Witness Update 2016-11-05 (SBD Interest Rate)
I have adjusted my SBD interest rate upwards to 20%.
In my opinion, raising the interest rate is the best way for witnesses to increase the value of SBD, and thereby support a higher market price. I have argued for an higher rate since late July, and I am happy to see many witnesses adopt this strategy lately.
As an aside, my other suggestion from the above post was to decrease the conversion wait period. The leadership recently indicated their intent to lower the wait period from 7 days to 2 days. I agree with @smooth's comments in the thread, that 3 days would be more appropriate. However, I am glad to see this improvement being made.
No price feed discount
I remain firmly opposed to the price feed discount which has been used by the majority of witnesses. I find the underlying argument for the discount to be very weak. Dan stated in his post on strengthening the peg, that the discount was intended to reduce the volatility and risk associated with conversion. However, discounting price feeds has the effect of devaluing Steem itself, which is counterproductive to the goal of a stronger SBD.
Dan correctly stated that "interest rates are only effective when volatility is contained." However, discounted price feeds encourage volatility by producing more Steem than would otherwise be created during conversion. That's more Steem to be dumped on the market, encouraging the downward trajectory that was depressing the SBD price to begin with.
There is no effective way to preserve the peg at $1 in the face of such volatility.
Dan also said that "When Steem Dollars are trading at $0.80 there is an implicit market interest rate of 30% assuming Steem Dollars eventually revert to $1.00 within a year." However, this implicit interest rate is based on faith in the peg which has not been justified by empirical evidence. We should manage SBD and the rest of the economic system as it is and not as we wish it would be.
In my experience, SBD spends a lot of time in the 80-90 cent range. I find a lot of utility in a currency that is stable within such a relatively narrow range (for cryptos). An increased interest rate would provide me with an economic benefit for holding SBD that can be realized without relying on faith that the currency will behave any different than it has in the past.
Account Creation Fee: 42 STEEM
Many witnesses are using 50 STEEM... I think that's very appropriate given the market price of STEEM. However, I think 42 is a much better number.
42, it is the answer after all!!
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Will switch my account creation fee to 42 as well to follow your lead.. My APR is staying at 20%
Good update Bacchist.:)
Thanks @bacchist, @kyle - keep up the good work. The cogs are what make the wheels turn :-)
In @dantheman's latest post, he has conversion time at 3.5 days. What are your thoughts on that number? And how could one even reach a proper conversion number? What would a formula look like based on the other figures that are cited? Is there one?
I think 3.5 is more robust than the original proposal of 2 days. It is not an exact science, because we're trying to manage risk and influence behavior. The 7 day period eliminates a lot of the systemic risk, but forces users to assume quite a bit of risk. 3.5 days socializes some of that risk, while avoiding some of the vulnerabilities of an overly short period.
OK. I was just wondering how the figures were reached for this. It seems that it's just a guess then about risk assessment/aversion. How would lengthening or shortening that impact Steem creation/inflation? Or would it?
There is some guesswork involved, but it isn't a total shot in the dark. Shortening it should encourage people to convert more SBD, since some of the uncertainty will be eliminated. It will hopefully lower the debt load and strengthen the peg.