SBD is broken, why not just remove it?
Lately there has been discussion around SBD which should be a token pegged to US dollar. The peg hasn't been holding very well. The situation isn't catastrophic because the error has been in the upper side (SBD is worth more than one dollar), but the system is still broken, nonetheless.
Root cause is the fact that the amount of SBD doesn't change according to the supply and demand of the markets. There has been a lot more demand for SBD so the price has gone way too much up. If the Steem blockchain can't print more SBD when there is more demand, the peg won't hold.
But if the blockchain starts to print more SBD, there is a systemic risk. If the price of steem goes down, the liability for backing the SBD token will be much bigger.
The usecase for a stable cryptocurrency is to help normal people to use it as a currency. Most people aren't interested in using very volatile currency in daily activities. SBD was supposed to help with this. But so far we haven't seen market places or any other real usecases for SBD although it has been existed for more than a year.
So we have two facts that speak against SBD: it can't hold the peg, and pretty much nobody is using it for what is was created for.
And here his a third. A while ago @dwinblood wondered where have some of the anarchism/voluntarism celebrities gone. It seems that they were motivated mostly by money, so when the price of steem went down, they didn't find writing here profitable enough anymore.
The dollar sum indicating how much a post has earned goes down when the price of steem goes down. I think we have now pretty good evidence that when users see dollars, they think in dollars. They forget that they earn also steem tokens which will become more valuable if the demand goes back up someday.
The funny thing is, those successful authors who left the platform when the price went down, would have multiplied the value of their earnings if they had stayed and taken their rewards in SP instead of SBD.
But they didn't do so. Why? Because the dollar amount in the posts is so misleading. It's depressing to see it go down.
The solution is simple: Ditch the SBD and start paying rewards only with steem and SP.
When there is no dollar amount in the posts but steem amount instead, it doesn't change everyday depending on volatility of the price. What you see and get is the amount of steem that you are rewarded by the upvotes. That is more accurate showing you if you have been successful because you write so well. Currently authors can have a fake feeling of success just because they wrote their piece when the price of steem was high which made the dollar amount big.
Now you could be developing as writer and become more successful in here, but you don't really see and feel that because your rewards depend more on the price of steem than your writing abilities and popularity.
When users start to think in "reward points" (in this case steem tokens) rather than dollars they will become much more engaged. They don't get discouraged just because cryptocurrency markets happened to go down when they wrote a few good posts.
Because I don't see any good reasons to have stable cryptocurrency on this platform, I suggest we remove it. It will make the user experience better, remove unnecessary systemic risk and make the system overall simpler.
I see that @ned resteemed this post. I would like to know if Steemit, Inc. agrees with this assessment...that SBDs should be removed. This isn't the first time that they've shown interest/support for calls to eliminate SBDs. Rather than remaining quiet/silent about it, why not state their position and engage in the discussions?
I think these repeated calls for eliminating SBDs are absurd. There's always some reason or another.
When the STEEM price was low and the debt ratio was high, everyone panicked about it and wanted to eliminate SBDs, even though the peg was held.
When STEEM prices are higher and SBDs are trading at a high premium, people are now calling to eliminate them because "the pegging is broken."
What has been true since last fall is that SBDs can be bought/sold for at least one U.S. Dollar. There has been a stable floor for the token. That was the primary intent for it. As long as they're worth at least one U.S. Dollar, I'd say that the experiment with them has been wildly successful. Eliminating them because they currently trade at a premium is just preposterous, in my opinion.
We need long-term thinking here. These reactions to relatively short-term price fluctuations in STEEM/SBDs really should stop. And Steemit, Inc. putting weight behind some of the calls/panic is a little unsettling, to say the least.
Steem dollars were never meant to peg strongly to the dollar. Dan always said he EXPECTED SBD to carry a premium and that it was meant to as often as possible be a weak peg with a premium essentially.
If u want a tight peg go with bitusd and other bitassets.
Having sbd removed imo is the worst idea there is. Simply because if u have steem backed dollars...EVERYONE knows what dollars are and that this association in and of itself is a huge marketing and mass acceptance bonus.
I've used to think this way. But not anymore, because I just don't see any evidence of this. It hurts the marketing by attracting low quality users and causes suspicions on potentially great users.
I see no evidence of what u say. :/
But i still love u :]
Indeed. It makes sense that an author's worth will be evaluated both by their ability and long term investment. Steem Power does exactly that. I also think that there should be a choice (perhaps a mini exchange widget within the wallet widget) where the user turns their Steem into SDB.
You may be right that we don't need the SBDs.
However, I don't think there is a need to ditch SBDs if the only reason is to display the rewards in STEEM.
I think that changing the display of rewards to STEEMs may be done now, without the need to ditch SBDs at the same time..
Even if we change the display currency, the problem will still exist if users are paid with SBD.
Hm... Guys. If there is choice between @timcliff's proposal of fixing the SBD peg by making it more complex and removing SBD interely, then I'll choose get rid of SBD, instead of adding additional risks for platform.
Luckily, we don't have to choose, so let it be the status quo.
It's settling down. I don't think this last aberration is proof that it's a bad idea.
It's a proof that the pegging mechanism doesn't work.
because we didn't had any mechanism for pushing price down. We just need to add what timcliff proposed, and thats it.
Market demand trumped price controls. What a surprise. But that demand bubble is tapering off rapidly. I do like the volatility mitigation concept even if it doesn't entirely work as planned.
The pegging mechanism should work in different situations, including the one we are in now. Of course nothing can guarantee a perfect peg but if the price is seriously off for more than 24 hours, the system is broken.
So there has been huge demand for our derivative token in recent months, but it's a problem because of a display issue which we could easily fix on the front end?
The extra purchasing power of the SBD is more a benefit than a problem. The display and perception problems can be tackled on the front end before you eliminate one of the central premises of the system. The high price is evidence of high demand for the product. It would be shooting ourselves in the foot to eliminate a high demand token from the system.
Quite right.
These are two different problems that could be fixed by removing the SBD. I generally support simple solutions that affect more than one problem.
I agree that the brokeness of SBD hasn't been catastrophic (so far), but it's still a problem. If there is no price stability, SBD won't ever going to be used in commercial markets. It will stay only in the hands of cryptocurrency speculators.
And our users would have benefited more if they were paid with steem instead of SBD. With SBD they made only modest profits, with steem they would have multiplied the value of their earnings.
Yeah, there is high demand. But doesn't mean we should be serving that market. By keeping the system simple we can focus on the most important things. It's a common mistake for startups to focus too much for anything that seems to get some traction and forget the fundamentals of their business. The derivate markets are not and shouldn't be a focus of Steem.
I don't think the dollar amount shown on a post does any favours for steemit as a serious blogging site, I would rather a more discreet value indicator.
SBD is doing just fine.
So far I've made quit a bit of money just trading on the difference between it and steem
it's not broke...so don't fix it.
I am kind agree with you. The only benefit of SBD is flooring rewards for authors. But its cost is quite bigger (i.e. publishing price feed, adjusting witness policy, additional selling pressure when STEEM price is going down, etc.). By removing SBD, we can remove large proportion of complexity.
Pegged asset sounds sweet. But in fact, it is basically a community money as well as STEEM. For instance, ETH person never uses SBD even though 1 SBD perfectly equals to $1, while Steemian is willing to use both SBD and STEEM as a payment method. Volatility is less important than belief in the platform.
Yeah, that is also a good point.
Yes, pegging currencies represent costs. A good example for this in the fx world- is the Swiss National Bank's move to remove the EUR/CHF floor of 1,2 in Jan. 2015, which they have supported before in order to support their economy & exports. They gave it up eventually as the costs were running to high and the pressure on the Euro was to powerful as the ECB was highly accommodative in their policy.