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RE: I submitted my first hardfork pull request to the Steem blockchain! (Updates to the SBD print rate.)

in #steem6 years ago

if the market wants lots and lots of SBD with less and less backing, why not give it to them?

Simply put, because I don't trust the market's risk management skills. In the medium-to-long term, undercollateralization almost certainly leads to peg discounts when the price of STEEM falls.

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Peg discounts are otherwise handled by the system and indeed if you look at the price history there have not been significant sustained discounts ever (apart from a short time 2016 when few people understood how it worked). Premiums are not otherwise handled by the system. The only way to resolve a premium (which do put a very high degree of risk onto SBD holders; someone buying/receiving SBD at $5 is at risk of easily losing 80% of their money, and indeed this has happened) is by issuing/selling more of it.

Furthermore there is no real 'risk' here, in the sense of risk to the overall system. SBD regardless of the amount issued is capped at 10% of STEEM's value period, which is so small it is actually less than many one-day price moves. Any additional issuance of SBD just means that SBD buyers are voluntarily accepting some of STEEM's price risk. I see no harm in that. It actually addresses one of the frequent criticisms of pegged assets, which is that they are making an unkeepable promise to always maintain a price. SBD doesn't do that. It promises to maintain a price as long as STEEM's price/marketcap is high enough.

Furthermore there is no real 'risk' here, in the sense of risk to the overall system. SBD regardless of the amount issued is capped at 10% of STEEM's value period

That's exactly right, and the missing piece I was forgetting about. It's not like SBD is at risk of a total collapse if too much is printed.

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