A Few Thoughts About The Decoupling Of SBD From STEEM

in steemit •  2 months ago

One of the most common comments on my daily market snapshos is about how SBD will eventually "come back" and rise again. Almost every market snapshot post has at least one of these comments, in which people publicly express their hopes for a "moon SBD".

To be honest, I'm always baffled by these comments.

Because, most of the time, they denote a complete lack of knowledge about how this platform works.

Sometimes I think that people who join some blockchain experiment, like Steemit, should pass some sort of quiz, in which they'll have to answer some fundamental questions. Like, for instance:

  • do you know how much STEEM is printed every day?
  • do you know that there's a difference between SBD and STEEM?
  • do you know that SBD is supposed to be pegged to the dollar? If yes, do you know why?

I think this basic learning process will save some people from major disappointments. Because, in their search for a "moon SBD" they don't realize they're chasing the wrong rabbit. The rabbit that should be "chased", the fundamental currency of the STEEM blockchain, is, obviously, STEEM. SBD is a glorified smart contract on the STEEM blockchain, which is not backed by real USD, but by "1 USD worth of STEEM". In other words, it's a debt instrument. The more valuable SBD is against USD, the more STEEM debt it creates. And debt based economies, we all saw how they go. When they don't simply crash, they go out mostly in flames.

That's why a pegged SBD will keep the STEEM debt under control. And not only it will support a healthy economical environment, but it will also pave the way for other use cases, like e-commerce, in which a stable currency is crucial.

"But if SBD is supposed to be pegged to 1 USD, why isn't it?" some of these "moon SBD" supporters may ask. Well, because, you know, good ol' greed. As long as SBD is traded on the internal market, witnesses - who are people knowing how the platform work - will publish price feeds that will support the peg. It happened for almost a year. But from the moment it starts to be traded on an "independent" exchange, a currency is subject to market manipulation. And a currency with such a small circulating supply like SBD, a little bit under 14 million tokens, is very, very easy to manipulate. Speculators saw a huge opportunity to play out this token, which had a very low entry barrier and a huge potential. And we all remember it went as high as $10. 10x your money, easy-peasy. Of course, the temptation is huge. But the long term price is really not worth it.

Just to be clear, I think professional traders have their role in any financial ecosystem. They provide liquidity, they help with price discovery and they are useful workers. I don't think they are "bad" in any way. But they have a limited scope of skills. They know how to move markets and that's it. Well, the world is not made only by moving markets around. You also need farmers, pilots, teachers and a lot of other professions and activities. If the entire world will turn into a huge speculation, focused only on the immediate gain from the next transaction, humans will become the most endangered species on this world. They'll become the most toxic agent against themselves. So, while I acknowledge the role traders (speculators) are playing in this ecosystem, I don't think they should be always followed. Some use cases are not for trading or for speculation.

I would always be in favor of a stronger and healthier STEEM, and stay away from a jumpy and volatile SBD. And yes, the recent decoupling of SBD from STEEM - meaning SBD remaining stable (or going down, towards $1) while STEEM slowly appreciates - is a very healthy thing for me. And yes, for a while the rewards will go down, because they're paid partially in SBD. But in the long run, a strong STEEM will definitely be the right bet.

As always, the usual disclaimer: I'm not a trader and this is not trading advice. I'm a witness on the STEEM blockchain and I do my best to keep this blockchain within the initial vision, along with other witnesses.


I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.


Dragos Roua


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With STEEM-SBD relations we hit with a trade-off between low SBD obligation ration to STEEM and enforcing SBD to USD peg from the above.

  • on the one hand you need to print any amount of SBD needed to keep its price from rising with no brakes set.
  • on the other, you want to keep STEEM obligation to SBD tokens lower than 10%.

Essentially you hit a dichotomy. Either you have a token forcibly pegged to 1 USD or you don't control the inflation of STEEMs. This is the lesson we learned from such an economic construction.

Economist-guy out )

That's why a pegged SBD will keep the STEEM debt under control. And not only it will support a healthy economical environment, but it will also pave the way for other use cases, like e-commerce, in which a stable currency is crucial.

The central banks have tried to "keep the debt under control" for 100 years now, but all we have seen is one debt bubble after another one.

A strong argument can be made that the notion of a stable currency is equivalent to the search for a perpetual motion machine, or unicorns.

SBD flight to 14 usd was an obvious pump-and-dump mimiking as a minnows donation.

Recently I saw a guy who had tried to convince me SBD will match STEEM by... market cap. So delusional.
They'll pay out of their pockets for such an ignorance.

@dragosroua,
I got a clear idea about SBD peg thing! But I also got a question and hope you will provide me an answer!
STEEM Market Supply : It seems too high and it has no Max Supply as well. So, don't you think it will give a disadvantage to reach our goals?
If so, how this blockchain could handle that situation? I heard 10:1 SPLIT every 3.3 years time! Is that possible to do?

I appreciate your kind response on these questions!

Thank you~

Awesome article, I guess I should have read the white paper lol, I thought new steem is printed based on steem power reserves.

The more valuable SBD is against USD, the more STEEM debt it creates.

If I am understanding you correctly, you are saying that the price of SBD affects the SBD/STEEM debt ratio. If that is what you are saying here, it is incorrect. The debt ratio always assumes that SBD is worth $1 worth of STEEM, so regardless of what SBD is trading at - it will never count as more than $1 worth of 'debt'.

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@timcliff
just want to know your opinion. Why don't we use another witness price-feed for SBD and calculate STEEM-SBD debt more precise from a market price of SBDs not the 1 USD assumption?

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Because it is not 'debt' when the price is above $1. The blockchain is still only "on the hook" for $1 worth of STEEM if SBD holders redeem their SBD for STEEM by converting.

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The debt ratio always assumes that SBD is worth $1 worth of STEEM, so regardless of what SBD is trading at - it will never count as more than $1 worth of 'debt'.

Can you please point me to the exact code / files where this is written in the STEEM blockchain? I genuinely want to see if this is exactly as you said, because I have a feeling it may not be entirely like that.

But even this will be as you point - which I'm not arguing against, I just want some proof in the code - an increasing SBD supply because of the increased supply by witnesses bias will generate more debt. Am I correct in assuming this? As in it will "flood" the markets with more SBD which in turn will create more STEEM debt?

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These are the main pieces of code if you are looking to understand how it works.

This is the section of code where the 10% 'haircut' rule is applied, and it basically reduces the amount of STEEM returned from SBD->STEEM conversions if the debt is above 10%:
https://github.com/steemit/steem/blob/bb8ca476f33c08434274f2d76333fcb74cfa58b8/libraries/chain/database.cpp#L3111

This is the section of code that reduces the SBD print rate as the debt ratio goes from 2% to 5%:
https://github.com/steemit/steem/blob/bb8ca476f33c08434274f2d76333fcb74cfa58b8/libraries/chain/database.cpp#L3452

Here is the section of code that processes SBD conversions:
https://github.com/steemit/steem/blob/bb8ca476f33c08434274f2d76333fcb74cfa58b8/libraries/chain/database.cpp#L2228

You can probably skip digging through the code and just think about it logically though:

  1. Nowhere does the blockchain have any data about the SBD price.
  2. When SBD->STEEM price conversions are done, it only looks at the price of STEEM to determine how much STEEM to create based on 1 SBD.

[Edit] I missed your other point.

increasing SBD supply because of the increased supply by witnesses bias will generate more debt. Am I correct in assuming this? As in it will "flood" the markets with more SBD which in turn will create more STEEM debt?

If witnesses use a bias to artificially increase the STEEM price in their feeds, then it will print more SBD (which would increase the debt), but witnesses are not using a bias.

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How will steemit ever become mainstream as long as it so complicate to grasp even for people like you guys.

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People don't need to know how everything works under the hood in order to use the platform.

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Lotta truth in that statement. Does anyone even understand where the internet comes from? Don't think so. As long as it works to DL porn and surf Amazon and FB no one cares about the details. ;)

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ty ... i don't yet understand, but maybe someday i will review

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Yeah how many people know how an engine works that drive cars

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Thank God for seeing this part of your comment. Content creating minnows need rewards - sbd is generated by content and the only way for poor people to get on here - the only way to get STEEM without investing.

SBD is the "rare coin" only generated by content. If that is not of value here - what is? Lots of minnows getting rewards and creating good content is what makes the platform appealing to bigger fish who buy their way in and grow the place.

Do we want lots of people posting here or not? It's complicated enough without trying to understand the money and how it is generated.

If I get another weight loss author to try to post here - I'm going to tell her she can reach her audience and needs to make $10 rewards on a post to get the "do follow" for Alexa. I'm not going to tell her to figure out the cash flow of the place.

If the entire world will turn into a huge speculation, focused only on the immediate gain from the next transaction,

The spanish (and portuguese) economies during the age of the conquistadors ( after 1400 AD) comes to mind. ( all that Aztec GOLD!) It destroyed the economy of both countries..they still have not recovered.

It's great you made it clear one more time...
It is sad in a way to see so many Steemians thinking on a very short time frame and not seeing the big picture...
At the end of the day for Steem to go to the Moon we need a very stable SBD, same as it's state in the whitepaper.
All we have to do i think is just Steem On!

I would always be in favor of a stronger and healthier STEEM, and stay away from a jumpy and volatile SBD. And yes, the recent decoupling of SBD from STEEM - meaning SBD remaining stable (or going down, towards $1) while STEEM slowly appreciates - is a very healthy thing for me.

For a while i have been blinded by misconception of the entire game, thanks for clarifying this matter, however i have always been in favour of steem high, but i didnt know the sbd had such implications on the steem

My question is this, why has the sbd taken so long to keep going this way? Can anything actually be done to change its subjugation to the market?

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Can anything actually be done to change its subjugation to the market?

Yes, and actually some witnesses are doing it. The only thing that can be done is to increase the SBD supply, which is done by increasing their price feed bias. Look at the steemd.com/witnesses and see which are the witnesses with a positive bias (meaning over 0%). Those witnesses are setting up the race at which the SBD supply is increasing.

All of us who are here as new users should have access to your brilliant post, I really believe that we enter Steemit and any crypto-monetary platform for money but no idea how it works or how that internal world develops or is generated. I follow you and reesteemear.

Hmmm. Well I wouldn't pass your test @dragosroua as I don't know how much STEEM is printed every day. I assumed you mean created rather than literally printed. 😁

So is SBD going down because of what the witnesses are doing or because speculators have stopped speculating?

Do you think it's likely to keep going down now or is there no way to tell?

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So is SBD going down because of what the witnesses are doing or because speculators have stopped speculating?

A combination of two.

Do you think it's likely to keep going down now or is there no way to tell?

As long as the markets rules will be in place - and one of these rules says: "bigger supply, lower price" - then SBD will go down to the peg, IMHO. And of course, as long as witnesses will support an increasing SBD supply.

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Oh dear @dragsoroua. I've been holding onto my SBD waiting for something to change before powering up so I could get at least 1 SP for 1 SBD like I have in the past. 😢

Sounds like that's not likely anytime soon.

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Hi Gillian, whilst I would be first to admit that @dragosroua knows a LOT more about the blockchain than I do, remember that this is just his opinion.

@ned has said on more than one occasion that he's stumped as to why SBD would trade so high - and he developed the platform.

But the market does as the market does. Yes, there's a relatively small supply and yes, its therefore an easy market to manipulate (pump & dump), so no, I wouldn't just get rid (i.e. power up) of all your SBD just yet.

In the long-term, Steem is the currency to invest in, not SBD, but it's likely there'll be another SBD pump at some point in the not-too-distant future (and no, this isn't insider knowledge - just a hunch based on historical data).

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Thanks for your input @m-ssed-t. It's good to hear other opinions.

An SBD pump would suit me just fine! 😁

I also enjoyed the short time recently when we actually earned Steem although I've forgotten why that was now.

do you know that SBD is supposed to be pegged to the dollar? If yes, do you know why?

Yeah I do know this but I don’t know why , but now I know and I can basically say I’m in support of pegging sbd down to a dollar .
This is quite very informative and educative as you’ve described it. Thanks for the education

And yes, for a while the rewards will go down, because they're paid partially in SBD. But in the long run, a strong STEEM will definitely be the right bet.

A strong STEEM drives up rewards just as well, if not better.

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Obviously agree with this, but initially it will be perceived as less.

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Yes, I’ve been aware that SBD was supposed to be pegged to the USD and why since not long after I joined the platform, but at that point it traded for more then STEEM and I liked the extra rewards. I understand now after having more experience with the price of STEEM fluctuating that a stronger STEEM is what really pays out best, but at first calls from bringing SBD down to 1 USD sounded like calls to reduce my rewards, period. But now I don’t even pay attention to the price of SBD. I’ve stopped converting it into STEEM to power up so it just sits there until I need to use it to buy something that sells for SBD.

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Understand and agree the perception is there.

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hello my friend @smooth i hope to have nice time, im here to request you be part of our project, i have one community and we made one bid-bot and it can start next week if you like you can be part of it and get your profit you can catch me on our discord channel: https://discord.gg/3HZdaGk and catch brotherhood Game

This post is worth sharing with as many people as possible, I see a newbie keeping SBD in her account, waiting for a time when it will MOON. I always advice her to either convert to STEEM or sell in internal market.

In every system, we cannot remove human greed.

Great thought..@dragosroua.. But Some people say that Can SBD run with the steem ???

Every steemian needs to read this, especially newbies and minnows generally. It is a real exposition to the background of and proper knowledge of the steem blockchain and steemit as a platform. Good job

now i know more about how this work and Steem and SBD, thank you.

Those who are holding sbd's will say it anyway,
They don't have much knowledge like you do.
I"m too sbd holder.

I asked the same question my other steem fellow.

he said, sbd's is trading on exchanges, how it can be pegged?
If it was supposed to be pegged? then why it reaches to 18 $ in the last August.

Your post explains a lot, I can say less, am a minnow though and it has led me to a lot of research, though I know that 1 sbd is supposed to be pegged at a dollar.

A little precision: SBD peaked at $18 during the Korean pump in December 2017, and before that it maxed at $22 in May 2017.

I as a new person will try to learn from your post, if you can help better by visiting the blog @dragosroua

Back to Life (back to reality)

It used to be that doing 50/50 rewards is more profitable, even if you just go ahead and power up your sbd rewards, but will this flip it? Since I am powering up almost 100% of my SBD, should I use 50/50 or 100% rewards?

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Until SBD is above one USD, one should always use 50/50. If SBD goes below one USD, use 100% power-up.

To get an idea of the market performance, just check on Bitcoin news. If you check the graph, all other coins are following the trend of Bitcoin. Bitcoin is the leader.

Which is why I'm powering up 100% for now!

Thank you. I think i suddenly have a greater understanding of the system. I also have a better idea of how i want to proceed with what i do with my sbd and steem and sp.

so they started a demand for SBD that was self-perpetuating and then sold when the demand (price) reached its peak?

I think meesterboom was the champion but i'm not sure.

The truth that your article is excellent I've always wanted a higher Steem I think it's something that we all want, but by your writing I realize that a stable steem is much better and that it stays in time. A thousand thanks for the infrmacion.

I read something related to what you said here from @memo. He made two minutes video sharing his view in which I asked me different set of questions which is bothering me.

I think the confusion is as follows... if SBD goes back to 1 USD, effectively you would be making more SBD's on your posts.

To make it simple... if the if you got 10 USD payout displayed on your posts, meaning that is how much you are supposed to get paid. it would pay you 10 SBD's too.

Today, it will show a 10 USD payout and pay you 3.3 SBD because of the current price of SBDs. Does that make sense?

That is what he said after I asked if the sbd is equivalent to 1usd has he proclaim. I really learn a lot too from your updates. I'm gonna make a rethink.

Truth be told even the witnesses (the ones who make the decisions) can't agree on what the future for SBD should be.

On the one hand some top 20 witnesses want to change the algorithm, the code of the blockchain to peg the SBD to 1 USD, meaning that it would work exactly like Tether, having no way of moving on either direction. There are even propositions put forth for the code to do this, and the arguments are quite valid.

How could you effectively sell, lets say food with SBD if once you pay for something either the merchant or the costumer will be upset a few days later due to volatility?
It was not the initial intention of it, might as well keep everything with steem
On the other hand.- the higher prices of SBD attracted a lot of new writers and it gave the ability for tiny accounts, for plankton to actually make some decent money. Functionality aside, this is a good thing for making Steem mainstream.

I speculate

A hardfork is on the horizon to peg the SBD, specially since the volume from Korea seems to be drying up. When will this happen? no clue... but if you have seen the.

That is another answers

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If you want to know how payments work on the STEEM blockchain, I highly suggest this:

http://steem.supply/rewards

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Thanks for sharing this, I'm gonna check it out

Greetings know from me, after I read the article you share I understand a little and after I read this article I am so excited again in posting, and now for sata SBD not be an important obstacle I have to give the best, your article really make the steemian open eyes, thank you this knowledge you share.

Again, the main problem is that people think SBD is the main coin, the important one, because it's the only one they can actually earn in a form that can be directly used. That is the main issue and as long as it persists, it will still drag Steem down.

Otherwise, it's like expecting people to understand that the meal ticket is the main currency of Romania, not the Leu.

Thanks for explaining this all so clearly. I’ve been trying to untangle this one in the last few days.

SBD to the moo.... I'm joking, I'm joking :) Healthy or not SBD pumps are likely to happen in the future, are they not?