THE PEG IS BAD!!!

There, I said it!! Just look how evil that peg is!

But why? For the simple reason that the way the peg works now is setting SBD, and STEEM, up for a fall.
It seems everybody is so hell-bent on the peg, and getting SBD back to 1USD, that very few are looking at the bigger picture, and thinking about what impact enforcing the peg will have on the STEEM price. Everbody just assumes the STEEM price will go up. It won't. There is an intrinsic flaw in the way the peg works which will stop STEEM going up.

Allow me to explain my thoughts...

The SBD price has nothing to do with the rate of creation of SBD. The price of STEEM dictates the amount of SBD created. The price of STEEM also tends to follow SBD as it goes up and down.

Let's look at how the underlying code on the Steem blockchain is working to restore the SBD-USD peg: It's all done through the rewards calculation.
When SBD is at a high price, the rewards algorithm continues to enforce the peg value of 1SBD=1USD, and so your $20 post will generate SBD at a pegged price of the USD value of STEEM x 1 SBD. So if the payout is 75% of $20, you get $7.5 worth of STEEM, and 7.5 SBD (way more 7.5 USD worth of SBD at the current price).

That means you get a bundle more SBD rewards, and the supply of SBD gets higher as the STEEM price gets higher (not the SBD price).

So when the SBD supply begins to saturate the market, demand for SBD will go down, and the price of SDB will come down, BUT!!! the SBD supply will continue at a higher rate while the STEEM price remains high, putting further downward pressure on the SBD price. The only way to reduce the rate of SBD production is to force the price of STEEM back down, re-enable the conversion option, or for everyone to 100% power up their posts (which nobody in their right mind would do onw at the current SBD price).

The way the price of SBD and STEEM have interacted with each other during any rise or fall, shows that SBD has always made the first move, and STEEM has always followed with a gravtiational pull towards to two reaching parity. Here is the pas 12 months of data from coinmarketcap.com, showing the tendancy for the SBD/STEEM ratio to always move towards 1:1 or parity.

Why parity?

When Steem is at a high price, we get a whole bunch more SBD to spend, and with SBD at a high price, it makes buying STEEM with SBD a lot more afordable. When SBD/STEEM was ad 5:1, the clever ones were loading up on STEEM and powering their account up as much as possible. This increased the demand for STEEM, and pushed prices up. Shure there were some other announcements about STEEM and SMTs etc... but a fair amount of the STEEM price going up would have been attributed to the high SBD/STEEM ratio.

Now with the supply of SBD ever increasing, and the price of STEEM playing catch up to parity, we're going to get a balancing out, until the the supply of SBD is so great that the SBD price moves down, and the demand for STEEM reduces due to the ratio declining, that there is only one way for both STEEM and SBD; down. This is the way the system is designed. SBD will go down to 1USD, as @bugged out explains in his post here.

So we're stuck with an over-supply of SBD until the STEEM price returns to the peg as well, which will also then reduce the rate of creation of new SBD.

How can this be fixed?

Leave the peg broken, and introduce a SBD price feed into the rewards and conversion algorithm. This will result in SBD being created using the market price of SBD vs STEEM. Also enable the option to choose rewards at 100% SBD, 50/50, and 100% powered up.

This will create a proper free market environment, where the high price of STEEM won't create a hyper-inflationary supply of SBD. The two currencies will operate more independently of each other, and people will either choose more STEEM or more SBD as the price of either goes up or down.

Sure our USD rewards value may go down initially, but when STEEM gets sucked back down by the SBD peg, we'll be back where we were in November, when both were hovering around the $1 USD mark, and our rewards will all be back down anyway.

Mark my words: The only way the peg will work is for the SBD supply to be independent of the price of STEEM, or STEEM will be indirectly pegged as well.

I would love to be wrong, and see STEEM go to that $50 or $100 level. Perhaps I misunderstand the whole thing, but I just don't see it happening for long periods if the peg remains in force as it is now. History shows that the ratio of SBD to STEEM always tends towards parity. 1USD= 1SBD will therefore result in 1USD=1STEEM.

I am here to learn, so please explain to me if I am wrong, and the supply rate of SBD is not determined by the price of STEEM, or that the price of SBD coming down will not bring the price of STEEM down with it, like it always has. Show me evidence, not theory.

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