Witness Update 2016-11-29

in #witness-category8 years ago

As @smooth.witness mentioned in a recent update, I have been involved in the ongoing discussion among witnesses about the most effective strategy for witnesses to use when applying discounts to the price feed and adjusting the APR that SBD balances earn.

Despite my aversion to do so, I have decided to lower my SBD interest rate to 10% APR, due to the strength of SBD in the market. I have resisted changing it back down to 10% because I think that SBD holders might be justifiably irritated by a decrease. Primarily because they will lose the benefit of increased interest that they reasonably expect (the prevailing interest rate at the end of 30 days is the only thing that matters, not what it was the entire month). I hope that flaw is fixed in future development...

However, I can't deny that now is not a good time for augmented SBD interest, since SBD has been on par lately. The blockchain has been giving 10% for some time now, and an increase is not in order at this time. At the moment, a price feed discount seems more appropriate, though since SBD has been at its target or above in recent weeks I think the discount should be tapered down until we discover what I will call the Smallest Effective Discount (SED).

This might seem like a bit of a deviation from my previous hard-line stance against discounting in general. And that is probably accurate. Through discussion, observation, and consideration, my stances are evolving... and I think that's perfectly healthy and I wouldn't have it any other way. That said, I still think that, due to the spillover effects of discounting (primarily downward pressure on the price of the underlying asset), witnesses should be extremely careful to avoid a heavy handed approach to discounts and should seek to make their interventions as minimal and temporary as possible.

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Well said. You are a smart guy. None of us can be totally rigid. Especially when are observations show us we need to adjust.

Thanks for the well thought out approach.

Lo! What common sense doth speak!
I like it @bacchist - thanks for the update and the willingness to evolve ;)

Great post and thumb-up to SED.
Let me add one economic concept on SED. In the market system, social contract and perception about the peg is excluded, and therefore effects from the peg can be considered as externalities. Theoretically, the best point of discount is actually maximize social welfare with the consideration of this externality.
That is, if removing a marginal deviation of peg (say, from 0.99 to 1.00) requires much greater costs than benefits, e.g. people don't care this amount of deviation so there is almost no gain, we'd rather allow little broken peg and save the cost.

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