SBD isn't broke: How SBD works on STEEMit
Fact is, SBD is a little tough to understand at first
I didn't understand quite how SBD was supposed to work, so I fired off a post, "Somethings' wrong with SBD", cause well, I thought there was somethign wrong with it, based on this chart:
...then I postulated maybe it wasn't supposed to track USD?!
...and that witnesses were supposed to ensure that it actually tracked the dollar. Sadly, this does not look like a currency that is tracking the dollar. I can't say exactly what it looks like, because I'm not someone who can look at a graph like this and instantly say that it looks like X, Y , or Z.
Earlier photo of internal market without actual trades
Later, I made some actual trades after getting these helpful hints from Mr. Steem himself, @dantheman:
Here are my actual trades:
As you can see yesterday I made a trade that would pay out very well only if the price of STEEM hit ludicrous levels. Today, I made successive trades that increased by one penny towards a large sell order for steem at $2.18. I figured that anything I bought at $2.18 would go through instantly, and it did.
My Orders:
My Filled Order ($2.18 for one STEEM, that's me at the top!)
Poloniex Price at around the time I placed these orders
What I clicked to make an order go through instantly:
While I was writing this, my other orders were filled also:
What'd we learn here?
- SBD works more or less the way it should and it'll never work better than more or less the way it should because it's an approximate thing subject to the various whims of unpredictable humans-- but "more or less" is exactly how it was designed.
- The Internal market might offer better deals than selling SBD on poloniex, which is what started this whole rigamarole-- I was going to try doing that to get a single "hop" to BTC.
- Ask a question on Steemit, even mangle a bunch of half understood facts together, you'll get an answer.
I <3 Steemit, and things related to it.
Thanks to all who replied with INFORMATION that caused me to seek KNOWLEDGE. This was not a bitching post, it was a fixing post, and it turned out what needed fixing was my education level about how these real-time cryptocurrency markets work. It's intense!
The Steem Dollar will trend toward a dollar's worth of steem. Because Price and Quantity are always tied together, the value of a Steem Dollar falls below when the demand to sell is greater than the demand to buy. Likewise, it rises when the demand to buy is greater than the demand to sell.
Any discount you see is the premium people are paying for Liquidity because they are in a HURRY to sell. Arbitrage is performed by those who are more patient, they buy low ($0.80 and sell high $1.00 or more).
In other words, the market is sorting out supply and demand and will keep steem dollars near $1.00 over wide variations on STEEM prices.
Right now, on the internal market you can use SD to buy STEEM at about the current price. Therefore, it is holding very well.
Thanks for your detailed explanation. Let me see if I can get that into the post, and please correct me if I get anything wrong. I'm testing this IRL on the internal market to get a feel for things.
BTW, Thanks for clearing things up, and for making Steem / Steemit / Bitshares / Graphene.
I'd be lying if I said I wasn't having a total blast with your software :).
PS:
If posts are edited, do they lose out on SD/SP from upvotes? If so, why?
Editing posts is fine, no penalty.
Maybe i got this wrong. As i know it takes 7 days to recieve your SBD.
I guess you are getting an amount of SBD that is equalent to $1 on bittrex.
Following this, you would get 2 SBD tokens if the price is sitting at $0.5
Please correct me iam genuinely interested in finnaly grasping this.
It's not pegged to the outside markets. If the price on bittrex is 0.5$ for 1 SBD you will still receive only 1 steem dollar. It's your decision to then sell it on the market for 0.5$ or not
I have wondered about the Steem Backed Dollar myself. I am surprised that more steemers have not responded to this post yet. I am upvoting this post because it brings up important questions: How does the SBD work? and Whys is it not currently valued at $1 on Bittrex?
it is its own currency no? like this Australian dollar? meaning it has its own independent value?
They are backed by apprixmately $1 worth of steem at any given time (based on the 7 day average price of steem)
Join our beyond bitcoin hangout and we can explain all of this. :)
The 7 day conversion comes with a certain risk, which is priced in on the SBD market. If you convert, you'll be subjected to Steem price changes in that period. Seems like the market expects Steem to go down.
0.85 cents is a very big spread though, Steem would have to drop ~30% in the next week for conversions to be a losing decision.
Hey, you mind going into more detail? It sounds like you may get it... and I still do not.
So-- when I do a 7 day conversion, what happens behind the scenes?
If the market expects that STEEM will go down, then..... SBD will trend lower because.... ?
Sorry, it seems to me like you're the best hope of really understanding this mechanism better than I do now :).
When you request a conversion, the conversion rate is base on the median price in coming 7-days (sampled hourly).
So if the market expect a fall of 30% price linearly in next week, that means your SBD is expected to be converted at 15% discount from current price.
This could also be another reason for the price to be a bit lower. Again, howerver, SBD is not "broken"... it more needs to grow up and be tweaked a bit over time more than likely.
High inflation of STEEM one of the most significant risk that's being factored into this 7-day lock-in period.
as pointed out by @hisnameisolllie in his article: STEEM Dilution Rate - MUCH higher than you might think… at current level the dilution rate of STEEM is nearly 1% per day. That means the STEEMs you get 7days later is worth ~7% less compared to instant conversion.
Yet another great point! You guys are rocking this discussion!
Its not tracking it because there's a lot of sell pressure.
Every day alot of Steem dollars are created via blogs and then transfered to poloniex or bittrex to sell imediatelly. Someone has to buy them for bitcoin, and at the moment there's not enough people who are willing to give bitcoin for steem dollars, so the price is drifting down. It can change ofcourse.
When poloniex has added steem dollars to the market price was 1.2 $ for one steem dollar (if I remember good). There was not enough SBD on the market and a lot of buyers.
when ANY cryptocurrency is launched it will have its ups and downs. As the community grows and the market matures you will, I have no doubt, begin seeing this all evening out.
Let's also not forget---SteemBacked Dollars (SBD) earn interest ;)
if we want to have a stable SBD-USD parity, some active intervention from human is definitely required... as described in my last post: Do Your Part to Restore the SteemDollar Parity.
To restore SBD back to parity, we need the Witnesses to raise the interest rate of SBD, and/or to quote the STEEM/SBD conversion-ratio with a lower rate that would pay more STEEM to the holder as compared to market price.
The fate of SBD will remain the same like now, as long as our "monetary policy makers" are unwilling to take any "open market operations".
As observed, currently most witnesses still quoting their price-feed that only mimic external STEEM/USD prices. At the time of writing, only one witness @anyx had raised the SBD intereste( from 10%) to 15%...
Witnesses can, indeed, make changes to help adjust the peg. Lets not forget we are in Beta and this is the MVP!??? (jeez that is crazy how addicting the MVP is...)
Right?
Crack rock, you have met your match.... and it pays, too.
In that case, let us all heap praise on @anyx.
Well it's supposed to be worth a dollar, but the market disagrees - and the market is always right.
Add in the interest you get paid and you will see that it gets pretty dang close to evening out and is the best solution out there in crypto for its use case (that actually doesn't rely on a trusted party).
The market doesn't "disagree" either. It simply moves a bit further in that direction over a spectrum of sentiments. ;)
There is nothing wrong with SBD (SD). It works as it was made to work. It was designed by in an idiot (french meaning of the word - a man full of ideas). And being a genius or not does not change the fact that everyone's ideas are 90% garbage.
Put simple:
Actually this has very little to do with BM being an "idiot" w/ 90% garbage ideas. He has spent quite a bit of time since the early days of bitcoin arguing that there are a few problems needing solved by cryptocurrency:
For scalability and efficiency he developed Delegated Proof of Stake (DPOS), which is used in the STEEM blockchain (thanks to the #bitshares community and @dan)
For volatility there are "smartcoins" that use prediction market mechanisms to peg to the value of various real world stocks, bonds, cryptos, currencies, commodities...etc
Self-Governance
It is possible with DPOS based chains for witnesses to be elected and kicked out of power within seconds should they be doing a bad job or a corrupt actor attempting to do something outside the benefit of the system. Generally 1 share/token = 1 vote...so those with more get more votes.
The design of steem has painstakingly been constructed after Dan learned many lessons in #bitshares. And I can tell you nowhere near 90% bad ideas come from that guy when it comes to crypto, at least...which is mostly what my experience comes from).
Some of this is still being tested, but it looks like @dan got it pretty dang close right out of the gates this time.
It'll take a minute of course, but indeed, I feel that @dan's concepts will ring true in the end here.
SBD is worth exactly $1 worth of steem on the internal market. Outside markets may vary because of low volume.
@bergy I believe you are incorrect. Check this out:
2.41 STEEM per steem dollar.
Now let's hit up coinmarketcap.com
STEEM = 2.10
Now, let's combine, shall we?
Internal market - 2.41 steem dollar per steem-- so either it's not exactly $1, or the internal market strongly diverges somehow.
because if we leave the internal market, we find it matches prices on the internal market nearly perfectly:
SD = $.85
STEEM = $2.10
2.10 / .85 = 2.47 ....... just .6 away from what's going on on the internal market.
Point is that I think that the external prices are being counted on the internal market.... and of course as both are markets, they should influence one another. @steemulate seems to have the right direction in terms of patching this issue up.
**I leave this poor reasoning on my part here for posterity. **
Tracking the dollar would mean that someone would always be willing to buy your SD 1:1 for dollars (via steem). This is obviously impossible. Steem tries to have its value as stable as possible by forcing users to lock their steem in the system (via power ups). This, combined with the general consensus that the steemit platform is promising keeps volatility very low. But in no way does this mean that SD and $ is of equal value.
As I said, the only way to guarantee this would be the steem organization buying back steem at a constant price, which is something they would never do. Pegged currencies never worked anyway. Look at dollar to peso, dollar to gold etc.
Somehow, I think that you are wrong. No offence or what have you, but that is my instinct here. Bitshares had a pretty complex mechanism for creating virtual currencies and I think that carries over to SBD. But.... fact is, I'd like some detail on this.
Which part do you think is wrong? These are fundamentals.
Me. I was wrong ;).