RE: Saving SBD - Proposal to Restore the $1 USD / $1 SBD Peg
Different thought on this
If a shop owner wants to sell a shirt that costs $12 USD to make, and they want to make an $8 profit, they will want to to list their shirt for $20 SBD. If $20 is a fair market price for the shirt, and SBD is trading for $2 - then why would a customer pay $20 SBD for the shirt if they could go to an exchange and get $40 USD instead? The shop owner can either hope for a customer who is willing to pay $40 for their shirt, or lower the price to $10 SBD to equal $20 USD.
Unless the shop only accepts SBD, it does not happen IMO. If a shop accepts USD, most people will buy the shirt with USD instead of SBD. The best part of SBD is users don't have to buy SBD to use it. Most of users earn SBD by contributing the platform with their contents, so 1 SBD means just 1 SBD, not 1 USD.
In sum, SBD and USD are located in totally different economic systems.
Interestingly, SBD is actively used in KR community for tipping, buying, and donating, since we already have meaningful size of community (with retail owners surely)
I rather think high SBD price caused by speculators benefits the community, especially our contributors. Why don't we leaving it and giving more profits to the community?
I think that happens either way. If demand for SBD is transferred into demand for STEEM then the community profits anyway, both from price appreciation of STEEM and from increased rewards since they are based on the STEEM price, even when paid in SBD. I don't see a benefit in paying 1 SBD worth $2 rather than paying 2 SBD worth $1 each. Both reach much the same equilibrium in terms of SBD supply, yet the latter adds utility to the token in terms of better stability (if people don't want stability they can use STEEM or something else).
Someone (may have been you) pointed out in discussion that the current and potential demand for stable tokens is extremely large (Tether has $40 million market cap despite its obvious and demonstrated centralization risks). Even not being all that functional, SBD is capturing some of it. We can capture a lot more of it if SBD works better, and pull that demand into STEEM value as well.
We need to think about that Steem is primarily social platform and it can be better to take simpler way although not much accurate, unless something harms. I actually haven't heard any complaints about high SBD from the community members.
SBD is working well now, as a value-guaranteed community asset. It guarantees authors that earned rewards won't below specific USD-denominated values. If one wants better pegged cryptocurrency, I would recommend Smartcoins of Bitshares.
IMO @timcliff's proposal is a small change that makes an incremental improvement. It might not be the best possible approach for pegged currency, but in terms of making small improvements, I see it having a lot of merit and not much downside. It is certainly a much less major change in terms of both development effort and the nature of the platform than would be something like smartcoins.
For me, it is not a small change. It is fundamental economic model change that opens SBD creation ability to individuals (maybe call it privatizing SBD printing)
What do you think of a more modest change which would be to allow authors to choose between 100% SBD, 50/50 and 100% SP (adding the first option to the latter two which already exist)? This would provide some additional ability for the SBD supply to respond to demand, but not unlimited, which as you say is a bigger change.
I guess we'll touch the 10% "debt limit" before it could push dawn the price.
I'm sure that is possible but considering we are currently at 0.3%, we are so far from the limit as to make it difficult to say what the effect of getting from here to there might be. At least from my perspective it is difficult to say, you might disagree.
Actually I've suggested the same idea on Golos - sinse GBG is trading 3-4 times above the peg.
However this reverce conversion seem to be much more effective method.
This suggestion has merit I think.
Simpler to implement I think and simpler for the layman to grasp.
There can then be a push to get people to choose the 100% SBD option any time SBD value is too high relative to the dollar.
I think that's more moderate and adjustable change. 100% SBD sounds good.
I think giving the option to receive 100% SBD rewards is not going to be very efficient at lowering the price of SBD
timcliff's idea which is a bit like an internal arbitrage would be much more efficient. because more people can participate.
Like dan said rewards are a trojan horse to bootstrap the currency. If steem is successful the rewards earned will represent a tiny fraction of all commerce done in SBD. I expect many people to convert USD to SBD so they can spend their SBD online.
Converting USD to SBD is the similar vein as converting USD to EURO. The key is they are in different economic systems. Steemians living in U.S are like having dual citizenship, and shops too. Cryptocurrencies and fiat currencies can juxtapose and customers can choose any of them. I don't think US people will convert USD to SBD to buy good from US shops. They can use USD, no conversion fee, and efforts. While, Steemians still can buy some with SBD if they want. But in most cases I think they use earned SBD.
I think this kind of answers the question. If users have the option to buy the shirt for $20 USD or $20 SBD - then nobody is going to pay SBD for the shirt. They will just end up cashing out the SBD for USD (or whatever other currency they want to use). They may still buy the shirt or they may not, but either way the shop is not adding value to the STEEM/SBD economy if nobody is using STEEM/SBD to purchase the shirts.
Yes, tipping and donating are surely two great uses for SBD.
It can be used for buying as well, but it does become more difficult. Either there is an extra burden on the shop owner to deal with the fluctuations, or there is an extra burden on the customer to pay a higher premium. It is not that it can't work, it is just more difficult with a fluctuating currency.
The added profits are a nice short-term benefit. I am enjoying them myself as well. From the perspective of an 'average user' I probably would rather have it trading above $1. If someone wanted to pay me $100 for my SBD I would be delighted :)
Looking at it from the perspective of the long term growth of the platform though, I do see value in having a system that makes it easier for business owners to participate in a marketplace to offer goods/services to SBD holders.
Here's an interesting talking from Dan (from 57:30)
"Steam dollars as an insurance against falling below a dollar rather than a guarantee of a perfect peg. And depending on perspective you take, it's an interesting crypto-instrument"
It is a valid view. To some extent, the whitepaper also says the same: "In a market where 0% interest on debt still demands a premium, it is safe to say the market is willing to extend more credit than the debt the community is willing to take on. If this happens a SMD will be valued at more than $1.00 and there is little the community can do without charging negative interest rates."
I know we have discussed this a lot before off-chain, and I think you and I are more in agreement than disagreement.
I am curious though:
My answer is unless SBD is under $1, less burden on the community is better. The burden includes perceived complexity and potential debt crisis. I would keep the debt ratio lower to prepare another ice age. Winter is coming :)
I think your proposal is much better than feed premium, and I am actually partially agree with you. Your proposal is a good way to switch demands for SBD to demands for STEEM. What I am worrying is more complexity, higher debt ratio, and losing perks for authors (Many authors are enjoying the high price!)
I am strongly against feed premium since it harms the community members when they convert SBD. Now we have no complaints but if premium is applied, we may hear some complaints, saying "I lost $50 after conversion!".
I'm with you. I tread into these waters very carefully knowing full well that we are just one STEEM price crash away from another serious debt issue.
Understood. There are definitely trade-offs. There are valid views on both sides for sure.
Yep, agreed. I stopped my premium the moment I talked to you, and I am very glad I did. I've seen similar complaints as well. I submitted a pull request to the condenser repo too (still waiting for approval) to more clearly communicate to users the potential risks that are there with conversions. Hope this well help too.
Absolutely agree on the condenser changes. People are making foolish conversions right now and have been for weeks (bad for both the user and the system). Anything that can be done to improve that situation is welcome.
Awesome answer, as always :)
I mostly agree with you but I don't think the proposal adds significant complexity. We already have conversions in one direction, it is actually a bit more complex to explain why it can only be done in that one direction and not the other (I have been asked this multiple times).
I agree that harming community members is bad. The problem is that the high SBD value harms community members when they convert, and by not addressing it we are contributing to this harm by inaction. At least two community members converted $200 worth of SBD today alone, each is losing about $100 in the process. The faster we can reduce the high price of SBD, the faster we can stop this from happening. It has been going on for several weeks and community members have been hurt doing this almost every single day! (Thankfully it is now less than before due to education, but that isn't perfect.)
I think we can get much the same benefit without the disadvantages by shifting demand to STEEM and raising the STEEM price. This also reduces the debt concern (maybe not on net, it is hard to say).