Oliver's Olive Oil Goes Into the Ground
Oliver here again. I just wanted to make clear that Oliver's Olive Oil company doesn't exist. The excitement from the last post just brought down the whole facade and people are after us with pitchforks.
But boy, can you imagine if you had an olive oil ATM? I didn't mention it, but a friend of mine suggested that it should also be able to deposit olive oil too. Yeah, that of course makes perfect sense. If the olive oil is of sufficient quality and away from expiration. Olive oil has so many good uses too! Would also bring a whole new meaning to your liquid funds (I'm not sorry).
Maybe it would have worked better with petroleum. Though I didn't really want to reference that one from Venezuela.
The Metaphor
Anyway, in my story olive oil plays the role of STEEM, and OOBADs play the role of SBD. One is liquid and the other is intended to have a stable value, though this point was not heavily referenced. In terms of fundamental worth, OOBADs and SBDs are established in the same way: the organization agrees that they can be redeemed for the market value of the volatile commodity.
However, as they can be traded in the free market, the market can establish whatever value it wants on them, as we all know. Supply and demand. For the analogy to be more complete, we make one more assumption about Oliver's Olive Oil: it has a giant stockpile of olive oil that it can release into the market at will (like a cartel). Much like the STEEM blockchain can just print STEEM at redemption time.
We will not issue more than 10% of the market cap of olive oil, and that will ensure that your OOBADs can be honored forever.
This quote was mentioned, but on reflection it is not quite right. The main worry is not about being to honor the token or not, the worry is about what would happen to olive oil prices if too many OOBADs were being redeemed for olive oil.
This is what STEEM witnesses worry about for SBD issuance. If too many SBDs are out in the wild, and all of a sudden people decide to redeem all of it, it could tank the price of STEEM due to the massive influx of STEEM supply. That's why there's a hard cap on printing SBDs that's related to the market cap of STEEM. I discuss this in detail in this post.
SBD is a Gift Card
An SBD is a gift card for STEEM. 1 SBD can be redeemed for 1 USD of STEEM, just as 1 OOBAD could be redeemed for 1 USD worth of olive oil. Nobody should be making that redemption at the current time though, because the market values SBD at a much higher price. And they've disabled that option in the Steemit website (you can still do it if you really want to with the API, I believe).
The hope was that bridging STEEM to a more physical commodity like olive oil would help bridge the gap of "What is an SBD?"
Why are people willing to pay so much for these gift cards? For a good portion of STEEM's history, the price was sub 1 USD, around 0.8. This is a recent crazy phenomenon, which has also happened a few more times in the full history. The supply of SBD is just so small. Our STEEM economy is not in a fully bootstrapped state.
As far as I can tell, the demand is part speculation, and the only other thing I can think of is usage in post promotion bots. Soon I will be exploring just how much post promotion bot usage could be driving the SBD demand, though I don't feel it should be. But I have to ask: Does know anybody that is doing that?
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I'm going to read both again @eonwarped, for the fun of it!
Question: what if simply by consensus amongst all market players one OOBAD had a purchasing power for exactly one unit of energy, now and for ever more..what then?
It is a wonderful coincidence that you bring the subject of value determination of currencies to the table this moment - above is analogous to what I propose in a post loaded into the baggage car today!
By market players do you include the people? Because nobody can stop desirability from pumping the price on say eBay if they so desire. The issuer of the token has made it clear what the token can do for them, but the market may have other ideas.
I'll check your post out!
I mean every Magic Dragon account holder.
The Idea is to issue say 500 free tokens to every account holder say every Monday. These are simply tokens issued for the convenience of the account holders, or 'players' in the market. The tokens can only be transferrable between PMD account holders. So the tokens can be either just valueless and meaningless tokens with the only useful quality that they can be securely held and securely transferred, or they can be made useful by the players themselves agreeing on a value.
It is a closed game. These tokens are nowhere to be found on other exchanges in the open market. And if the 'whitepaper game description' that comes with the account says that the tokens each has a nominal purchasing power for a unit of electricity or anything of equivalent value amongst members/account holders, these tokens can serve as a very handy means of exchange amongst themselves, especially if they are short of money otherwise.
There are examples of community exchanges functioning as closed 'members only' systems, but with a central server handling all transactions and a different currency convention that have been running successfully for many years, for example the Cape Town Talent Exchange.
PMD will be different in running a in decentralized fashion with a slightly different currency, a currency with a universally recognizable nominal value that can deployed to function in service of local communities anywhere, simply by prospective members opening PMD accounts all on the same blockchain.
I think I don't quite understand still. You couldn't arbitrarily keep printing money and expect the value to hold, so there will need to be something to prop the value of the tokens up, no?
I hope to post more on this shortly. I respectfully don't think the phrase "arbitralirally printing money" applies here. The idea is to issue a carefully considered equal number of tokens to each account holder every week, with the total number of tokens in circulation limited by resetting all accounts to zero every seven years, when an equally thoroughly considered total volume has been reached.
This method of protecting the assigned specific value of the currency is not cast in concrete though. Players may perceive the seven year reset cycle as being too disruptive and it will eliminate the long term value storage potential of a coin like this, thus limiting its function to being a means of exchange only. A variation of this could be to put an upper limit to the amount of wealth that can by accumulated in an account, which boils down to the same as taxing the wealthy. I am open to suggestions.
My first consideration was to create a SmartCoin with a purchasing power of one unit of electricity. The bitUSD trading on the Bitshares exchange is a derivative of the USD, the value of which in turn is controlled by government / the Fed.
The practical value of an amount of energy, on the other hand, is governed by the laws of physics and is constant in relation to volume of production - one unit of electricity can for instance be used to cook on a one kilowatt stove plate for one hour today and in a hundred years from now one unit of electricity can still be used to cook on a one kilowatt stove plate for one hour.
This fact alone should be a strong motive for users to adhere to the convention. A means must however be devised to limit the volume of tokens in circulation to a level beyond which, I agree, the value of the token will be corrupted. If the means of limiting the number of tokens in circulation can also serve to prevent an unfair distribution of wealth, so much the better.
Okay yes, so there is some mechanism needed to preserve value, it sounds like. I await your post about it, because I don't have good ideas about how to accomplish it :).
I don't really know how Smart coins work, would have to do some digging on it.
I really want to know why SBD skyrocketed so hard from1$ to 6$ and a few dys later to 12$. Never really did a research about it but I was sure it was because of speculators or whales with big SBD-stocks pumpin in up.
What do you do with your SBD right now? Yesterday I traded a few into STEEM with a ratio og 1.6 STEEM per SBD. Was pretty worth in my opinion
That's my understanding as well. It was unleashed into the Korean exchanges and that did it. I don't really know much more than that.
I use my SBD to trade for steem like you do (while it is over 1 USD), and partially for bots.
God Dammit Eon! I had my attorney on the line and ordered the bank to prepare a suitcase full of $500 bills to invest.
What a con-man you are!
lol :) Nice one Evan! I really thought olive oil did really exist. Good thing I read the chats as well. lol
Mwhahaha. This is brilliant. Best fake currency on the planet coupled with a superb analogy.
You're the best :D hahah
You should be sorry!!
You really got alot of point covered with this your lines. Really love the fact and hope things is done properly @eonwarped
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