The Rate of Steem Backed Debt Issuance is Too Damn High
Part
of my platform for being voted as a Witness is that I want to see the level of Steem Backed Debt, and that is what it is, reduced, because I believe that 5% is too damn high, and with interest payments on top it is only going to grow, and is slowly but more quickly over time bankrupting everyone else who holds Steem or Steem Power.
In aid of this I am making a somewhat token gesture of making the pledge that I will burn all Steem Backed Debt that I am paid in subsequent posts (I already have been for two days), and launching this with a $10 SBD promotional payment. SBD is not money, it's debt on Steem. Debt is like any medicine. Too damn much and it's gonna send you to the poor house.
It would be an improvement if the hard-coded rate is reduced by Steemit, Inc. in the Witness codebase for the network consensus, but I feel it would be better still if Witnesses had the ability to steer this issuance rate. Either one would be a success in my eyes. In the interim I am heavily discounting Steem vs SBD in my bias setting and my SBD interest rate is set to zero.
I don't think these are good settings but I don't think that 3% interest with a rate of issuance that has seen the level rise to now just on 5% is low enough and it is the main reason why the market capitalisation of Steem is continuously shrinking. The exchanges are just stacking SBD up because it's a sure bet for holding or appreciating against USD, a unicorn in the financial world. That's where our market cap is going, I am quite sure of it.
It is reducing Author and Curator payouts.
It is reducing the value of Steem and Steem Power.
It is time to unwind some of this debt and let Steem's inbuilt superior features shine!
Thank you for reading this damn post!
We can't code here! This is Whale country!
Vote #1 l0k1
Go to steemit.com/~witnesses to cast your vote by typing l0k1 into the text entry at the bottom of the leaderboard.
(note, my username is spelled El Zero Kay One or Lima Zero Kilo One, all lower case)
The only thing I like about this post is that you spent 10 SBD promoting it. For that reason alone I'm not downvoting it, but I'll point out that it is disseminating bad information about the platform.
You have a long way to go in understanding the SBD system. Please read the many posts by myself, @timcliff, @clayop, @abit, and @dan / @dantheman (sorry if I left someone out here; not intentional). Many of the statements in your post and comments are confused, misleading or just plain wrong.
Upvoting my own comment for visibility. I'll burn the reward.
Is there any mechanism to reduce the amount of SBD? It is issued at a constant rate, and it attracts currently between 2.5 and 3% It is gaining on Steem at this rate. The internal market is not the only influence on the SBD price either. External demand for it also drives the price up and this requires the increased issuance.
I think it would be a good thing to get a clear statement about the mechanism and the competing theories about its effect on price movements from people who know it better than I do, of course, I am being slightly over the top in order to provoke a debate that settles or at least makes the issue more accessible.
conversion or burning (including promotion) both reduce the amount of sbd
my theory is that it is has minimal influence on the price and is way overemphasized by people looking for a scape goat to explain the declining price (when the real reason is investors just not wanting to buy in, enough, at this valuation).
SBD introduces leverage and that has an impact on the price (increasing, slightly, price movements both up and down), but the leverage ratio is tiny, currently about 1.045x, with a cap of 1.1x. That's almost nonexistent leverage, not even worth considering very much.
@smooth hmmm I thought it's stable now
anyway .. could you please check your chat?
I sent you a reminder thank you very much ...
EDIT: thanks for getting back at me!
But you have to multiply that leverage by the ~4.8% from the market cap proportion, to get the daily cost, or, how much steem has to be sold to hold that 4.8% which grows at 4.5% (1.045x is 104.5%) on top of currently 3% formerly 10% APR on the SBD.
It is accelerating, because nobody has a reason to burn it, and assumptions in the business logic and the general theory of it say that this acceleration does not matter, but it does. It is selling tomorrows steem for today's SBD. Which means as SBD goes up in proportion the Steem must also grow in proportion.
I think the real rate at which SBD is piling on liability to Steem is more like 1.048 * 1.045 gives you 9% at current SBD quantity. With 3% APR paid on top you get 12.8%. This comes out of every bit of money that comes into Steem, and ends up sitting in an exchange proxy account continuing to get paid interest at 3%.
Why the flag. Waiting for explanation. Ugly it turns out. @smooth
Thank you.
There's no flag, at least not by me
Look from you set. If you accidentally, then clear the flag. Thank you .
https://steemit.com/photography/@dman57/the-original-photograph-mucha
You believed. It's insulting like that .
Clear the flag
Uncheck the flag. Thank you . Waiting for an answer .
.022 SBD for the promotion of this post. Nice job digging into detail. Definitely compelling. Thank you for your time.
So maybe for the sake of the system I should convert my 48 SBD to STEEM? I'd lose the little bit of interest income and risk a further decline in the price of Steem, but if it's going to be a help to the platform, however small, I am thinking of doing it!
NO!
This does not help. Someone else will get the interest payments on it which is part of what is increasing the proportion of SBD to Steem. Currently the only influence we can have, which is by its nature altruistic, is to use it to promote posts, which deletes the SBD from the blockchain.
Better you keep it than it get into the pool of an exchange like bittrex or poloniex. This is why the parameter has to be changeable (the proportion of SBD to Steem issued). It's too much and then on top of this it is a desirable asset to hold for someone (like an exchange) who depends on keeping a cash reserve.
If you see reason (or want to join this campaign) use the SBD you have to promote your posts and maybe drop a little link to this post to explain why you are promoting. It's more important that we get a mandate built that this reduction of issuance needs to be done (and justifying this mandate with some analysis will help too) than anyone personally sacrifice their SBD holdings. The exchanges won't do it so it's a prisoner dilemma that won't go away until we can stop printing so much debt (ahem, dollars).
I have thought through the possible ways to do this and the only one that fits the architecture of the system is to simply not issue so much. Negative interest rates on SBD would also reduce supply but it is possibly impossible to implement (charging is not a procedure that blockchains can really do, they are credit-focused), and allowing people to unwind it has no guarantee of sufficiently reducing it, because it is work for no benefit (unless there is a dividend payoff, a discount on SBD vs Steem in this unwinding of the contract).
Witnesses, on the other hand, if they had an influence over the interest rate of Steem, and as a group probably can make the best decision about steering the issuance rate up or down.
I am burning my SBD in protest. It's not going to have a measurable effect by itself and it costs me exactly how much I burn. It is to raise awareness and get this subject settled because it has been on the table at least 2 times in the last 6 months and it was partly why they introduced the promotion tab.
Thanks for your excellent reply!
I was under the impression that if you Convert SBD to Steem using the UI on the Wallet page, you were actually burning or destroying the SBD. The SBD would be gone, not simply transferred to another owner, but the Steem associated with it would be "unlocked" and received from the conversion.
I have been further informed that convert does free the Steem (delete SBD). But currently you pay a little for it. It works on a moving average of a median momentary price. I am investgating it further.
Thanks for all the thought and effort you put into investigating this matter for the good of the community!
@l0k1 I still like the SBD and IMHO a lot of us does specially that it's now worth $1 freaking easier to understand :P but I still voted for your post why not :)
When steem goes up, it has to sell steem. So too much of it and it sells too much steem. I'm not saying abolish it.
@l0k1 okay copy that
I always get rid of my SBD by putting a little towards promoting peoples post that encourage conversation. This is really what the community is about and I think others should consider doing this for posts they really like. I put my SBD where my mouth is by adding to the promotion pool of this post with some of my SBD.
Thank you for the post and getting the conversation going! ;)
Some level of SBD rewards helps people who want to promote posts, but I don't think it should exceed 25% of total rewards (half of the 50% liquid split) on post payout.