Is SBD propped up by design?
My good friend @famunger just posted https://steemit.com/steem/@famunger/sbd-how-do-you-explain-what-is-going-on basically wondering why SBD is trading above its peg.
Before answering his question I want to cover some background:
The purpose of SBD
Every blockchain has a currency, money that is being printed and can be transferred. But to this day there does not exist any blockchain that has a currency that can be used as money in day to day. The reason is for money to be useful it has to be stable in value.
Stable means that the value of one unit does not change value for the people (user) that are using it.
Since the designers of steem are kick-ass, they solved this problem by separating the currency into three parts that includes one stable currency that is SBD.
In other words the purpose of SBD from my perspective is provide steem with a "stable" currency so that the platform can be actually used as a monetary system.
As a result SBD > $1 is a problem longer term
So because in order to have a working currency it needs to be stable and this is not true for SBD, now a key part of steem is not working and it cannot be used as money. It has given up one key advantage over any other blockchain, which is a huge issue, that the leaders of steemit should address extremely agressively.
@timcliff has proposed a solution which I would encourage to implement.
Not a problem short term
Nobody uses steem to buy coffee or anything else at the moment and steem is just a social app, not a currency at this time. As a result this simply not a problem.
If SBD would work however it could do what TUSD is doing in a much safer and secure way and 1B market cap would flow into the steem ecosystem, as a result it still should be fixed. However steem does not need a stable currency to work to create value and so this is not a problem at this time when it is not a financial system yet.
Still the power and utility of a functioning SBD should not be underestimated and so please fix SBD.
It solves a real problem
One huge problem of steem is its distribution of wealth. The top 1% have around 94% of all the power. Since steem is part of the user experience, its more fun to be on steem with more steem, this is a big deal.
Higher SBD result in more rewards given to authors, which means effectively more money is given to new users.
The interesting part is that the value is coming not from within the steem ecosystem but from outside. This benefits the steem holders as well as the authors. The idiots overpaying 7x the price of SBD on the market are effectively giving this money to the content creators of steem.
A big problem for steem is that money has no other way of flowing into the system other than investment: people buying steem and powering it up. But there is no real way of cash flowing into the system otherwise (i.e. like on facebook where ad money flows to share holders).
Well with this SBD price divergence money is also moving from outside to steem, in this case people trading SBD to authors who are selling the SBD.
So this is great for steem. It must also always be a leading indicator that steem price should increase if this divergence is high for a while, since it has to increase growth of the platform. Someone will do something with this free money and work to compete for it. The only way is to be active on steem and write content that gets upvoted (this is the basic way value on steem is created).
With SBD at $7 author rewards are multiplied by 3.5. Without any cost to the steem ecosystem.
Could this be on purpose or just dumb luck?
I cannot imagine why anyone would pay more than $1 for steem, like @famunger pointed out. To me it shows how idiotic the current crypto market is.
However if I wanted to help steem and prop up my investment I could imagine the following way to do this:
Pump SBD buy buying it up. Since the supply was very limited around $3M when this happened this would not be very expensive. Maybe one would have to invest a few hundred thousand $.
Hope that the stupid crypto market picks up the price increase and starts to trade SBD like other crypto assets. Due to its tiny supply any activity increase will catapult the price of SBD.
Profit from the spoils via increased steem price and the SBD I bought around $1
Maybe 2. and 3. happened without the need for 1. That would mean we got lucky for mis-designing SBD. Sometimes life is like this and rewards the idiots.
However I would not be surprised if some smart whale of steem has been helping out by doing 1., since most of the time the intelligent creatures do find a way to get most of the spoils of life.
Thanks for the detailed answer and your view on things. Maybe the whale it outing himself here. Would be fun.
I read both posts, this one and the one you resteemed. Interesting read, I was thinking about it too, the supply is still small so the listing on some Korean exchanges helped a lot to increase the volume and therefore the price.
It is also easily tradable and somewhere seems to be some demand.
The higher price is good for the platform and for small fish like me. ;)
And it really helped our donation posts, due to the high SBD price we might get quite a nice sum to hand over at the end.
I must say I enjoy the high SBD prices quite a lot but I would not buying a single SBD to those prices as you stated.
As another good example how idiotic the market is that people buying the dip on bitconnect tokens.
As the money comes from outside I think nothing should be changed and the authors should enjoy the higher rewards as long as it lasts.
SBD started to explode when the korean exchange listed Steem and SBD afaik I think people just bought it because of the small supply without checking what it really was.
While this could explain the first pump now people buying the "dip" as SBD was traded for 13.5$ as it highest I think.
That people like haejin saying SBD will go up to 37$ might pump the price even further.
SBD can't hold over 7$ indefinitely. Cos it's drives up prices of Steem - only mean of producing SBD. And when a Steem price rises, ammount of printed SBD rises with it. This driving a SBD price down.
So, short term spike in SBD price is just a gift for a platform, but it will fall to 1$ in long term inevitably. We must not be afraid of this disbalance. But the market is crazy indeed - time to make money! )
You've pointed out many things that SBD does, but solving the issue is extremely difficult and I'm wondering what you suggest to get SBD back to $1 other than asking to fix it.
here is the issue, USDT works by depositing $1 USD for 1 USDT Token. Thats how they maintain the peg (whether or not this is in fact true or not remains a myster to me. I know that they audit their stuff from time to time).
I don't see any other way for SBD to remain at a dollar unless SBD is arbitrarily created and sold for $1.00 whenever someone wants it.
The only way to do that is to centralize the creation of SBD since you can't code market demand into the STEEM code.
If we were to hardfork, i suppose one way to cure this would be to inject the network and give all accounts enough SBD to force the SBD back down to $1.00 per a token. Everyone's total token value wouldn't change but the number of tokens would decrease.
however, if people dump the coin and drop its value below $1.00, interest payments would kick in to get people to hold and collect interest... but whos going to pay that interest payment? Inflation and ultimately the rewards pool.
not an easy problem to solve.
Thank you for this information about SBD
I want to clarify about how to withdraw the profits from Steam if you convert steem and sbd to dollars and convert them into my personal account. Or there is a karton card especially by steem
Thank you again
really one of the most interesting and honest post about sbd ,,i know that people are happy by the rise in price of sbd but this was not meant for......
If you invest money you can must be make money. Great post.Thanks for share
thanks for sharing keep it up
This is wonderful!
Really very nice idea.thanks for sharing with
I just love when my payout has higher sbd value in it....for that purpose only ..idont want this system to change atleast i have something which has 7x value in it
yea I feel the same way!