SBD should be Removed!
So the SBD debate is going on, finally, I have called for this weeks ago in my older articles:
- https://steemit.com/steemit/@profitgenerator/steem-dollar-has-met-it-s-end-100-steempower
- https://steemit.com/steem/@profitgenerator/how-to-fix-steem-inflation
The recent article of @krnel about @ned and another one from @dantheman has put this debate in focus, which I was calling for 2 months ago.
So let me address all the arguments there, especially those of the commenters that are clueless about economics and how markets work. First of all I have 10+ years of experience in markets and trading, and I don't mean to say that as an argument from authority, but just so that you know that I know what I am talking about. I have also intensively studied Austrian-Economics.
The issue with SBD is simple. You can't peg a currency to another currency without holding reserves of it first, it's that simple, that even the Central Banks understand it. And although their reserves is fractional, at least they have a % fraction of the reserves at hand.
The US has:
- 120.142 billion $ of foreign reserves (source)
- And it has a M1 money supply (which I consider the liquid money) of 3340.4 billions (source)
- They also have 8133.46 tonnes of gold =296.1141 bn $ (source)
- So the total reserve is roughly 416.2561 billion $ which is kinda the same range although since 2015 it has been increased I suppose, to what the World Bank says. And yes there are some conspiracies about the gold reserves, but let's just suppose that the gold is there.
- Therefore even in the shitty fractional reserve system, the USD is backed 12.4612% of it's value. Of course backing it with other fiat currency is not a stable system, but that is another topic, but alteast the 12% is there.
Backing
SBD is backed by nothing. And I imagine it can't be backed with USD to give it's value, since that would cause regulatory issues for the Steemit corporation. Therefore it's "backed" by 7% yearly interest (which is nothing more than an unnecessary siphoning of value from Steem) and of course a risk isolation mechanism, the internal market.
Derivative
Ok, so this makes SBD more like a derivative instead of a currency, because there is little use case of it, it's not like there is a huge commercial demand for it, and maintaining the peg without actual reserves is just siphoning away value from Steem, which is already not in a good shape.
Internal Market
The internal market mechanism is like a quarantine system since the people that don't want to convert their SBD and wait a long time for it, can sell it for cheaper in the internal market, and this is where the risk is quarantined. Since this lifts up some of the burden from Steem, and it contains it right there, where people can sell their worthless SBD in an OTC mode at discount. It's like if you get an empty check in the mail that should be worth 1$ but it's actually worth 0$, and you try to sell it to your friend for 0.80$. It's still worthless, it's just that you quarantine your risk and pass it on to others.
Liquidity
The liquidity of SBD at this point is only maintained by speculators. When Steem goes down, it's better to hold SBD, when Steem goes up it's better to hold Steem. So this gives to it a hedging mechanism, that speculators love, however the cost of maintaining it is not worth it.
Safe Haven
If you want a safe haven currency, there is Bitcoin, you know the currency that has 14.6 billion $ backing it and has a functional economy. Why reinvent the wheel? What is really the point of SBD, it can't compete with Bitcoin, so why have it?
Can SBD be saved?
Yes, but only if it get's backed by Bitcoin as I suggested in my older article.
There is no point on having the current system. The 7% interest of SBD is a liability not an asset, it's inflation. Crypto-currency is supposed to be against runaway inflation of the Central Banks, so why not use the global established safe haven called Bitcoin.
If the community doesn't want to do the backing then it's just better to remove SBD altogether.
Bitcoin Reserves
It would be easy to back SBD with Bitcoin, just buy Bitcoin with all the SBD and hold it in a smart contract system, so that it can be converted into Bitcoin at any time. For example 1 SBD = 0.001 BTC would be a good peg, but then we need to rename it to BBS = Bitcoin Backed Steem.
It would be so much more efficient, Bitcoin is the Ideal Money, why fight against it when we can just build on it. It's the law of monetary graviation (i forget what the actual term is), when the weak currencies will gravitate towards the strong ones and use the strong ones as the reserve. It used to be the USD, but now it's Bitcoin, and it's much easier to do business with Bitcoin.
Why Bitcoin?
So I can't understand why these altcoins try to reinvent the wheel, Bitcoin won, yes there is Monero and Dash that are viable alternatives, but technically Bitcoin is the preferable one due to it's real use and economy that it developed.
Bitcoin is not a fiat currency, it is backed by millions of users, an online commercial empire of various industries so believe me we would all be better off if we would start backing SBD with Bitcoin (maybe not 100%, but at least have some reserves there).
Upvote, ReSteem & 
This is not true. Using your argument Bitcoin has no backing because it has no reserves. It is backed the exactly same way as SBD - by supply and demand. However, SBD has much better technology backing it than BTC has. BTC just has the first mover advantage and thus the functional economy.
SBD has a significant value in making cryptos more user friendly. This is our niche.
Well the niche is not holding so well currently. SBD is already a liability, if Steem would get bigger, that would make the liability only bigger.
Yes if SBD would become a commercial tool used in SBD based shopping, but that is unlikely to happen. Bitcoin already beats every single currency out there in terms of commercial availability.
It has tons of casinos, merchants, websites, investments, lenders, services accepting it. It would be really foolish to go against Bitcoin and try to compete with it.
Yes this would make Steem less sovereign, but it's not like Bitcoin is an opressor, Bitcoin is already the most secure currency out there, so it would actually improve SBD and not drag it down.
We can still make SBD easy to use, becaue average Joe doesn't have to understand the mechanics of the backing, but atleast he can say that his tokens are actually worth something and he's not trading hot air.
Nonsense
Not an argument. Might want to explain your position first or show me where you think I am wrong.
I see that you're flagging everyone. Have one on me.
"Everyone" is a big fat ugly word...
Other than that, are you trying to bully me kid?
You are starting a thread/post trying to create a f@ck!ng stupid flag crusade against steemsports (or whatever their name is) and when this backfires and you get flaged for your stupidity, you start crying about it in irrelevant threads/posts.
Your flag is a badge of Honor! kid...
It seems that common sense is the most rare thing in the crypto world...
This post has been ranked within the top 80 most undervalued posts in the second half of Dec 23. We estimate that this post is undervalued by $4.54 as compared to a scenario in which every voter had an equal say.
See the full rankings and details in The Daily Tribune: Dec 23 - Part II. You can also read about some of our methodology, data analysis and technical details in our initial post.
If you are the author and would prefer not to receive these comments, simply reply "Stop" to this comment.
If you think about reserves as locked bitcoin like in Vault, then you have to know, that from technical point of view this is not possible with blockchain. Simply, you cannot store private key in public network.
This is BTW only reason why all crypto-currencies are not connected together as sidechains
But could it be done with some multisignature system and smart contract wizardry?
Etherium could do it. It would be an Ether-Backed Steem Bitcoin
See this link for an opposing view https://steemit.com/steem/@leprechaun/steem-dollar-benefits
Okay. How would the smart contract work? .
Similar to Dan's article.And my argument is that the costs overweight the benefits. Either SBD get's really backed up by Bitcoin, or it has to be removed.
I am not a programmer, I am sure some good programmer can figure it out, perhaps after Segwit passes, we can create SBD as an alt-chain for Bitcoin, to make it accesible and somewhat sovereign.
You cannot back SBD with btc because as soon as btc falls it will be fractional reserve. You BTC could be printed, then it could back it.
You need to revisit your assumptions.
Wow thanks for responding, it's a pleasure to see that you have read my article.
However I have to disagree, because you don't back it with the value of BTC, but just with BTC itself. Therefore the price of BTC doesn't matter, that is the individual risk that every investor has to assume and it lies as a collective burden on the hands of the BTC investors.
So for example going with the analogy of the article let's say 1 SBD = 0.001 BTC, every time 1 SBD is issue, 0.001 BTC has to be bought and set aside in a segregated vault that can be redeemed for it.
Now it could be fractional, if that would give more flexibility to the system, however to make it sustainable the interest on SBD has to be removed to prevent unnecessary inflation, and post should no longer be paid in SBD.
So the risk will be contained inside the Bitcoin price, and as we can see, Bitcoin has been a pretty solid storage of wealth so far, so I think it's worth a shot.
Perhaps we could create a 4rd currency next to SBD, where we can test this system and see if it's successful or not, and it could run parallel next to SBD and see which one is more liked by investors.
That wouldn't be pegged to dollar but to btc.
I just watched your long chat with Jeff from Oct. - @dollarvigilante -- I couid listen to you and Ned speak all day, I learn so much from finding nuggets of you guys everywhere. I appreciate you guys like I said a few days ago in that post on your page a week or so ago.
Yes that is the whole point. I think a BTC peg is much more elegant and easier to achieve in the cryptocurrency world, than a dollar peg, that would bring regulatory problems.
Besides BTC has already proven itself to be a better reserve currency, just look at the BTC/USD price of the last 2 years.
LOL.... SBD stands from Steem Backed Dollars. If Steem has value, then you cannot say that is backed by nothing if you will always get proper amount of Steem equal $1.
Yes true. I think what he is saying is that you need to be backed at least partially by the reserves of the currency that you are pegged to. I don't know enough about this kind of stuff to really speak to that though since my knowledge is just limited to my own cryptocurrency experience.
Steem has value, but SBD doesn't, individually, atleast not yet and not in it's current form.
Besides the name is misleading, it's not backed in the sense that there are segregated reserves out there that guarantee the 1$ price.
The market does, relying on speculators, so SBD could be 0$ or 100$, it depends on their mood.
good blog
upvoted and followed
What is the original intention for SBD?
See https://steemit.com/steem/@leprechaun/steem-dollar-benefits
The jist of why I asked is if the original intention hasn't been achieved, then leave it alone. But thanks for the link ... good reply!
I think the original intention was to give a middle of the road betwwn very unliquid steem power that appreciates and liquid but very inflationary Steem. Now that Steem has been changed the dollar and steem are similar now in these qualities. That's what I gather from Ned's interview on Epicenter.
You're thinking of Gresham's law. Bad money drives out good.
Indeed, thanks i forgot the term.
So in this context this would bean that as a storage/reserve mechanism, you want use the better money, and for consumption spending you want to use the worst.
Bitcoin is better than the Dollar, and since the SBD is already not backed by USD, it would be wonderful to back it with Bitcoin instead, that would make SBD a safe haven asset on the Steem blockchain.
I like the SBD, let it like it is.