RE: Witness Run: My outline of the Economics of the system. What to do to keep the SBD peg at $1USD and why we should.
What I want to do is satisfy the needs of all the stakeholders involved.
I think it's too harsh to say that in my version it wouldn't be backed by steem. You can convert. It's on the same platform. They are issued simultaneously. I'm not suggesting a complete removal of the backing. I do think we need to inflate the hell out of SBD while going through expansions in order to keep it around $1USD, but it should still be around $1USD worth of steem.
We should keep it at $1USD worth as best as we can to try to help merchants and traders have a steady value and to help newbies understand this place more easily.
I think the two separate rates for how much steem and SBD to issue need to be pretty different. In order to keep the value of SBD low while going through expansions we have to inflate the supply. We're trying to enter the US's $19T economy with 1.2M SBD in play. Of course these things are going to go up in price if we keep the supply stable. So, to counter act that let's inflate SBD like crazy while not inflating SP like crazy.
Steemit is growing so we have three main pathways.
- Do nothing
- Inflate steem/steem power
- inflate SBDs
If we don't inflate anything (and 10% inflation on 240M is basically nothing compared to government currencies) then SBD will fluctuate along with all of crpyto and not create a good busines climate. SP will go super high making whales rich and stakes for new people completely unobtainable.
If we only inflate Steem and Steem Power it'll be like the last crazy inflationary period where whales got tons of steem, distributions got crazy, and people left in droves.
If we only inflate SBD heavily we can create a pressure release valve for the expansions, it won't lead to a more unequal distribution of steem power, and make a better business climate.
Don't stop backing it, but we should inflate the shit out of it while expanding.
I'm starting my witness fairly conservatively, but I'll be ramping it as I watch us expand.
But by inflating SBD you're inflating STEEM through the back door.
Not immediately. But as soon as the SBD price goes down again, conversions will go up, creating new STEEM. And if the price of STEEM drops at the same time, the supply of STEEM could go through the roof.
What do you think the alternative is?
Let the system mature, and a market evolve. Right now it's all speculation, any steps we take now will probably fall on our feet when the climate changes.
Like last time. When Steem price went low, some paniced that we could have too much SBD soon, and a hard fork limited SBD creation. Without that change, we maybe wouldn't even be in the current situation.
The difference is, that that decision was made to protect Steem and nothing could go wrong. Inflating SBD could lead to a Steem hyperinflation in the future. Endangering Steem to feed into SBD speculation is certainly not the way to go.
As long as our users are able to get at least 1$ for their earned SBD, I don't see any need for hasty reactions.
So, your answer is do nothing for the time being? How does that help new people that want to come in? How does that help merchants? I think it protects the current steem owners best in the short term, but won't open this up to more people.
What's your answer to the obvious problem I now explained in all detail?
Sorry for telling that you didn't think your idea through.
New people that want to come in don't need to buy overpriced SBD, why do you ask?
Merchants shouldn't build upon a non-existing peg obviously. Well, they can of course treat it like it's worth 1$, because that's the thing we can guarantee. But nobody will buy then.
SBD are debt to Steem owners. You seriously argue that creating more debt for them is in their best interest?
//edit:
no you didn't, misunderstood :D
protecting holders is the most important thing. we don't need new users if the price is breaking the whole system ;)
I think we agree on some points here. I'm certainly not looking for the price of steem to crash. I don't want the price to moon though. That makes the distribution worse.
If we agree to print more when the SBD is higher than $1USD then that can maintain the peg.
If we agree to print more when it's above say $1.1 or $1.25 that gives us some buffer too in order to prevent a crash.
Debt at 0% interest doesn't scare me. Having an easy to trade token is swell.
I'm trying to balance protecting holders with growing users.
I don't think either of us is wrong I think we just have slightly different objectives.
There are many other ways to grow the ecosystem without depending on SBD. When steem is big enough, it can support a higher debt and the peg will be more stable.
Arbitrary printing of new money without an option to reduce supply would make this worse than central banks.
Maybe changing the rate from 50/50 to more SBD would be a step to take without adding inflation, although the reward pool is just a drop into a big lake at current market volumes.