RE: Does PayPal have a challenger?

[themarkymark]

SBD is pegged - but there is no perfect peg.

I firmly believe it isn't when Steem goes to $5 I believe SBD will be well over $2.

Comments

[sorin.cristescu]

Yes, it is likely - but:

• it states the intent of being pegged - which in this field of finance is a bit of a self fulfilling prophecy (the higher up it goes from $1, the stronger the psychological pullback force since more and more seller will see it as something to be shorted and those wanting to buy it will be less and less numerous)
• the big problem is on the downside, not on the upside - the two directions are not symmetric. The issue with crypto is with the seller of goods, who needs to accept crypto in exchange. For him, the fact that SBD has a risk of going up is actually a benefit, not an issue. He is especially concerned by the risk of it going much below $1 - this is what the SBD peg should protect him from. The upside risk is a problem for the payer (he might miss an opportunity) but if the upside is not that big (SBD can go to $2 when STEEM goes to $5 so why would he stay in SBD rather than in STEEM?) and is also infrequent and hard to predict, then it doesn't diminsh the willingness of the payer to use the SBD in order to pay.

[themarkymark]

That sounds great if SBD is $1 at the time, what happens if it is a month down the road and SBD is $2. Do you put all transactions on hold because the risk of dropping 50% is pretty significant?

Either way, I don't think you can ever trust SBD to be pegged again, not unless new tools are given to witnesses to have more control of the peg without the collateral damage the current tools to push it down creates.

[sorin.cristescu]

I agree that more tools to keep the peg would be good.
In the example you are taking, there are two aspects to consider:

• if the SBD is $2, then the real world transactions revert to fiat, as before the SBD, waiting indeed for the $1 peg to be re-established. Some people who used to pay with SBD will revert back to paying with fiat.
• on top of it, here intervenes the beauty of steem: there is still a certain probability that some people will "overpay" by paying with 1 SBD that the vendor (who gets the SBD) only takes as "face value", i.e. $1 if the following things hold: a) it is pretty easy to gain SBD by doing something you like doing, like for me writing AND b) it is pretty hard to convert those SBD into $2 of fiat, as is my case for instance because I don't have an account with Bittrex so I would need a full set of contorsions to extract maybe 15 extra bucks from as many SBD ... not worth the trouble

Generally yes, it would be better if witnesses had more tools to enforce the peg and if the peg was more stable. But I think you can trust the SBD to be "relatively pegged" - with a better certainty than for instance STEEM.

After that, it's a matter of how much risk one is ready to take - as I said, there is not perfect peg and a very shaky peg is still better than no peg at all.