Many people are very happy with the rocket price of SBD... I'm worried! why? because the SBD was created to be pegged to USD, and it is not working very well. You may say: Julian, but it worth more than a dollar, this is good!... mmm, I think each coin has its function, and the function of SBD is to be pegged to USD, it is very important and I will tell you why.

USDT vs SBD

For the people that don’t know, USDT is a coin that worth 1 USD, and its value is very well pegged. For this reason it is used in all exchanges to simulate the dollar. The problem with this coin is the way that it is backed: A sum of real USD is in a bank, and we have to trust in the creators that it is true... when they put new USDT in the system they have to save more USD in the bank, but they do that? maybe yes, but I want a new way to thrust.
In the last post of @jerrybanfield, he told us the benefits of SBD over USDT in terms of backing... and this is good, the SBD are backed by STEEM in a transparent way for all. But we have a problem... suppose that I have 1 BTC and I want to save them in dollars, which coin do you choose? I can’t choose SBD because it worth $10 now, and tomorrow maybe goes back to $1, and I will loose money. The people change to USDT because it is very stable.

If we can make a stable SBD we can attract more people to invest in STEEM, because we can be a good alternative to USDT.

How SBD works?

SBD means Steem Backed Dollars... meaning that when do you want, the blockchain will give you an amount of STEEM worth in 1 USD by each SBD. It uses a smart contract. For example, in this moment the STEEM is worth in 2 USD, then if I transform 10 SBD the system will give me 5 STEEM (5 steem x 2 = 10), but if the STEEM is worth in 1 USD, then the system will give me 10 STEEM (10 steem x 1 = 10).
And you may ask: If it is worth in 1 USD, why we see this hype of 2, 6, or 15 USD? Because we have a reduced supply, that makes the SBD scarce and that's why its price goes up.

Proposal: Transformation from STEEM to SBD

One thing is true: If the value of SBD goes under 1 USD it recovers its value easily, because the people will use the contract to transform them in STEEM worth in USD, then there is no way to lose.

Thanks to the contract the SBD has a floor in 1 USD

But we cannot do the opposite: Transform from STEEM to SBD. The unique way to get SBD is through the rewards from authors and curators.

There is no contract to limit the ceiling of the SBD. We need one!!

The time to transform for SBD into STEEM is 3.5 days in order to reduce speculation. We could do the same in the opposite, or even add more days, maybe 7 days to transform STEEM into SBD.

Redirecting the bullish movement

In this moment we have 2 bullish movements: One in STEEM ($2) and one in SBD ($10), this last is very high. If we introduce my proposal, there will be a chain reaction:

• The people will transform their STEEM into SBD (using 1 STEEM the blockchain would give me 2 SBD, and I can sell them for 20 usd).
• That STEEM is destroyed, then its supply is reduced and the shortage will cause its price to rise.
• The new supply of SBD will cause that its price goes down, until stabilizes in 1 USD.

In conclusion, all bullish movements will be transformed in a unique strong bullish movement in the STEEM price, which is very good, STEEM to the moon! And on the other hand, we will have a strong well pegged SBD that will create much more confidence.

What do you think?

---

Posted on Utopian.io - Rewarding Open Source Contributors

---