Pegging SBD to the dollar
Wasn't SBD supposed to be the stable version crypto linked to Steem?
I believe that increased demand for SBD to use vote-buying services contributed to the initial run-up in SBD. Compounded by the link to bitcoin being much stronger than the link to dollar (and the massive run-up in bitcoin this week)... SBD didn't have a snowball's chance of staying tied to the dollar. So much for less volatility than STEEM.
Steem has very specific features to keep SBD from dropping below the dollar, but there are no specific features keeping it from skyrocketing above the dollar. Or to bring it back down to earth once it has.
So I had an idea.
Hyperinflation
The only thing that can bring SBD back down to the dollar is to flood the market with cheaply created SBD until the price returns to normalcy. Then if the price drops below $1 the conversion and interest features can pull it back up.
Right now author rewards are the only source of new SBD, and the creation rate is slow.
One way to increase the creation of SBD would be to allow authors to published at lower than 50/50. I don't support this, because I think people benefiting from content creation should have some of that reward intrinsically invested long-term.
But there is another way.
It would require a change to the protocol (a hard fork) so I am only floating this as a thought bubble to see what people thing. This is not an actual proposal to fork, only a chance to discuss the possibilities.
Witnesses maintain price feeds for SBD and STEEM so that reward ratios can be established. 50/50 means 50% value in each, not the same amount of each. What if we generated new SBD and rewarded it to investors based on their proportion of VESTS owned, but only when SBD price comes unhinged from the dollar?
With one block every 3 seconds, there are roughly 28800 blocks generated each day. 100 times each day, (every 288 blocks) new SBD can be awarded to VEST-holders. New SBD would be created at an inflation rate of 0.01% of premium to dollar (over the past 24 hours). If the average premium for SBD is 100% (SBD is worth $2) over 24 hrs, the block would create new SBD to equal 0.01% of all the existing SBD. Over a full day, the inflation rate here would be 1%. If the premium rises to 1500% (SBD is worth $16!!!), the new SBD created would equal 0.15% of all the existing SBD.
The new SBD is awarded to all Steemians in proportion to the VESTS held, and can be claimed by any Steemian once their rewarded SBD exceeds 0.001 SBD. It's a bit like rewarding a dividend to long-term investors. Investors can then sell it to the speculators. The new flow of SBD would bring down the price and help it stay pegged to the dollar.
Just a thought. The math gets a little intense, so I hope people can follow. As always, let me know if you have any questions, tell me what an idiot I am, or share any concerns you may have.
I still don't understand the difference between the three pillars here on steemit.
It can be a bit confusing, especially with SBD not working the way it's supposed to.
Hi Joseph,
Sometimes the simplest solutions are the best... i wrote this thought in my post:
https://steemit.com/steemit/@miti/you-want-to-help-steemit-grow-up-strong-and-sure-four-step-for-success
I like the elegance of your solution, but I don't think it would create any more SBD.
As I recall, less than 25% of outstanding VESTS are actually being voted. My understanding is that the protocol adapts for this. The system assigns the Rshares assignable by VESTS based on the actively voted VESTS in some rolling period (5 days?). So the whales that aren't voting are by default delegating their voting power pro rata to everyone that does vote. Effectively, the rest of us reward 4x as many Rshares because of the inactive voters. If they actually voted, it would not increase the SBD created, it would only change the distribution. Am I wrong about this bit?
Edit: This prevent the blockchain from being manipulated by whales accumulating VESTS and not voting them with the explicit purpose of decreasing the inflation rate. It prevents the protocol from 'rewarding' inactive HODLers with lower inflation, and instead provides incentive for active HODLers to reward content that will increase the value of STEEM over time.
Wow... so technical answer.. I need to read up about it before answer you. I found some interesting explanation in this comment page from @theoretical
https://steemit.com/@theoretical
Do you have the comment permlink? I looked through that page and there are some interesting theoretical discussions about systems that have since been changed, but I didn't see anything that ties directly to the relationship between VESTS and Rshares.
https://steemit.com/theoretical/@theoretical/the-steem-reward-system-part-2-v-shares-from-r-shares
thanks!
Okay, found and read. So the math is a little technical but it works exactly as I described.
The total reward is distributed proportional to the total upvotes. So not voting at all effectively 'redistributes' your voting power to everyone that does upvote. Downvoting a post removes its rewards and releases them for all the other posts to receive more.
And getting higher participation in voting does not create more SBD, it only changes the distribution of the SBD/VESTS that are created.
I don't agree.. i've to read that post a little slower, but a first reading of it, I understand a different mechanism.
Why would you want to bring the SBD price back down? I don’t understand. Isn’t it better that it has way more value now and so, when your content is rewarded you are actually making more money?
I would rather the volatility be in the SBD since it is not tied to curation or the awarding of overall token liquidity.
One of the objections made against cryptos is that the price volatility makes them unsuitable for regular commerce. The reason there are two liquid cryptos on Steem (STEEM and SBD) is so that STEEM can be the volatile one that goes to the moon, and SBD can be a more constrained crypto that is pegged to the dollar. (SBD literally stands for "Steem Backed Dollar." That's why your Steemit wallet says that SBD is worth about a dollar, even though it's obviously not.)
By design, the value of SBD is supposed to always be $1. That's laid out in the white paper. Since the design is clearly not working, this is a suggestion to improve on that design.
Pegging your SBD to the dollar would not decrease your rewards, because the amount is established in VESTS and then 50% is created in SBD instead of VESTS, based on recent price differences.
wow, there was a lot i did not know about. Thanks for the information.
But still since currenly 1 SBD is worth 14 dollar, (more less) isn't it better that way? so that people who plan on cashing out get more money for their work? on the 50% they can cash out right away? like.. lets say all the Venezuelan steemians who currently are actually making a living with the earnings from Steem it? if they used to get 1 dollar for each SBD (More less) and now can get $10 or more , isn't that better? or will this crazy rates hurt the ecosystem of Steemti?
In the short-run, crazy high rates are always better for the people receiving new crypto. In the long run, they hurt the ecosystem because they prevent adoption for use cases outside of Steemit itself.
If the SBD peg was actually working, then STEEM would be the currency that ran up in price instead. Whenever SBD tried to run up, more SBD would be created and rewarded to the long-term investors. Since they are long-term investors, they could dump that SBD into the market and buy STEEM with it to power up, stabilizing SBD and causing it to be STEEM that runs up. (With the added benefit that they can live of that 'dividend' and not have to power down as frequently to meet expenses, which would also strengthen the price of STEEM).
Then rewards are calculated in STEEM: so if STEEM has a higher price than SBD, you would receive more SBD for your posts. So instead of receiving 8 SBD worth $8 each ($64 liquid value on a 50/50 post) you would receive 64 SBD worth $1 each. The same liquid value, the same outcome, with the added benefit of actually proving that a crypto price can be held stable enough for savings accounts and day-to-day business transactions.
i completely get it now.. and it makes a lot of sense. Thank you so , so much for teaching me all these. I Truly appreciate it!
but i am guessing it is bound to go back to normal , right? or is it unpredictable? is there a chance that it will remain high? because if it is remaining high.. then, a solution would also be... getting the Smeem to a higher rate?
Theoretically long-term holders who understand the peg will convert their SBD to STEEM and power up. Over time that will create downward pressure, but it's a very slow process.
That's why I suggested in this post to increase the inflation of SBD when it becomes misaligned like this, so it will speed up that process.
I see
Why do we need a "stable" currency?
The only ones who care about that are businesses operating in that currency which we do not have on here at this point. Without commerce, the main ones who benefit are not here.....
And even if businesses are on here, they could use the USD for that...We simply only need a USD/steem exchange added.
Do bidding bots not seem like businesses to you? How many more complaints about bidding bots (or cries of scam when upvotes aren't as expected) have you seen since SBD took off?
Steem is actually full of businesses, and many of them use SBD as their primary currency, but since they are benefiting from the high prices, we still pretend there are no businesses operating in SBD.
How about those who get taken by voting bots stop using them? How about people write articles about what a scam voting bots are and that people dont get adequate return?
And with the price of SBD higher, isnt there greater incentive NOT to use them since SBD is priced so high? Do you think the voting bots would do well if the price was one full bitcoin? I bet nobody would send them. Ironically, the higher SBD price deters using the bots (or should if people used their head).
It seems you are against voting bots yet rail against something that will make their business more difficult.
Blaming the currency and wanting to manipulate it is what we face in the dollar based economy. Print more SBD? How are you different from the Fed?
SBD was intended to have particular function that it doesn't actually have. If Steem Backed Dollar isn't pegged to a dollar, why do we even have it?
Realistically, maintaining a currency peg is almost impossible in the real world, so I'm not at all surprised that it has failed. And like I said in my article, I'm not actually suggesting that we make this change, just floating the idea to see what people think of it.
We print more SBD every time a 50/50 post pays out. Does that make Steem no different from the Fed?
Not a bad idea. I am doing my part by immediately selling any SBD I come across for steem in the market!
Hard forks are hard to implement. And I am not convinced that stability and commerce is an important aspect here (now I'm reading through the comments). Yes everyone wants to prove that 'bitcoin' could be used for buying toilet paper - but thats not what its good for. A store of value =/= does not have to equal buying toilet paper.
I think this benefits steem, and when I explain that my 12 dollars is really 78 dollars, the people I am explaining it to get more excited to adopt the platform.
But you are right, it was not meant to be this way. Steem should be at 3 + dollars and SBD at 1. We'll see what happens, seems to do this about once a year ;p
I think the issue that people are overlooking is that pegging is built into the reward algorithm. On my most recent post payout. Here's an example:
Does that look like 50/50? But let's break it down still further. Yesterday SBD closed at 5.60 and STEEM closed at 1.85.
So that's actually $262.09 in SBD and $50.91 in STEEM if we convert to USD at closing prices. Does that look like 50/50?
Now imagine the same post paying out with a working peg. A $310 payout here would be 165 SBD (at $1 each) and the same 27.518 SP, driven by author rewards of 55,029 (55.029 SP), which is where the 27.518 at 50/50 came from. That would have STEEM at $3.
Accounts would be worth more, liquid payouts would be the same, SBD would be stable, and post rewards would be more predictable.
Don't you think that would be better for the long-run? A stable SBD could actually be used for buying toilet paper. Imagine stores accepting SBD because of its stability, and offering a 2-3% discount to use it because no merchant processing fees.
Absolutely!
The part I am not clear on is if this were working properly, would you be receiving 310 dollars or the original 92?
If my proposal were followed, it would increase the intrinsic value to STEEM by providing extra SBD to the VEST-holders, so the attempts to pump SBD would result in pumping STEEM instead...
Theoretically it would result in the 310, not the 92. You can see how much harder STEEM is to pump (more in circulation) than SBD in my example, actually. SBD is pumped to $8 but keeping the peg so that STEEM is pumped instead showed an outcome of only $3 for STEEM. The trading demand that resulted in 800% rise in SBD would only have resulted in 300% rise in STEEM.
I hope you mean selling in the market. Converting uses the same price feeds that have rewards all messed. Never use convert features unless SBD is below $1.
Yes I meant that I was exchanging in the market. Going to edit that now for clarity.
Investors already make quite a bit, in addition to owning a commodity likely to go up in value quite a bit.
There is a problem with curation however. If more SBD is to be made, it should be for curation. Perhaps SBD generated and given based on voting, vote weight, and distribution? Still rewarding those that have a lot invested in the community, but also the ones that work to find content.
I like the idea, but unless it's specifically a curation reward (like a toggle to receive 50/50 on your curation rewards, instead of 100% SP), I think it would be more difficult to implement. But changing curation rewards from 25% to 50% (as I have seen a few people discuss) and setting it all to 50/50 would be simple modification of proven code sections, which makes for a more elegant solution than my suggestion, but with similar effects.
My suggestion would likely be a modification to the curation reward. Not overly complex, but not overly simple.
50/50 curation rewards would probably be an extremely simple and possible solution. One that I think should actually be done. Not sure it would be enough though.
My idea was based on what everyone always talks about, the distribution of votes. How some people vote for the same people. If you reduce the rewards for people always voting for the same people, and increase them for those with more distributed votes, while keeping it tied to curation, you increase the incentive to go out and find new good content.
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