Interest rates have a floor of 0%. If the SD interest rates were dropped to 0% and people were still hoarding SD rather than converting it to STEEM (so that SD supply decreases), it could theoretically be possible, especially under the scenario of a rapidly declining USD price of STEEM, for total SD supply to be able to claim an amount of STEEM greater than 10% of the total STEEM supply. That starts to approach a dangerous debt-to-equity ratio which if left unchecked can cause the value of STEEM to suddenly collapse. To protect against that black swan, either the total amount of SD supply needs to be capped relative to the USD value of the total STEEM supply (which was @dan's original "bail-in" proposal that many people didn't like and also imposed considerable technical challenges to third-party services), or alternatively the amount of STEEM that 1 SD can claim (via conversions) needs to be capped (which is in his new proposal in this discussion thread). So the maximum price on SD conversions is still necessary to protect against that black swan even with variable interest rates.
By the way, interest rates are already variable. As in they can be changed by the witnesses at any time. As of now, it has remained 10% since July 4th. But if SD was to have a large premium for a long period of time, you can bet the interest rate would be dropped. It could also be dropped even without a large premium on SD. SD holders get absolutely no guarantees about what the particular interest rate on SD will be.
SD has a variable interest rate. Interest rates are an imperfect tool for monetary policy, as central banks around the world are experiencing right now.
Interest rates have a floor of 0%. If the SD interest rates were dropped to 0% and people were still hoarding SD rather than converting it to STEEM (so that SD supply decreases), it could theoretically be possible, especially under the scenario of a rapidly declining USD price of STEEM, for total SD supply to be able to claim an amount of STEEM greater than 10% of the total STEEM supply. That starts to approach a dangerous debt-to-equity ratio which if left unchecked can cause the value of STEEM to suddenly collapse. To protect against that black swan, either the total amount of SD supply needs to be capped relative to the USD value of the total STEEM supply (which was @dan's original "bail-in" proposal that many people didn't like and also imposed considerable technical challenges to third-party services), or alternatively the amount of STEEM that 1 SD can claim (via conversions) needs to be capped (which is in his new proposal in this discussion thread). So the maximum price on SD conversions is still necessary to protect against that black swan even with variable interest rates.
By the way, interest rates are already variable. As in they can be changed by the witnesses at any time. As of now, it has remained 10% since July 4th. But if SD was to have a large premium for a long period of time, you can bet the interest rate would be dropped. It could also be dropped even without a large premium on SD. SD holders get absolutely no guarantees about what the particular interest rate on SD will be.
@arhag, for those wanting to convert SD to SP, what is the formula to determine the amount of SP from 1 SD?
SD has a variable interest rate. Interest rates are an imperfect tool for monetary policy, as central banks around the world are experiencing right now.