Why SBD will fail and how can we fix it?

in steemit •  2 years ago

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Actually you can check like in the Bittrex buy orders book for SBD there are less than 9 btc of volume depth and seller have more than 100 btc of volume in the Sell orders book . ¿what is happening?.

Actually the sum of the pending payouts of top 25 trending posts only in the last 24 hours is more than 100000 SBD. and all this SBD will can arrive to the market less than one day

if only this 25 steemers want to sell his SBD by BTC the market would need 100000 USD only for sustain the peg, at this moment you can check at Bittrex how actual price is under the peg, about 0.85 USD cents per SBD

We are creating SBD in a unsustainable rate if we want to keep the peg.

¿What is happening?

I identify 2 structurals problems:

The first problem about SBD is a not limited withdrawal rate, every 24 hours steemers created are paid directly in SBD and they can convert it directly to Steem , choose sell at market for btc or hold SBD waiting for 10% interest rate. If people thinks that SBD is going to lose value they will discard third option (hold SBD) because they dont trust in the 1:1 peg, but if at same time SBD value is falling steem too fall, then they only have one possibility to save his investment value and it is sell it for Btc.


Second problem is about sustainability of pay a 10 % of interest rate and keep the peg of SBD. in this example i will use a very conservative creation rate of 100000 SBD daily (without include interest) , it means about 3 million SBD will be created every month, in one year it will be about 36 millions of SBD created.


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Now let´s see what happens with the interest in one year term too


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in this graphic we can see how the increase rate of generated interest is exponential, in one year term we will get about 2 millions of new SBD by interest.


How can it be solved?


i think we have two possible solutions:


Easy option: Remove SBD and let only the Steem and Steem powers with his really smart witdrawal limit rates, i think optimal solution would be to change post rewards from SBD to Steem power .


Hard option: Add some kind limitation to SBD creation or withdrawal rate and low (1 or 2 %) or remove the interest rate generated by this for reduce the seller pressure in the markets and make it sustainable


PD: I have wrotten this post because i really love Steem project and i want to see it to prevail , it is only my small contribution to try to improve it and make it strongest.

I want to sorry to readers about my English level i have tried my best but i know it is extreme limited and poor


Comments, critics or suggests are welcome




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You are missing the point of how SBD are actually created. Let's think this through:

  1. SBD price goes down further
  2. People start to use "convert" instead of selling into the market
  3. A week later, they get STEEM
  4. Steem are sold
  5. The market cap of Steem goes down
  6. Less SBD are created from posts (because the market cap went down)
  7. Less sell pressure due to SBD sell-off and convertion due to less amounts available
  8. Meanwhile people start to understand the implications of SBD (free instant micropayments, interest)
  9. Buy Pressure for SBD starts to build up again
  10. Meanwhile the network grows and demand for SP grows aswell
  11. People buy into Steem to get SteemPower to obtain more VotingPower and higher rewards
  12. Marketcap rises
  13. Rinse and repeat until sufficient market traction slows down the process
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Hi Xeroc thank for your view, but it SBD goes down while Steem too goes down the most profitable action is not to convert to Steems but sell your SBD for BTC . Because with this BTC they will can buy more SBD or Steem at future (if the downtrend continues), could you please explain how modify the market capitalizatión to SBD creation process? I dont see nothing at Whitepaper about it.

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1 Steem per block is available for rewards .. parts of that steem are converted to SBD at the steem:sdb price. Only after that it will be available for payouts on posts etc .. That means, the higher the steem price, the more SBD are created and available to be paid for posts and vice versa

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thank you for the explanation, but it does not solve the danger of big SBD holders scared for a down in SBD and Steem price sell and broke the peg

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What's missing is liquidity and on-/off-ramps .. that's all ..
In the meantime big SBD holders can always request a settlement/conversion and rest assure they get a fair price after one week .. then they can sell STEEM in more liquid markets ..

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Good analisys

Great posts. If you would have boobs, you would be a whale right now.

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lol, probably but if i have to choose i prefer to help to improve steemit economic system and make it more sustainable and strong. I think we have actualy enough quantity of boobs in steemit

Steem whales are buying the SD with bitcoin they got from dumping steem to you and me in order to run this party.

There is no free lunch!

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Interesting view, i am really interested what will happen with Steem and SBD price next days

37 votes in 5 minutes with 0.10$ value! Looks legit...

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Some bots have voted for this post - but that is legit. Dan is on the record saying he sees no problem with bots...

P.S. The following post proved that the bots are upvoting everything with a steemit tag:

https://steemit.com/steem/@aenor/test-to-lure-the-up-vote-bots

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Thank you for the info, i promise i am notcheating the system it is my first serious post

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Thanks for clarifying, I jumped too early with my decision and unflagged and voted now.

I was browsing the "new" section and his post had so many more votes than others around it so I thought it was just him doing it on 20-30 of his accounts.

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All solved then, thank you very much

I think it's a great post. Something I hadn't thought about. Maybe Steemit devs think it will work because of the internal market here?

Also your post will do much better if you fix the broken images!

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Thank you very much, sorry for the images i used imgur instead steemimg, now should be fixed

Hummm...
Good points , but I think it will all even out at some point without making any significant changes.

I tend to have the same doubt about the scalability of the currency, even if I'm quite enthusiastic about Steemit. If this project scales, there will be a sell pressure due to the power down + above all people selling their SBD continuously.

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Yes in fact if we get a black swan with falling Steem plus Falling SBD it will be really dangerous

I'm not sure but I think Steem Dollars interest rate are paid in SP.

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Hi, SBD interest payments are paid every 30 days when your move your coins and it is paid in SBD, i have confirmed that
thank you for coment

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Thank you very much to have taken the time @bhokor Can you clarify what you mean by when you move your coins? You really have to move your coins, from an account to another? Thank you again!

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it is automatically credited in your balance

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If I understand you correctly, you are saying the interest rate is a problem.

However the interest rate can be changed to increase or reduce demand. Witnesses decide this interest rate, hence no problem.