Debating Steem Backed Dollars - Come On Baby Let Me Know Should I Stay Or Should I Go
It may be difficult to reach consensus on a platform as diverse as Steemit, especially when one is as new to the cryptocurrency world as I am. Just understanding how all the moving parts work is, well, work.
I watched Ned's interview on Epicenter last night and thought it was great. He answered a lot of questions and shared some of the developments coming our way.
He made one comment, however, that has sparked a debate across the community and I've been spending all day learning, commenting and thinking about this one topic his comment ignited.
"Does the community want to continue to be paid out in Steem Dollars, or do they want the system to be even more simple?"
I have researched this all day and have some thoughts on the matter that I'll share below, but first I want to show you some other good posts both for and against doing away with Steem Backed Dollars. (SBD)
If you haven't heard Ned's video you can find it on @krnel's post. There, you can find a link to the full podcast as well as the soundbite of the remarks in question about SBD's and you can find that post here. Ned On Sbd Does The Community Want To Continue To Be Paid Out In Steem Dollars --- by @krnel
@ned made a comment there that reads in part:
You got to love these guys for listening to the community, or maybe I'm just getting used to doing things by consensus like this. CEO's I've worked with make decisions behind close doors and never tell the kids, let alone ask them for advice.
I've spent the whole day thinking and talking about this on Steemit and have condensed some of my thought here to share with everyone. I'm not an economics major or an expert so go easy on me please.
I'm surprised this topic is the main topic we're discussing based on the small fraction of time Ned talked about this on that podcast I mentioned.
There were so many more interesting things he brought up we could be discussing, like integrating Disqus -type plugins to run on WordPress sites and all the applications in development.
Points For Keeping SBD
Reading the post by @ats-davis which outlines some very good points in favor of keeping SBD as part of the platform.
Initially, I agreed with the points made in his post. One of them discussed here:
entire post --- by @ats-david
The question:
Yes, having SBDs does come with risk and it does incur a debt for STEEM. But is this risk too high?
It seems like this could become or is becoming a problem that is putting downward pressure on the price of Steem. Coupled with the recent changes that allow users to power down faster, it could be hurting the platform to have to peg SBD with Steem. It takes more Steem today than it did when the SBD was earned.
@timcliff explains this a bit better in his post,
entire post --- by @timcliff
Cryptocurrencies are inherently volatile, Steem Dollars being the exception, but to keep the SD stable means witnesses must create more Steem today and when all that Steem enters the market, the price of Steem drops.
Any given day witnesses may have to create more or less Steem, sell it so they can peg the SBD. We are trading SBD stability for less stability in Steem.
Again, that's the way I understand it. If I'm mistaken, enlighten me.
@pfunk made some comments in favor of keeping SBD.
and @ats-david
Initially, I agreed with this as it makes perfect sense until I learned merchants do not have to think about wallets, fluctuating altcoins prices, bookkeeping, taxes or how to price items in crypto, they don't have to change a thing.
They don't need to know a SBD from a bitcoin to a zcash, just cha-ching.
(POS) Point Of Sale systems like BlockPay have solved these problems for merchants. Just enter the price and pay. Done.
From a merchant or business owners perspective nothing changes. They just have another way for people to pay.
@ats-david makes another good point I agree with in the same post quoted here:
The biggest problem with STEEM/Steemit continues to be the lack of development of the interface, the lack of marketing, and the lack of stability to the economic fundamentals of the system. Every new change to the latter will delay new investment. The time spent on debating these changes is time that can be better spent on figuring out the onboarding and retention issues, which is mostly tied to development of the interface. entire post --- by @ats-david
Steemit would have more Steem to direct to development if it could reduce having to pay SBD at today's Steem prices. Not only would more Steem be available for payouts, marketing, development and figuring out onboarding and retention issues, but more focus could be redirected towards those directions instead of having to focus on keeping SBD pegged to the dollar.
The Genesis Of The SBD
When one reads the white paper for information about SBD, it appears to me that it was never intended to be the main token of Steemit.
Steem is the token we are working to bootstrap worldwide, not SBD.
Steem Dollars was implemented to offset the hyperinflation of Steem as I understand it. I could be wrong so correct me if I am. That goes for anything I write.
as @timcliff pointed out above:
- If STEEM coins are worth $1.00, then the blockchain would only need to produce 1 STEEM coin to pay back 1 SBD.
- If STEEM coins are worth $0.10, then the blockchain would need to produce 10 STEEM coins to pay back the same 1 SBD.
With the Steem price low, witnesses have to produce more Steem to keep the SBD pegged, this adds more Steem to the market, thereby driving down the price of Steem, the token we're attempting to bootstrap.
It's like trying to bale water out a canoe with a smaller and smaller bucket. It gets harder to do the smaller the bucket is and the faster the water flows in. That's the cost of pegging SBD's
Instead of doing that, we could redirect that Steem to development, marketing, UI, more applications and all of the other things @ned talked about in that podcast that got us on this topic.
As @ned points out in his comments above:
the future of SBD, [sic] does not need to be a binary position, it can live on, live on with a reduced role, or be retired. No decision need be made overnight.
From my perspective as a user, nothing drastic really changes either way except after a post payout I now have two choices.
- Power up - same as now
- Sell Steem - instead of SBD
Provided I'm correct to think that Steem Power earns interest just like SBD does. If I'm mistaken about that then obviously, correct me please.
If I want to have my Steem, instead of SBD pegged to the dollar, I can sell Steem into BTC and transfer in on my card or to a bank account. It is now pegged to the dollar because it is a dollar. Keeping it in Bitcoin is not such a bad idea recently as the price keeps climbing
The only difference I see is I have to make that choice at payout of each post if I cared enough about price volatility or just power up.
It's kind of like filling the tank on your vehicle. Power up is fill the tank and transfer Steem is burn the gas or stash the cash. This makes it easy to explain to a new user.
Rewards Pegged To The USD
Rewards displayed on posts could be in US dollar and at the time of potential payout on a post, that many dollars of Steem at the current price of Steem could be paid out.
Since the SBD was pegged to the dollar anyway, what difference would it make to pay in 100% Steem Power, or 50% Steem Power and 50% Steem? Hell, just a while back our posts were not earning any SBD, just more Steem and Steem Power. That spent just as good.
Imagine a new user discovering that the earnings shown at the bottom of posts is in USD. Would that be harder to understand than explaining Steem Dollars to them?
Then adding an explanation about Steem Power and , oh yeah, there's Steem too.
Simple way to explain it would be.
- Posts rewards shown in USD
- Post payout is in Steem (Steem price in USD x USD earned)
- Power it up and get Steem Power benefits
- Cash it out get dollars or bitcoin
We would have less to explain to new users and this would be easy to understand. Simple and elegant. Less moving parts.
What about Current SBD Holders?
No one seems to have discussed what would happen if SBD were removed. What would happen to the value of SBD for people holding lots of it? Could they sell it if it had no use on Steemit anymore? Who would trade Steem or fiat for a SBD then?
Is all of this discussion just to frighten SBD stake holders to sell their SBD for Steem now while it has value and if they do that in a mad rush, how will that effect the price of Steem?
The dynamics stimulate the brain cells on overdrive, but really does it change that much beyond post, vote and earn?
Let's continue this conversation in the comments below.
Related posts
Steem Dollar Economics --- by @dantheman
Not being a SBD holder, I don't have any interest in maintaining it. It is easier for me to understand one token, STEEM. I hear the argument for a SBD, but I think that people can adapt their practices to live without it. Services are springing up everyday to make exchanging tokens for fiat currency easier and convenient. Steem and steem power is a simple concept to understand.
Agreed. It's a lot more simple that people think.
The problem with this entire debate is that nobody on the anti-SBD side wants to put any of the STEEM price declines into context. The overwhelming percentage of the downward pressure on the STEEM price is mostly due to two factors:
Inflation - Despite the recent inflation adjustments, the volume of available liquid STEEM has greatly increased. This increase (4 million+ in the last two weeks) is a direct result of the changes in the recent hard fork and trumps the relatively tiny amount of pressure that SBDs are putting on the STEEM price.
Power Down Schedules - The STEEM price had been declining week over week because many of the largest stakeholders were cashing out (and some still are). Coupled with the inflation rate, that was enough pressure to bring a $4+ STEEM price down to ~$0.10 in about three months.
And as stated several times already, SBD supply can be managed much better than it has been and some of the largest holders of SBDs are accounts that are controlled by Steemit, Inc.
The relatively tiny amount of STEEM that is needed for SBD conversions makes this a non-factor. Steemit, Inc. has STEEM/SP/SBD value in the millions of U.S. Dollars. They have plenty of resources available to develop and market STEEM/Steemit.
This just isn't true. They do have to think about these things - and that's why there are very few merchants who accept cryptocurrencies. They do have to change things, even if it's a POS app and registering with another payment system. The advantage of SBDs is that merchants don't need the additional conversion software and don't need to immediately withdraw the money, which would reduce the downward pressures on the STEEM price. The idea is to not have constant selling of STEEM on exchanges in order to cash out earnings so that they can be protected from volatility.
My understanding of SBDs is that there should be few actual conversions and sales of the token - that they are supposed to be used as an "internal" currency between accounts. The SBDs are pegged because the value is supposed to be fairly consistent so that they are not constantly sold or converted. The STEEM ecosystem would become its own marketplace - it would create its own economy that wouldn't require every user to cash out in order to protect their earnings or realize gains.
Of course, this is a long-term outlook. We obviously don't have the user base right now. It needs to grow.
Keeping SBDs on the platform and having users exchanging them with other users is the whole point - it's what makes crypto tokens currency. If SBDs were eliminated, you eliminate the advantage that STEEM has over other cryptos and you eliminate the single largest reason for merchants to join the STEEM ecosystem. Without merchants and customers, there's no network effect. We'll just have another second-rate alt-coin.
You do make some very good points and to be clear,
I like SBD just the way it is and I'm for it
I'm just looking at all sides of the question from as many perspectives as possible. I know you like SBD a lot and think that's the main reason people join Steemit, but it wasn't the reason why I joined.
That may be a bit of an exaggeration and there really are platforms that work right alongside existing POS systems where a merchant wouldn't have to change anything to accept crypto, so yes, it is true. Business owners don't care about crypto, they care about more customers and sales. Explaining crypto to them is not as necessary as you think.
In any case, I think it would be premature to make any change like that so soon after the recent fork and as I mentioned in this post , I'm not 100% sure I understand all the implications it would have on the system as a whole. The whole reason I wrote this post was to learn more about how people feel about it and to share my thoughts. From where I stand and how I use the platform, nothing would really change that much.
I do agree with you on the points you make in your post about not always tinkering with the system and the effect this has on the perception of Steemit, but it is an experiment in beta and tinkering it is to be expected. This is just an idea we're talking about and no action needs to be taken right away as @ned pointed out.
If I want protection from volatility, I would have to sell. How this would affect the price of Steem if everyone had to sell (or power up) is something to consider as well and you make a good point for that.
This is very appealing, but from what I understand this SBD stability is paid for by having to constantly sell Steem, thereby undermining Steem price stability. While it's true the SBD are not constantly sold, the Steem to support it is. At least that's my understanding and again, I may be mistaken.
If this is a potential systematic problem as @ned mentioned, we need to talk about it before it becomes a problem. If it's not a problem, them why did he mention it?
@clayop made another post about this you may be interested in here: https://steemit.com/ned/@clayop/should-we-keep-sbd-or-remove-it
From a non-crypto perspective, sbd seems like the easiest way for practically anyone to know the value and liquid use for purchasing anything anywhere. I don't buy things with any crypto due to extreme volatility. i think you would be phasing out a lot of potential for widespread use by eliminating sbd.
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Regarding a phase out, wouldn't it just be a case of unbinding the steem at a particular moment contained in the sbd and transferring it to the user? It is a derivative, and at any given moment there is an internal market rate.
You mean convert it all at once? If the STEEM price is what people are worried about, that would be apocalyptic. If my SBD were suddenly traded for Steem, I'd convert it to something else as quickly as I possibly could. I'd sell all of it, at least as long as markets existed to sell.
I hold SBD for one reason: I want price-stability. I'm sure I'm not the only one. If people want price-stability, it's price-stability they'll get, and they'll get it by rapidly exiting the Steem ecosystem.
Sounds simple enough. Don't understand what you mean by unbinding exactly. Wouldn't they have to sell the SBD they currently have to get Steem?
The steem already exists, you just freeze the internal market and out spills the beans... It would cause a sell spike at first for sure.