Addressing the Steem Dollar Situation
Im sure by now everyone knows the problem that is happening with the Steem dollar. Basically the Steem dollar is supposed to be pegged at the dollar, but it has, for some reason or another, been pushed to a bit over $10 per Steem dollar. What ends up happening is the dollar values per post are all out of whack and it shows darker sides to a market trend.
I have seen some suggestions on what we should do to address the problem, for example change the value amount pegged, increase the amount paid out ect. In my opinion there is a simple option that needs to be coded in to make sure that if this happens again, it will easily be dealt with. I personally wouldnt want to mess with the power down algorithm, but instead focus directly on the payout algorithm.
If the price of a Steem dollar is over an amount of lets say $1.50 to $2, the payout algorithm will start paying in all SBD and no Steem power. People are going to unload it very quickly and it will push the price down. A bonus is that many people will also go and buy the Steem they missed out on and it will push the value of Steem up. This, in my opinion, is the best way to handle things. The second the price goes back to normal, which will be broadcast by witnesses, the payouts go back to normal.
Many people might say that this is no big deal and there is not a problem with a Steem dollar at $10, but I disagree. In my opinion this shows a deeper market trend of people having no idea what they are investing in. Allowing the Steem Dollar to get that much investment ends up hurting Steem holders because it is lost investment. We need to put disincentives to push the price past the pegged value in order for the system to hold for the long term.
We should be incentivizing people to invest into the ecosystem and ultimately make the platform more valuable. Letting the Steem Dollar go that far past the peg while the actual Steem currency only slightly increases in value, is the wrong way of treating this. Ultimately even if we didnt make any changes, the situation would probably cease after many people stop speculating, but still if we want a quicker snap back to normal, we might think about implementing an alternative method.
-Calaber24p
Isn't this happening right now? All the content creators are selling their SBD while the exchange rate is high. What's so bad about that? Obviously someone out there with very deep pockets is trying to keeping SBD at elevated levels, but I'm sure this won't last for long anyways.
Is it possible someone is pumping SBD in order to force a change to the payout structure?
Yeah, but not fast enough in my opinion. Like I stated at the end of the article, the market will adjust if we do nothing, but it will be much slower.
It seems more reasonable than pegging it at $10 like a lot of people have been suggesting.
Pegging it at $10 does literally nothing other than putting a bandaid over a problem. We need to find a better permanent solution.
There are now about 3.8 million of SBD and about 246 million of Steem in circulation.
At $135/SBD market cap of SBD would equal current market cap for Steem (507$ billion)
"We should be incentivizing people to invest into the ecosystem and ultimately make the platform more valuable. " Quoting your sentence I agree 100% this place will crash if the value of this place goes down. Speculating hurts a lot of cypto-currencies.
How can some one trade a cypto-currency, if the price is constantly going thru wild swings. This place needs stability to bring in more talent.
Thanks for sharing your ideas !
I agree that we should be working towards a long term increased value of the steem currency and keeping investors here.
:0 Wow, you are right, we should invest to make the Steem currency more valuable, with that we all gonna get a benefit. I will start next week, thanks for explaining detailed about this work, that opened my mind.
I completely agree @calaber24p and the long term value and confidence is much more important! Thanks for articulating this so clearly. Resteemed
Thanks for resteeming this Ruth, and thanks for writing this @calber24p.
Being late to the crypto game, and missing out on Bitcoins run all together, isn't this kind of the new normal the way all cryptos have been moving lately? Why shouldn't steem/sbd get a piece of that action and a good piece too?
I think bitcoin has gotten way ahead of itself and with the new wallstreet derivative of bitcoin there could be huge money moving out of it and into other lesser known cryptos like.....steem and SBD. Doesn't a rising crypto tide lift all ships anyway?
On the other hand I don't really get the whole pegged one SBD to one dollar in a totally free market. If SBD is bought up and speculated on, then isn't that simply the free market in action? Wouldn't a peg be the opposite? Just some thoughts from a newbie crypto investor, semi-veteran stock/commodities trader.
"A bonus is that many people will also go and buy the Steem they missed out on and it will push the value of Steem up. This, in my opinion, is the best way to handle things."
I agree with what you wrote here as I've already done so with some of my SBD as have many others.
"We should be incentivizing people to invest into the ecosystem and ultimately make the platform more valuable."
What do you mean by "invest in the ecosystem" and how would that be done?
I bet that's a great point to help me understand why I'm off in my thinking. I probably shouldn't have written so much. Sorry all my thoughts came out in question form. This is probably way over my head. Being still a newbie to crypto and steemit, I'm really not qualified to comment on this deep crypto/steem stuff. It's just all too fascinating and as a steemit travel blogger it's hard not to enjoy this move in the markets and it makes me want to improve the quality of my posts too.
By the way Ruth. @sndbox....just awesome. Thank you so much for getting me in!
It is, as long as the steem price doesnt go down, people are entering it because a large amount is issued and sold daily.
The free market and openly traded things are why pegging something is so difficult. The current system we have doesnt do a fantastic job of addressing the system quickly, but pegged currencies in the real world you would basically see governments print more until it reflected the peg. Although for the most part pegs and free markets dont tend to mesh well.
There are many approaches that could be done. We could pay more to people who 100% power up their posts fully. Stop paying curation rewards to people powering down. Starting a fund where we take 5% of all inflation and fund projects built off the steem system. I think probably the easiest would be the lower the inflation rate of steem. Theres a million things we could do. Im sure people have better ideas than me though.
Wow you really know your steemit economy. Thank you so much for the detailed response. So much to learn, you're ahead of the game. Keep up the great work! -Dan
thanks @calaber24 for the detailed response, very helpful
This kind of response - interaction is great and I wish I could answer your questions! I'm not new to steemit but very very new to any understanding of crypto and market factors. I hope that @calaber24p responds because I too would like to hear the answers!
And you're more than welcome, I'm so glad @sndbox is working out well for you. It's a great community in so many ways.
Thanks Ruth :)
I'm still trying to get my head around how the system here works so pardon my ignorance. But can someone please explain to me how the value of Steem Dollar went so high despite the peg. Is it pure speculation or is something else at play here?
The peg is a minimum price peg maintained by interest rates, not a hard peg of $1. So the bottom is supposed to be constrained, but there is no way built in to control upswings.
That explains things. Thanks professor :)
In my opinion (although I have no proof) purely people speculating and having no idea what they are buying. Theres not much of a reason to buy a peg and think it will go up in value, the purpose is to make sure it is $1 at all times.
See prof-pieters's response down below. It seems the peg is just a floor on the value of Steem Dollar but there's no ceiling and the value is allowed to go up according to demand.
Hello @calaber24p,
Have you had anything from ned about this?
I have not personally
Doesn't it give more incentive to post and come to the platform as creators are paid out in SBD?
I'm not sure this works, but it's a really interesting idea that should be explored further.
If the price move is purely speculative, it would have no impact. And people converting SBD to SP to post occurs on steemit, not on the exchanges, so it will not have an impact on SBD prices.
I say just let it go in what ever direction it wants. It is an ecosystem.