as well, and with it the amount of SBD. For a good long time, these ratios work reasonably well. In the distant future, the situation may be very different (STEEM itself could be a useful currency, STEEM could be less volatile and more liquid so the supportable amount of SBD could be higher, etc.).
Smooth nails it.
"having more SBD is beneficial when STEEM is rising" this sentence alone made me change my mind about getting rid of SBD . I never hold SBD, but I use it to promote my posts and pay other users, even today I used SBD to donate to the busy project. I also see an upcoming rise for steem from bitcoin profits, so it would be smart to keep SBD for that reason.
But having more SBD is harmful when STEEM is decreasing. We'd rather change this scheme to "using more SBD" is beneficial for STEEM.
looking at the markets right now, steem is holding it's ground rather well with rise of bitcoin, most other alts are bleeding, STEEM is not decreasing
We cannot always expect rising STEEM.
I think that is NOT possible. Impossible trinity.
A simple but crude way is charging fees. (while I don't like it personally) Or we can only charge fees on accounts that have less SP than a certain amount (e.g. if an account owns 1000 SP, 1 transfer/day is free)
That is exactly how bandwidth limits work (not those numbers of course). The number of free transactions you are allowed to make depends on the amount of SP in your account. If you don't have enough for the transactions you need to do (for example to run your business), you must buy more.
@smooth
Not exactly the same. The differences are:
Do you truly think this is bottom?
Nobody knows it man.
Lets say merchants demand SBD, So lets assume there are lots of shops, e-commerce sites to spend SBD. What benefit does it incur to steem price?NONE. it will create only downward pressure on Steem price. SINCE SBD is (STEEM BACKED DOLLAR) SBD price will fall too. To anchor this SBD to USD, We should spend more money on it and who pays it? STEEM network. SO IT is death spiral
Disagree. Every one of those shops, e-commerce sites, along with the various supporting services that they use will need to own SP in order to access the network. High volume merchants and payment processing services will require more of it.
Second, there is no mechanism by which more usage of SBD creates downward pressure on STEEM. None. At a minimum it reduces the cost of SBD pegging since with more monetary demand the interest rate can be reduced.
Third, all those shops and e-commerce sites will make the steem network more attractive to other users who want to do business with them. Those users will also have Steem accounts and will also need to own SP. The presence of all these shops and sites and users will create natural and free publicity for Steem, in turn attracting more users and shops and sites. It is a virtuous circle.
There are likely other effects as well, but none of them are negative on the STEEM price.
First, Required SP is not enough to compensate Pegging COST
Second, more usage of SBD means more SBD, which means more pegging cost. there is clear feed discount cost but vague feed premium benefit. This is asymmetric and main reason why I think sbd tranfer fee structure is necessary.
Third, Those shops and e-commerce sites are not interested in Steem, they are interested in DOLLAR.
Show your work. I estimate the cost of pegging SDB given a 1% debt target at approximately 0.1% of STEEM market cap per year. It could very well be less (for example, the above assumes a feed discount of 1-2% but I think less is likely needed longer term, maybe on the order of 0.1%-0.2% instead, and my interest rate estimate may also be high). It is entirely plausible that increased demand for SP and generally increased exposure and activity within the ecosystem could increase market cap by >0.1% per year.
This doesn't follow. As I indicated above, if demand increases, then pegging cost may (likely would) decrease.
While Steemfest had lots of donations in SBD, it is just one use-case, and the donated SBD was sold for BTC then sold for probably EUR to support Steemfest. What we need to improve is circulation of SBD, e.g. SBD paid as reward is used to buy iPad, then to pay rent, to have lunch, and so on. You can understand the difference.
Regardless of percentage of SBD, as you mentioned 1%, the most important part is using SBD does not benefit STEEM systematically. Imagine 1 million SBD is used (not burning) a day. What do STEEM holders earn from it? IMHO what we need to focus on first is improving SBD to benefit STEEM when it's used.
Steemfest was an example of usage, and it wasn't just donations. There were several different types of transactions, including donations, registration fees, and the travel fund, all done using SBD. Steemfest could not have used the platform at all were it not for SBD. The risk would be too great.
The presence of SBD allows usages such as these to spring up when the situation arises. Some are one-time, some are not. Some are arguably one-time in a sense that they may persist for a time and then conclude, such as Busy which also runs its sponsorships, budget, and developer payments on the Steem blockchain (using SBD; it could not be done with STEEM).
Answered elsewhere. Steem charges implied transaction fees on all transactions (including SBD) by requiring those who transact to hold sufficient SP. There are also indirect benefits of keeping activity on the platform and building business on the platform (which brings more users) which simply could not or would not function without SBD.
You missed my point and might be not able to catch the difference I am saying
That can only develop over time. You are not going to just wake up one day and instantly find that a new relatively-unknown cryptocurrency can be used to buy breakfast and pay rent (buying an iPad may come relatively soon though).
The first step is distributing coins to users, along with attracting more users. Then people do things on a small scale, one time events, those within the ecosystem using the currency to support their activities and pay each other, starting businesses within the ecosystem, etc. Then businesses spring up seeing this growing user base as potential customers (steemsports, peerhub, and a few others are the first signs of this). Then some of the businesses become successful (some will fail), attracting more and more businesses, which in turn attract more and more users.
It doesn't happen overnight, and it can't be done in a synchronized manner. Without a user base with access to the currency, businesses won't start. Without businesses springing up, more users won't be attracted to join. The process needs to be given time to develop and grow, but it starts with distributing the currency. Bitcoin was distributed for 2-4 years before even the first signs of real business started to spring up (not counting pizzas). Before that it was people paying each other for various casual things, and payments within the ecosystem (mining payouts and such). Even after 8 years it still struggles to build a large non-speculation economy outside of some niches. SBD has actually done better in a short time because its properties are so much more suitable to a wider variety of uses.
To conclude after six months that because there isn't a large economy yet, distribution of coins to users needs to stop is impatient and short sighted. I don't mean this to imply a temporary pause in distribution for the purpose of reducing the supply overhang is necessarily a bad idea; I do think that is worth considering.
The point is that until we see popularity of SBD, and even if after that happens, STEEM needs to pay costs for having SBD while gains no benefits from using SBD.
It is the same problem with bitUSD.
OpenBazaar 1.1.10 just announced
"Alt Coins have been integrated using Shapeshift. When paying, an option is now available to open a Shapeshift modal window and pay with alt coins using Shapeshift."
https://github.com/OpenBazaar/OpenBazaar-Installer/releases
It could help a little, but still it is Bitcoin depended.
The difference between BitUSD and SBD is who issues it. BitUSD is issued by individuals with collateral, and SBD is issued by STEEM network. So all benefits and losses of BitUSD based on BTS price go to issuers, while SBD's benefit/losses go to the network, that is all STEEM holders.
Now I think I found a fundamental problem of them. These derivatives (SBD, BitUSD) only benefit when the base currency is rising, but not benefit the issuers when they are used, while their main reason of existence is being used as currencies, not being invested. What we need first is make them to produce profits for the issuers when they are used.
Very reasonable anaysis.
I do think that getting paid in sbd is best, especially when we want to appeal to new users, or those that are doing this for income.
I think we should add:
We can then be more conservative in how much sbd we create while still having the good user experience of only paying sbd for those that do not want the volatility of steem.
And yes having sbd is ultra important, for the reasons @smooth described.
The checkbox at the lower right when you submit a story changes your payment to 100% steempower.
Paying 100% in SBD is a bad idea as it exacerbates the "SBD problem".
There is still a difference when getting pid in steem vs sp. paying 100% in sbd does not increase sbd supply if the sbd gets purchased from the market. As such your statement is not correct.
Again think about the purpose of such functionality.
Getting rid of sbd is like sawing off the roof of a car on a sunny day because it is not raining.
Nope SBD is just unnecessary financial burden that make steem price fall. It's systematic bleeding. Since there are natural default risk, ppl trade 1SBD about 0.9x , 0.8x dollar. To anchor to 1USD, Steem network constantly print steem to pay that cost. This is very stupid. Frankly, I don't understand why ppl can't see it. These C++ developers love their gadget and invention. So they just want to keep their shiny, brilliant toy. Even it is stupid invention in terms of business. At least we should take fee from SBD transfer and stop SBD interest scheme. Or just get rid of SBD completely. It's very expensive financial vehicle that cause serious burden on Steem.
I thought the same and posted about it (https://steemit.com/ned/@mark-waser/the-steem-backed-dollar-sbd-having-your-cake-and-eating-it-too). Then Smooth pointed out that SBD was less than 5% of the market cap. MY new conclusion is that SBD is NOT that expensive.
No sbd does not make steem price fall. It does increase risk hut that is limited to 10% of market cap. But there are other reasons why the price is falling.
Sbd is the only currency on the steem blockchain and getting rid of it hurts the eco system.
Most people in crypto do not understand economics or what money is and why it is valuable for an ecosystem.
It is utterly nessesary to have a stable currency to do any economic activity and if we remove sbd from steem we prevent many applications from being possible.
I am not arguing removing the roof, instead folding the roof when it is not raining.
Why not focus on finding useful ways to use SBD. If for example we had advertising, we could require the advertisers to pay in SBD. The stability makes perfect sense for 3rd party ad budgets. They don't have to worry about volatile value fluctuations. The same would go for distributed storage services, website hosting, etc. Instead of dooming SBD because there are not uses, lets focus on making more usages.
Yes!
That's very plausible way, but IMHO we are not getting that stage yet. When we arrive there, we can fully focus on it.
This is correct.
http://www.npr.org/sections/money/2010/10/04/130329523/how-fake-money-saved-brazil
If this story is fake news, I apologize, but what I understand from it is that inflation is just as much a psychological problems as an economic one. I think this can be applied here.
Firstly, I assume that the largest current usage of STEEM/SBD is in curation/ reward. And even if not, it is more than important that we feel good about this, we feel that the platform is worthwhile. However, returns have fallen, users drift away, sometimes melodramatically, and we have this perceived problem. An economic solution? Let's turn on SBD! It's a kind of a job panic.
In the Brazilian situation, inflation was stabilised by the introduction of a fake currency. Prices were fixed, the numbers did not change, 10 FAKEs per hour. FAKEs continued to fall against the official fiat, but users became accustomed to stability until eventually the FAKE became the new currency (they chose a better name).
How can this be useful here? Display rewards in STEEM. An upvoted post in December will be receiving the same as an upvoted post was in August, and everybody will start to feel happy and positive, and this happiness and positivity will build community and attract the new users. That the real world value varies from month to month does not matter - aren't most users here for the long-term?
This first, but also, yes, there are economic (mathematical) difficulties. As @smooth suggests, suspend SBD payouts in the short-term. If someone wants SBD, they could buy it with STEEM.
SBD should be removed. with the new fork we should focus on Steem itself becoming the currency
a stable cryptocurrency has great value, if SBD continues hold stable I can see it been used for cross-border money transfer. A multi billion dollar industry
That is a pretty logical suggestion. The network kind of adjusts #1 automatically, but perhaps there should be a better criteria for printing SBD - i.e. when Steem is stable enough to be backing another currency. Could be something like - <1% debt ratio for a sustained period of time where the price of Steem (adjusting for anomalies) does not fluctuate more than X% or something like that.
The only issue would be, with SBD no longer supported, the price will start dropping below USD 1, which might affect consumer mindshare when it is actively supported again. Perhaps it could be taken off the markets and pegged to USD 1 temporarily. (In the same way some fiat currencies are pegged)
As the Irishman might give instructions to a foreign driver, "I wouldn't be starting from here!"
nested reply
Again I contend we need to quantify these costs. Longer term (once SBD supply is reduced from its currently slightly bloated amount), I estimate them at roughly 0.1% of STEEM market cap per year, if not less. Currently, with the higher debt ratio, SBD interest cost is 0.2% of STEEM market cap, and the need for some small (perhaps very small) feed discounts will add incrementally to this, but not a whole lot.
I am reasonable confident that STEEM will gain many, many multiples of any of these numbers from the incremental demand for STEEM/SP needed to transact in SBD, along with (especially) additional exposure and growth in its user base that derives from the growth of businesses based on SBD.
The latter is especially crucial since growth of a large user base is absolutely essential. No currency system or social network can survive without a large network effect from a large to extremely large user base. It is foolhardy for Steem to not avail itself of every available opportunity to bring more users and usages into the economy. Some fractions of a percent annual cost of market cap is a tiny, tiny price to pay for this.
My impression is that too little time was allowed to pass before the last hard fork to develop an accurate picture of STEEM/SBD with its previous mechanics, and too little time has passed between the last big change and the big changes I see currently being proposed re SBD.
But IF something actually does need to be done about SBD, your phase out makes far more sense than a totally getting rid of steembucks - and could be coupled with a reintroduction of some respectable APR being paid to SP or STEEM savings account holders to make investment in the token into something that makes sense to people.
I have been market making SBD for two months and feel that SBD is not sustainable without artificial intervention now (because of no usage). We don't have to create more burden.
If SBD is truly not sustainable on its own, then it is definitely better to phase it out.
Steem itself isn't sustainable because there is no demand for Steem Power. So what is your point? Blame developers for not focusing on creating demand.
No