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RE: How do we fix the peg without popping the SBD bubble? I may have an idea.
That's exactly what I am proposing: a slow lowering of the peg to the desired level. A 1.7% drop per day would give us 94 days from $5 to $1. If the market moves quicker we could lower the peg sooner, or enforce the slower reduction rate via the SBD feed. That way the price of SBD drops slowly in a controlled manner, avoiding a crash.
The mechanism must change. We could find ourselves faced with a SBD pump to well over $10 again very soon, but if we have a plan to implement a slowly moving downward peg, that may prevent a massive pump at the very least. The first step is to cap SBD.
Yes you are right. When you wrote
I misread that as implying that it you would allow SBD to float between $1 and the ceiling. But in fact you meant there would be a strict peg that could not move above the ceiling, more or less the same as what I suggested.
In any case, this does not require a SBD price feed, which is fortunate because a code change like that would be significantly more substantial.
What it requires is:
Bingo! That's a lot easier than I explained.. but I don't know how the cogs turn all that well. It that can be done, then it just takes agreement, and a minor change to enable bidirectional conversion.
Could this work in practice?