STEEM backed Dollar (SBD) is back to one USD. Is it time to apply reverse peg to make SBD stable for ever?
SBD is almost back to one USD (i.e. exactly $1.01). Some may say, they have predicted that SBD will be one day back to one USD due to its inherent design. However, SBD is backed to one USD due to BTC's bear trend not due to its design. It is only pegged one USD that means it can't below one USD since it is backed by STEEM. That means anybody can exchange one SBD for one USD equivalent amount of STEEM.
Currently, convert function is disabled because of confusion since few users unintentionally converted SBD to STEEM at lower deal. Since November SBD is traded much higher than one USD. At one time, it was traded at more than $20. Due to SBD's down trend along with whole cryptocurrency market, that convert option can come back again.
Now question is that should witnesses and STINC apply reverse peg to make SBD stable in both ways. Currently SBD has no upper limit. Therefore, it becomes victim or tool for frequent pump and dump. However, due its its inherent design (i.e. one SBD is always treated as one USD by STEEM blockchain), content creators have earned 2-6X times more.
However, big number of investors and witnesses think that SBD's higher price is suppressing STEEM's demand. Since a large number of users are confused about SBD, and invest in the platform through SBD. Moreover, they expect more return due to its history. SBD is designed to be used as a stable currency so that internal bartering and future SMTs can be traded against stable SBD. However, it looks like it not working for now.
With peg and reverse peg option, SBD can easily peg to one USD in both was. That is when one can convert Steem to USD equivalent SBD. For example, if current market price of Steem is $3, then 1 Steem can be converted to 3 SBD.
Now the question is what will be effects of revers-peg of SBD. Can Steem ecosystem get benefit from it? It is a hard question to answer. One thing is sure that SBD will work as backbone liquid and stable currency for the STEEM ecosystem. In future all SMTs could be easily traded against dollar pegged SBD. Therefore, traders will feel comfortable keeping SBD.
Moreover, there is an external demand for USD pegged cryptocurrency. Tether and True-USD are backed by real USD fiats. On the other hand NuBit was designed to peg for 1 USD using BTC pair (i.e. Nubit's price is kept 1 USD by putting sell and buy orders using BTC). However, Nubit recently crashed and went far below 1 USD. Perhaps trader dumped it in huge numbers against BTC and Nubit foundation do not have enough BTC to sustain.
Can similar problem can happen to Steem ecosystem? If SBD goes much below 1 USD, Steem blockchain have to produce lots of liquid Steem. Steem inflation will increase further than it was designed. Can Steem sustain the pressure of keeping SBD at one USD?
On the other hand, Steem's price will rise organically due to demand from new flux of investors. SBD will be supported by both peg and reverse peg. It is complicated and perhaps we will not know the answer until reverse peg is implemented.
Disclaimer: This opinion is not a financial advice, it my personal perspective and opinion. Please seek professionals for financial decisions.
Image sources: Most images are open sourced (e.g. Pixabay, Wikimedia etc.) with Creative common license. Some images are used with due courtesy to respected owners.
Thanks for reading.
@riseofth
Cryptominer since 2013, occasional trader and tech blogger
The conversion tool wasn't meant to be the way to peg SBD to $1. The main ways of doing this are the Bias and APR by manipulating supply. The Bias alters the rewards ratio given to the users who choose 50/50, either increasing or decrease the influx of new SBD. The APR gives an interest payment to people who hold SBD, encouraging people to hold instead of sell, decrease the supply of SBD on the markets. Also, giving users the option to get 100% SP as a reward would also decrease the supply of new SBD if it falls below $1.
When SBD drops below one USD, bias and APR manipulation works along with choosing 100% SP reward. However, keeping the upper cap is the hurdle since there is no such mechanism right now. That's why reverse-peg comes in. Moreover, increased supply of SBD has low effect on price, since high speculation can overcome it. But STEEM blockchain has a mechanism when total SBD supply crosses 10% of total STEEM supply's, SBD production will stop. At some stage, with very high supply of SBD (20% debt), SBD can only be converted to 0.5 USD equivalent of STEEM.
https://steemit.com/steem/@timcliff/re-bacchist-re-timcliff-re-bacchist-re-timcliff-i-submitted-my-first-hardfork-pull-request-to-the-steem-blockchain-updates-to-the-sbd-print-rate-20180528t211227510z
However, it would be interesting to apply a negative APR when SBD trades higher than one USD.
This post has received a 3.13 % upvote from @drotto thanks to: @riseofth.
I am new to the steemit community and to be honest yes it is demotivating right now to see the price of SBD falling. :( But its a bear phase in the market which will probably soon subside..
I am not in favor of enforcement of peg at the risk of substantially dropping post rewards which I believe are responsible for increasing growth on the platform.
But having said that I'm in favor of this down the road if steemit can substantially grow its user base and thus the marketcap to the point where SBD can actually serve it's function as a stable asset... we definitely need more stability in cryptos for them to be used against fiat....
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I think the SBD should have been pegged to the US dollar before the pump even happened. By the time it started, Tether was already out and pegged to the dollar. Their similar in such a way that both of them want to be pegged to the dollar. Just wondering why it didn't already happen?
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