RE: The Coming STEEM DOLLAR Purge : Why it Needs to Happen and How
The big question, and I mean HUGE question, is whether this is also the point where the SBD Peg is fixed to have Bi-Directional Conversions so that this problem does not repeat. That is ultimately going to be for the Witnesses to decide and I’m not particularly optimistic.
Reverse convert and convert for SBD and STEEM to peg SBD to 1 USD.
Covert process- if SBD is less than 1USD, it can be converted to 1USD equivalent of STEEM, conversely, if SBD is above 1 USD, then STEEM can be converted to USD equivalent of SBD.
For example, if STEEM is $4, then when SBD is below $1, it can be converted to 0.25 STEEM while SBD is above $1, STEEM can be converted 4 SBD.
I am confused about supply souce of both SBD and STEEM- where they will come form. If somebody can explain the supply source of both "SBD and STEEM" in this convert scenario, it will be helpful.
However, it will definitely peg SBD to 1 USD. There is a market demand for 1 USD pegged stable currecny such as Tether, TrueUSD or NuBit, most importantly, it will be helpful in future internal exchange for SMTs due to its stable value.
At the end of the day Blockchain technology is just a "Public Ledger" so when you convert from one to the other you are just creating one and destroying the other by changing numbers on the ledger. It's part of the code. Just like you create STEEM when you mine a block, you create STEEM (and destroy SBD) when you convert SBD to STEEM using the code.
Thanks.
However, the question was how the automated SBD/STEEM creation/destruction are kept on par with fixed yearly inflation rate. If SBD/STEEM are created for conversion purpose for supply and demand, it can a case where abundance of STEEM if SBD's demand remains high.
However, STEEM supply is kept to a fixed rate (i.e. with 0.5% decreasing rate per year, currently at 9%). Is that emission/creation or burn/destruction of both STEEM and SBD due to conversion will be on per with inflation rate.
What happens to fixed inflation process if more STEEM/SBD are created on conversion process? Or, effects (e.g. slight increase or decrease) are negligible to fixed rate of inflation.
Currently, more liquid STEEM are created since SBD (i.e. 1USD pegged SBD) ratio of STEEM market supply crossed 2.5%, at 5% SBD production will be stopped.
What understand total reward pool (both SBD and STEEM) is generated on the base of inflation rate.