What's The Point of the SBD Peg?
Today I was in the shower enjoying the flow of shower thoughts rolling in as they do always.
Then I thought... I wish SBD would rise... but everyone wants it down. What's the deal with that?
I can't get why people want the SBD to go down. The reason it was designed to be pegged is Dan wanted to increase the trust in the currency due to having the tokens worth $1 so people could know their investment was safe...
...but what's the problem with it being $1 and then some?
The only problem would be if it would fall below that!
Or is there anything I'm missing?
I don't get it.
Explain a Noob: Shouldn't We Prefer the SBD to Rise Alongside STEEM?
So, as the users I'm going to tag below know I'm fairly new around here.
I'm about 5 months and a half old and there are some things that I still don't know about this blockchain, I confess, but I do know a lot about it already.
One of the things I DON'T know is why should we prefer SBD to go down to $1 instead of it going up alongside STEEM?
If It Would Raise STEEM price... would it?
Something I thought about was that if SBD price was lower, then people would need more SBD to buy SP, hence STEEM would become more valuable... and maybe rise.
But would it?
I mean, crypto doesn't care about stuff like that... it moves pegged to the BTC, and BTC doesn't care about fundamentals either, it moves around as a wild thing.
Trust me, I'm a fundamental analyst and crypto doesn't give a crap at those.
So, even if in theory it would mean this... I'm not sure in practice it would help.
I'm Calling Someone To Explain:
So, I trust the greater part of my 2300 Followers also don't know why we should want the peg.
I would thank more experienced users to chime in and educate both me and my followers - again, I admit I don't know, so I seek to understand because the posts I've read about it don't answer the question I posed about if the goal is raising trust in the currency, wouldn't pegs above $1 work just as well?
I'm going to tag Steemians whose opinion I value a lot, some are for the peg, and some are against it, and hopefully one or two will come out and let us know their thoughts on this.
Hopefully, I can learn why the peg is good, or if I'm getting it correctly and it would be best for us to leave the peg broken.
@smooth , @transisto , @aggroed , @yabapmatt , @themarkymark , @aggroed , @grumpycat
I hope some of these 7 Steemians pop up and educate me...
... by the way tagged experts, thank you for your time!
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Because of the high SBD, the curation on this platform is completely broken. Since curation rewards are paid out in SP and not in SBD it highly punished anyone who is willing to put efforts into proper curation on this platform. The rise of the SBD came along with the explosion of bid bots and vote selling since it's by far the best thing anyone with a lot of SP can do. It asks no time and earns a whole lot more. As a result, wales are much less willing to support mainly dolphins who now need to buy the bigger upvotes and are forced to sell their own votes to be able to pay for it. This means they are less willing and able to support many of the minnows who also need to buy upvotes. So the system where curation makes higher quality posts stand out no longer works.
Having a stable currency linked to the steem platform would allow real life adoption as it can be used to actually pay for things in a predictable way. This real life use it what gives sustainable value to something. Right now the only thing that keeps the price up is the fact that new people join who are willing to buy up the steem that is being created each day. I don't believe this model is sustainable longer term.
This is best answer by far. Agree 100%
Thanks @cibar !
I wrote an article about it last month so the reply was ready to go. Could have gone in much more detail though. The thing that actually worries me the most about the situation is that there is no statement whatsoever from the devs (for as far as I know). Not about high SBD, the broken curation, the broken trending page, the bid-bot situation, the @haejin situation, ... I'm hoping Hardfork 20 wil fix a lot of these issues somehow.
+1
I responded before reading this but I agree this is the best answer.
Stability can be achieved at a higher value... the point you make on number 1 is fair, but in all fairness curation rewards are so low that unless steem would rise inactivity would insue.
I dont like bidbots or the trending page anymore than you do, but I prefer to earn more rewards in USD terms than cap. I would make it stable at a higher number.
I don't think your first point adequately addresses why we care about the peg. I think it only addresses how incentives change when you compare the SBD portion of the reward vs the STEEM portion. If steem price goes up the market value of the SBD portion goes up, and all else remains exactly the same.
Edit: oops, I'm dumb. The ratio of the two is preserved. Nevermind that point lol.
-- second edit: this is a really good point I must not have understood earlier, thanks for that.
Sorry, second question about the first point, which I think @spiritualmax briefly touched on. Even if there peg were working, doesn't the same problem remain? Low effort to roll in the dough so why bother curating at all if you can sit back and let the good times roll in? Meaning, the dynamic of choosing one over the other is certainly more pronounced with higher SBD, but it isn't the main incentive for the behavior in the first place.
Let me ask you a different question. What's the point of SBD if the peg cannot be trusted?
We can very well just remove SBD even today just by setting the
sbd_print_rateto 0. (There are a few people that like this idea, but enh...)The only reason people like this broken peg is simply that the market value of the reward under the current rules is more. But beyond that, there's no really no point. Anyone claiming it's about adoption or whatever silly effects they think it might have relative to STEEM price is missing the larger point.
Why peg? I'll drop this, the section titled "Introduction: Why Does Price Stability Matter?" which explains the desire for a stable-coin better than anything else I've seen thus far.
Predictability for merchants is really the big one here. One might argue, who cares about merchants, but in fact there are projects that decided not to launch that cite the unstable peg. (Otherwise you need mechanisms to price in the volatility that are likely to raise prices relative to fiat, and by that point, why bother...)
And just imagine you had accumulated X SBD. If it were stable, you'd be comfortable knowing the value would not change so drastically. Why would you want to subject yourself to the crazy feelings when one day it's worth 5 USD and the next it's crashed down to 2 USD?
Now about achieving the peg in a safe manner, that's an entirely different issue that I don't think has an easy answer. I'm quite afraid of reverse conversions, even though the thought exercises have been done to reason that it will be okay. I'm not so sure myself.
Glad to see you here in the comments! I'll just add, the most immediate use case for the pegged asset is for investors. Say btc spikes to $50k but you remember the last dump... so you sell high, place it all in sbd for safe keeping, and buy back in after the price settles around $20k. Like tether... but without pretend backing :)
I don't know if I should be surprised that the reverse conversion hasn't already been enabled. Having an asset that's supposed to be pegged, but isn't, is a bad look for the platform as a whole, tbh. kinda weird they already had "smartcoins" in bitshares before steem was developed.. why it worked there and not here, idk.
Well, it's quite a tough problem to solve in a good way. :). That's why the company behind the white paper I just linked receieved like 35 million $ in funding (or something like that, i forget), and it will attempt to achieve the peg in a slightly different way than all previous approaches. (All the usual stuff we know that's not Tether-like is collateralized against an already volatile asset, and that alone raises some concerns from some folks that the amount collateralized may not be enough).
Except stability doesn't mean it has to be in a stable low value... it could be on a stable higher value.
Stability can be achieved by pegging it to another asset or another number.... why go down to $1. Peg it to $5, Peg it to another currency...
This is what I don't get.
That's not what your post is arguing though. And I'm sure most people would be fine with stability to any value.
I listen in to a lot of witness shows and most folks has the understanding that the PEG is used to make SBD Stable like the USD Tether but since crypto is a speculative market and their is demand in SBD because of bot bids and most of the rewards are in SBD so it more liquid that SBD has risen and fallen.
To be honest I have conflicting answers and would want to know the real deal as well.
I have seen a lot of criticism on the dual coin mechanism created by Steem Inc as well.
Again, why should stability be pegged lower so we get less rewards... why not peg it at its current price, or even peg it to another currency... makes no sense to peg it at 1...
Stability is a lame excuse... it can be stable at a hjigher value.
Short explanation: SBD and STEEM are designed for different porpuses.
Long explanation:
The design of SBD is that It would work as a liquid currency, wich represent the a debt of steem that exists on the system. Its main fuctions was to be like cash, with a somewhat stable value. Its not that SBD wouldnt have fluctuations, but It should be always close do $1. Or Else, there would be no incentive to spend It.
The natural inflation of the system (always printing sbd and steem) Will eventually bring SBD down. Steem on the other hand might have increase of value due to demand to Power up the accounts (also, locked steem stacks increase in size, wich keep its value over time).
If SBD is not close to 1 dollar, It wont work as designed.
Long term, It Will Go down. Every time SBD e high, more SBD is printed, increasing even more the supply.
When below $1, interest mechanism kick in, stimulating people to hold the SBD.
But again, why not keep it stable at $5 for example... stability can be achieved while keeping our rewards high...
Yeah, it's not pegged, it has a floor. It's made so it won't go lower than $1. It can go higher and higher and there is no limit, as per Dan Larimer's statements.
I don't get why people want it low either. It's great if it's high. Dan Larimer told World Alternative Media (@JoshSigurdson) that the floor is there to prevent it from going down to 0 and that it's was not meant to stay at $1 or designed to never go up, He sees it going up as something great.
I invite you to have a look at that interview. Josh has a YouTube and DTube channel called World Alternative Media (WAM).
One with Dan Larimer and WAM mostly about Steemit:
More about EOS and a bit about Steemit:
Thanks!
Will take a look!
The answer is commerce.
Merchants who sell products don't want to have to worry about their earnings getting cut in half because the price of the currency in which they were paid dropped overnight, or worry about all the difficultly involved in exchanging one currency for another one that's more stable.
Additionally, consumers don't want to (and shouldn't) spend a currency that is expected to increase in value - which we all hope STEEM will.
So a pegged token is great for commerce, and as other people have commented already - there's absolutely no need to have two tokens here (Steem is already confusing enough) - so if SBD will not be pegged then it's really no different than STEEM and we should just get rid of it.
HOWEVER - real commerce on the Steem blockchain is very far off, and the high market price of SBD means authors on the platform are getting a lot more money which helps growth and retention which is what we really need right now.
So, all in all, it's an odd and unintended situation, but it is good for the platform right now. It will eventually go back to $1 over time as the supply keeps increasing (which is why I always sell my SBD for STEEM right away) and at that point I expect the peg to be restored.
Stability could be achieved at a higher number than $1 guaranteeing the best of both worlds... I dont want a $1 SBD number... I would make no money :D
The only reason you're making extra money from high SBD prices is that the Steem blockchain is still printing it under the assumption that it is worth $1. If it were to be pegged at a higher value then the blockchain code would be updated to print it at that new value so you would make the exact same amount of money in that scenario as if it were worth $1.
Ok, then I'm against the peg :D
I get what you're saying. I actually prefer it when SBD rises.
Historically you're better off holding SBD instead of STEEM. When SBD rises it can go crazy.
For the reason, I think it market forces or something like that. The majority of the activities on steemit are done with SBD instead of STEEM, so it's no surprise to see SBD going up the way it does.
With this post I discovered I'm against the peg.
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