What the SBD Pump Means to Me
When I first signed up for Steemit last year, I was new to cryptocurrencies overall, but I wasn't new to the idea of a social media site with its own currency. In fact, @libertyrocks and I put together a business plan to start a website a few years ago called LibertyRox.
Now LibertyRox was a great idea in my opinion. It was supposed to use the private currency within the site to incentivize good behavior on the internet. Less spam, more value, and financial penalties for those who behaved badly. One of the main reasons why we decided not to go through with the plan was because I couldn't conceive of a way that we couldn't end up losing money on the internal currency market we were about to create. There was no way or us to issue the currency (that I knew of at the time) without it potentially costing us more to administer it than we were generating in revenue when people decided to cash out into USD.
This is why I was so excited about Steemit.com when @libertyrocks told me about it. It meant that the problem we were unable to solve above was in fact solved by the team at Steemit Inc. using the Steem cryptocurrency. Now obviously there's more to it than that, technical stuff that I'm not really interested in getting into right now (or maybe ever lol), but suffice it to say that Steemit isn't going to end up paying people money for any Steem exchanged for USD because they don't actually own it. The user does. We were trying to create our own exchange, the cryptocurrency free market has taken care of that for Steemit. What's awesome about this model is that even if Steemit Inc. folds and even the website Steemit.com with it, the Steem blockchain will continue to live on, and any other applications that are built on it. It's an iron clad system to protect against failure, and it's decentralized. In my opinion, it's perfect... almost perfect anyway.
What I've had a huge problem with since day one after reading the white paper on the Steemit currency setup, and I've been relatively quiet about until now, is Steem Dollars (SBD). First off, I don't see a reason for it. It was created as a psychological crutch for people who can't understand exchange rates, but I think there are other ways to do that, namely with simple algorithms, kind of like is done now with the rewards estimations below posts. Also, it's a pegged currency. As I learned from reading Martin Armstrong's work on this subject, it's impossible to beat the arbitrage on a pegged currency. You have to have a floating exchange rate, or the whole thing will get manipulated and the house will end up losing money. I think we're seeing the fruits of that kind of manipulation right now. SBD, which is supposed to be worth exactly one USD per coin, is now many times more valuable per coin than the main currency of Steemit; Steem.
I think that this problem undermines the platform because it just serves to confuse people when it's not actually worth an actual dollar, but some fraction of it, or in the present time many multiples of it. The solution for me is clear. If it's technically feasible, I think SBD should be cut from the Steemit website and be allowed to die. They should give notice for people to bail out into Steem or some other currency, and then when people have done so, let it wither away into the ether. Pegged currencies don't work for various reasons, and this one has shown to be no exception. Let's stop kidding ourselves and get rid of it. It only serves to confuse the newbs, who are the very people it was supposed to help wrap their heads around what's going on with the site.
What are your thoughts? Should we get rid of SBD or am I overreacting? Please give some rationale behind your assertion. I'm genuinely interested to find a legitimate use for SBD, but I have yet to hear a convincing one.
Image Credit - User @artefacti post here
As a beginner here... I can tell you I am confused as hell about how it works. I am just waiting to start seeing payouts so I can see how it works for myself hahah. Thanks for this post.
You're welcome. I've been on here a while, and I've heard lots of arguments for why we should have it, but they don't seem to hold water. Maybe I'm missing something.
So STEEM is the actual token traded on exchanges right? That is what is actually valuable? Steem power is a conversion you do to give your upvotes and comments more rewards? Sorry if I sound stupid.
Well, you can exchange either token on the exchanges. SBD is supposed to be manipulated in such a way that it equals a USD in price, and it has a much smaller market cap than Steem. Steem is the currency that has the most value on the platform because it can be converted into Steem Power, increasing your voting power. SBD has no relationship with that, except that you can convert it to Steem and power up your Steem. I honestly have no good reason I can come up with for SBD to exist, at least with the website as it exists today...
Gotcha. Thanks for helping me clarify. Take it easy man.
A great and clear post, we hope whatever happens is best for steemit and for all. I think in steemit better choose just one both STEEM and SBD. but that is why all those who decide they are more involved in steemit because whatever they do it may be the best for us and for the glory of the steemit. thank you for sharing.
Really good job bro thanks i like this post and your all post is very important and helpful thanks
These kinds of comments are best left to a simple upvote. If you have something more specific you liked about it, I'm all ears.
It looks like people are able to game the system by selling SBD on the market and buying STEEM at a much lower price. Was this an oversight by the devs?