The Value of stable SBDs to me

in sbd •  26 days ago

The SBD on steem to me is a very powerful and amazing feature of the blockchain. Today I was watching the witness forum by @aggroed where @andrarchy was talking about all the hard work steemit is putting into build competitive functionality with limited resources.

One example mentioned was the account recovery feature as something steem has that other blockchains like bitcoin do not. We are currently in a crypto bear market and value creation is what will bring us forward and separate steem from shitcoins.

I agree this is exactly what steem needs.

One other such amazing features to me are SBD. I know of no other blockchain that has an intrinsic stable coin. Yes stable coins are being built ontop other blockchains like DAI or achieved with backed collateral such as Tether and others, but having a stable token as part of the core protocol provides some additional benefits.

Good for people building apps

I am one of the many people that are trying to built applications ontop of steem and having a currency to do business in is an important feature. For www.steem-bounty.com it is important that bounties can be described in SBD and thus stay consistent over time.

Think about the many applications on other blockchains, especially Ethereum that simple do not work because transaction in something volatile just does not make sense if the time horizon is more than a few minutes. A great example is Augur, which has many issues, but most of all I think cannot work as long as predictions are denominated in ETH. Augur has less 100 user per day. Predictions run usually over some longer timeframe and ethereum was 50% higher a short wile ago. If you made a prediction and gained 50% your entire win could be wiped out. Gamblers don't want to make two bets in one.

Good for user that need to protect value

I have recently done something I have never done before (but would have liked to do when the price was at $8): I cashed out some steem. I powered down over 10k of SP and converted them into SBD. That is about 20% of my holdings.

The reason why I do this is simply to protect me agains total loss of value in steem. I have seen steem trade for $0.07 and won't be shocked if we are going back to below $0.5 range.

In the past I have not sold any steem for one key reason: I did not want to exit the ecosystem.

Did not have to exit

Because I can use the internal market and sell steem for sbd right on the blockchain, I did not have to go to an exchange and cash out my steem. Instead I got some SBD for my steem on the internal market and moved it into savings.

It is still in my steem account, right there. I only switched between tokens.

This is valuable for me

This is valuable to me, because I can protect some of the value my account holds. It allows me to hedge against a further loss of the token value and will provide an easy way to increase my amount of steem that I hold if this event occurs. I plan to convert all of my SBD into steem again at some point in the future, hopefully in a way that makes me more steem than I sold recently.

Very importantly I can be loyal to the steem ecosystem, without losing value.

In any other blockchain or token project this cannot be done without using fiat and an exchange of some sort.

This is good for steem

This is valuable for steem as well as I have not exited out of steem (as my funds are still all in my steem wallet). It will allow me to buy back steem when the price goes lower, which will provide some price support for steem.

So this is not something that only benefits users, it also keeps the steem price a bit more stable.

We really need SBD to work

I urge everyone on here to appreciate the value SBD bring to the ecosystem and come up with a way that will keep the SBD peg work in both directions.

I am pretty sure it will work to the downside. We need to bring it down as well when it goes up. @timcliff has provided some great solutions, please support him and others working towards that end.

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

Sbd is very valuable to have and a great tool! But I am very worried by the plans to introduce opposite conversions to enforce an upside peg. I don't think this can work without adding a second colleteral beyond steem printed by the blockchain

I very much share @aggroed's perspective
Posted using Partiko Android

·

I dont understand. Why are you against an upside peg? What issues would that create in your mind?

·
·

I am not against an upside peg. I am against implementing it via inverse conversions.

Crypto is still new and a lot of things are not know, but it is not a wonderland where we can simply wish what we want.

Stable coins need a working collateral. In the case of sbd that is the chain printing the steem via inflation. This is fine when the debt ratio is low, but creates a out of controller spiral when debt ratio is large. And are converted causing inflation. As a result steem prices fall and the debt ratio does not recover. This describes the fact that an ecosystem can never collateralised more than its market cap.

To avoid this catastrophic effect the 10% haircut was introduced. Meaning that the downward peg of the sbd is broken when debt becomes large. This case is however unlikely since sbd is only issued by the cabin when debt ratio is low. The 2018 crash so far caused and to be no longer issued, but the peg remains in place. It might however be temporarily be broken if we crash further.

The problem of private sbd creation ist that we may very easily reach 10 or more % of debt. Then only small downward fluctuations will cause the peg to broken with sbd < 1$.

This means that by trying to enforce an upside peg, we have softly broken the downwards one. The simple reason being that the colleteral is not strong enough. By sending 1$ of steem there is no way to guarantee conserving taht a 1$ value independent of the price of steem. Sending 2$ with forced settlement maybe.

If we allow free printing of sbd I think it is only a matter of time (next bear market) until sbd will be less than a $ combined with a massive loss of confidence in the steem economy.

Therefore if rather not go that way. People trust sbd to be a safe haven and not a speculative investment. It should stay that way. Instead why not create a second user issued stable coin on top of steem? Maybe this could even be done via a SMT? Have not thought about that yet

Posted using Partiko Android

·
·
·

You made some great points.

I dont think inverse conversion would be a problem if it came with a fee that is set by witnesses.

If the amount of sbd is at $1 nobody would use this feature as it would be cheaper to just buy at the market.

However if the sbd proce hoes above the fee it would push the proce down.

Comversely if steem crashes people would convert sbd and thus resuce supply which also would fix the issue.

If however thwre is no way to keep sbd at $1 it looses all of its utility and value.

At the same time if sbd demand is high there needs to be a way to convert this energy into the steem price. Incerse conversion with a fee that is burned would create that. As a result i think inverse conversion is best way to fix sbd.

Are you aware of a better way?

Very good idea and decision that you made. I think the SBD Markets need to be more liquid in the outside world beyond Steem-internal ecosystem. The internal conversion mechanics work like they should...not perfect but there are clear rules that are being enforced. But the price discovery on external exchanges is in the hands of pure speculation, because of a leck of volume, market participants and overall crypto related hurdles.
Therefore I would really like to see an easy to use in build market exchange for fiat currency like USD, EUR and others. If we could achieve a permanent flow of fiat capital into this ecosystem than I suggest we could see SBD more stable and valuable as a good trading pair for fiat currency.

Having a stable asset like Steem Dollars has plenty of benefits, for example bloggers always know what they are getting paid, it takes away the crazy volatility of the Crypto World. It is also great for traders who can take their profits hedging Bitcoin, Litecoin or any other currency against SBD.

Public opinion : Some people are saying that Steem Dollars could be pegged to the USD at some point.  I have no idea if that's true but you should do your own research before buying.  I prefer Steem because it can be used to power up on Steemit and earn some money.  It does get locked in and you can't sell it all straightaway but I like that too.

Thanks for your thoughts.

Steem on!

Thanks for sharing. I am selling all my SBD, but man this think is just going higher and higher:). Some investors and speculators probably bidding up the price, not knowing anything about SBD. Just my 2 cent opinion.
The 1 USD peg is enforsed by two processes^

if 1 SBD > 1 USD then mass of SBD tokens will rise with new rewards
if 1 SBD < 1 USD it is profitable to buy them on market and convert to STEEM.

The first thing is slow but inevitable, The second is very fast provided it's all OK with transfer from exchanges.

·

Question: Where can I find the "convert to steem function"? At the end of 2017 it was removed from the steemit desktop steemit.com in the wallet tab.

Some people want a pegged SBD and I hate that idea as I'm a free market fan. So allow the markets to decide values of SBD and steem.

Personally I bought SBD when values were running 1.4 SBD to 1 Steem and now it's at 0.9 steem to a SBD (give or take) and been converting some of it because it's a great bonus on the money invested. But at the same time I am having a hard time converting it all as I really feel that SBD will rise faster then steem.

See without printing SBD right now any jump in demand will be met with a lack of supply. Feel that there will be drastic jump in price and once more is printed the price will settle back down much like the spike that happened at the end of last year/early this year. History is a great teacher.

·

Sbd should never be above $1 and if so you should never buy it as it will come down to $1.

By design it is worth $1, never more.

·
·

By design it's never worth less then $1 and there are protections against that. It can rise freely and due to the limited supply is very easy for pump and dump plays which makes buying worthwhile. Don't care what the original design was, SBD moves along with Steem and the price ration between the two can be a great investment play.

When the ratio for SBD to steem was high it was completely worth buying IMO as that money would have either bought steem or SBD at that moment as I wanted to add to my steem holdings. It was around 1.4 SBD per steem at the time. Now it's flip flopped and is 0.9 steem per SBD. So by playing the ratio between the two the 400 SBD would have been about 280 steem. Today I can convert it to 440 Steem. Net gain is 160 extra SP by playing the ratio.

·

I don't see how this is related to free market principles. We build cryptographic systems and then let the market decide. But we can try to build stabkecoins or whatever else we want if math allows it

Posted using Partiko Android

·

I don't see the peg as a free market issue. A pegged SBD is product created by the creators of Steem. It's up to you to use it or not. In my opinion, there is no need for two non-pegged native cryptos on Steem.

Posted using Partiko Android

·
·

By having two free moving currencies there are different plays at different times which makes thing much more interesting on the investment side.

·
·
·

The IRS considers any swap between two coins a tax event. When liquid rewards are paid in both SBD and STEEM it makes it hard to avoid making swaps. The IRS does not allow any losses to be deduced from the wins. Steem is already quite complicated. The downside peg of SBD is the only reason it's worth keeping around in the first place.

To listen to the audio version of this article click on the play image.

Brought to you by @tts. If you find it useful please consider upvoting this reply.

If SBD remains stable at $1.00 per SBD, how can you make money by exchanging Steem for SBD? You will always have the same $ value, right? And if Steem's price goes up you would actually lose Steem, as you would be able to exchange it for less Steem per SBD. Or am I not thinking this through?

·

I am not buying sbd to make money. I am storing the value of my steem to not be exposed to the downside risk of steem.

·
·

The price of SBD can go much higher than 1 USD again if/and when STEEM picks up again. Not only are you protected from the downside but you also have a chance of making money.

Posted using Partiko Android

·

Yeah you are right. He is betting steem will go down. If it goes down he will buy more steem with the SBDs.

I feel that right now is a risky time to sell Steem for SBD. However, I seriously hope that SBD maintains its stable peg this time around. Of course, if it does go up to 15 times again then you will have made an amazing investment.

I would love to see it being a stable peg. Having said that, if it stays stable at $1 and Steem goes up then you will have lost money. I guess it's a gamble that could go either way.

·

I am not investing in SBD. I am storing value.

If steem goes up i lose upsite, that is correct.

We really do need SBD to work but as of now it was being manipulated and obviously did not work. I'm sure it will make a comeback soon and I'm sure you're waiting for that moment. It will be as important as you say once the peg system is real and preserved.

Thanks for your thoughts. For the short-term, I would love to see high prices for Steem and SBD. But I understand that for long-term growth a pegged SBD will be extremely beneficial.

Anyone who is joining the Steem community today doesn't even understand what SBD, since it has been so long since it has been apart of post payouts.

·

Sbd should not trade above $1 for a while, as there is no reason for it to be worth than $1. It would require many buyers that misunderstand where its value comes from.

I agree. The people need to peg it to the USD. If we all just agree to except SBD 1 for 1 in the market we can have a stable currency. When people hodle SBDs for the hopes of getting more down the road we fail to peg it. Haha what if we had the SBDs pegged by how much the currency moves around. If people don't move SBDs the block chain prints more SBDs. Haha like inflation but weird.

·

Pegs have nothing to do with people agreeing, because there is one sure thing and that is that we can agree on nothing :)

Posted using Partiko Android

·
·

I agree. Lol. I just wish people would sell and buy stuff with the SBDs it would self regulate the "peg" . It would be great for those who have talents other than being good at making steem/SBDs. But if the people good at making steem don't want to buy things, it's there loss. It almost would be nice to have some some program to encourage money spending but we all know that is a bad idea. Hopefully we all know.

Sir, I am your post@upvote @reasteemed

So far I was not happy about SBD price and now I understood the risk! As you said if it PEG around $1 they it will drop back to that price level very soon! So better be prepared and buy back STEEM! Thank you very much for sharing this great advice with us!

Cheers~

I agree on the value of a stablecoin as part of the Steem ecosystem. But the problem is that when SBD was introduced on some exchanges, it became a vehicle of speculation and quickly spiked to 14 USD thus making it useless as a stablecoin until recently. Now that it's pegged to one USD from the downside, it's great for as long as the debt ratio stays below 10%.

I was a big advocate of removing SBD ..... You have convinced me other-wise. For some reason the use of SBD to protect Steem investment never crossed my mind but you are absolutely right. If SBD was to stable at 1 USD than anyone holding steem can choose to lock in its current value by trading it for SBD.

  • The only better solution is to allow us to trade directly for USD onsite.