No. Specifically, if the platform can freely re-peg the SBD whenever, then the peg loses it value. It strikes me that the best possible outcome in the current configuration is for the platform to guarantee a $1 market price for SBD, but then allow it to trade outside at any price the market decides.
Hi @prof-pieters, thanks for a great answer and it makes a lot of sense. I am currently on my annual leave until January 2018, but would love to have further conversations around your studies on the use and implication of cryptocurrencies as a globally traded alternative to national currencies or assets. This sounds very interesting.
We are in the process of designing a Crypto Economy and are talking to various economists and other specialists in this field. Can I interest you to join our slack channel?
Our Website: https://sportspodium.io/
You can join our slack channel here: https://sportspodium-slack.herokuapp.com/
Joined.
How can you guarantee no lower than $1, though? I think the current situation proves that it can't be capped on the upside with current parameters, so why should we expect it to be contained on the downside?
It sure would be nice to have a system like that, though. Talk about a no-brainer buy if that were true and SBD ever reached $1 again.
The platform would have to eat the loss, much like central banks do when they try to maintain a peg.
They should not be selling SBD, only buying (I don't consider the distribution of SBD selling). And they should buy at $1, and $1 only, no matter what the external price is. That way the SBD maintains the minimum value it was intended to do, without the need for the more exhaustive monetary policy required to maintain a hard peg.
Hmm. I don't know if that's healthy or not for the system. Seems to me, the more controls you try to implement to get the desired effect(s), the more points of failure you now have to deal with. More factors, more complexity, more likely to have problems down the road.
That is the correct sentiment. However, SBD is a peg that has already been introduced, and therefore it demands controls to obtain the desired effect.
There are very few ways to maintain a peg. Now, the good news is that SBD is a minimum price peg, which is an easy peg to maintain (as opposed to a strict must-equal-$1-all-the-time peg). Given the minimum bound peg, you have to implement controls. The question is, which ones? The interest rate route, which the platform has taken, only works under very specific conditions of credibility. The problem is that the exact time you need the SBD to be a peg and provide inherent value to the platform is the time the interest rate peg is most likely to fail (i.e. during a massive crypto-market crash). Granted, you could have a dual interest rate + guaranteed buy-back system ... but does that level of complication improve the system or weaken it?