Great post Luke. This is a very interesting topic and from my personal experience the Steem Dollar getting way out of wack caused me to cancel my power down in the fall and then ultimately led me to powering up 0.5 BTC worth because I anticipated the price of STEEM getting pulled up because of the SBD being so high.
I personally do like the idea of the dollar peg and I'm blown away that the reward pool has increased 46X with these increases. To be honest it is kind of weird because a lot of us bloggers aren't really feeling it. I feel like I was making more money when STEEM was worth $2 and I had less followers than I am now.
It might be because there is tons of self voting and that is draining a lot of the pool. I'm not really sure. I would say some of my videos that I have uploaded on DTube have been some of the best work I have ever done on this platform especially my video on EOS which made maybe $15 or so.
Payouts are wacky and we have just accepted it but I'm also surprised no one mentioned NuBits anymore in the dollar peg conversation. It is unfortunately only on Bittrex but I have used it before and it seems to have a mechanism to keep it fairly stable.
It Tether blows up then I'm assuming my BitShares investment could payoff big if people feel they can't go to SBD because of the increased prices.
Thanks Brian. Yes, payouts our funky and whenever we set expectations about them, we're bound to be disappointed. On the plus side, you do currently have a potential payout of $123 on a Picard meme on Dmania. :)
Interesting that you're confident a rise in SBD will directly lead to a STEEM rise. I see them usually happening together (especially when the combo gets added to a new exchange), but I'm not fully confident STEEM will always rise and fall with the price of SBD directly. Time will tell, I guess, but even then, it's still a correlation, not necessarily a causation. Most likely, they both go up and down based on the larger cryptocurrency market movements.
I'm not as familiar with NuBits. I'll have to look into it. I remember hearing about it as one of the pegs that broke, but it seems like it's doing well recently. I'll have to give it a second look. And yes, I think BitShares has a lot of room for growth for many reasons.
You know... I can disappear for a long time (say weeks) on your posts. Not intentionally.. just "life happens".
...so then a few weeks pass... I come back to your blog, and I always ready myself "what if @lukestokes has sold out in the time I've been gone?"
Nope. Your morals are always intact. Money flows. It doesn't change who you are... You continually post, share your important thoughts... and never go silent.
I love steem. I like the price of steem.
Without being able to go to sleep at night knowing that @timcliff and @lukestokes are a key part of every block solved, I don't think I'd ever develop the confidence I do.
This is the long way of me saying @lukestokes -- you lead by example and thank you so very much... :)
Wow. Thank you so much. That's one of the nicest compliments I've ever received. I love steem also and how it rewards individuals like me very well for helping as best I can.
hello sir @lukestokes, I am @princessjoyesto and I also chose you and vote you as my witness in the steemit community I hope it is okay with you. Have a good day ahead sir.
Great topic and video Luke! I think we need something that's pegged to the dollar. Steem currency is already living it's own life and to not create confusion it's essential that we have a separate currency that's stable.
thanks for the detailed article, @lukestokes. A stable currency definitely has utility and value for a community and I would like to continue down the path of incentives and trying to find potential losers when SBD is much greater than $1.
The Minnow (as an author)
Steem(it) has a retention problem and much of it is b/c new users never make their first $5. With a high SBD price, this helps minnows the most and hopefully they will see rewards to incentivize them to stay around. Also, the majority of their rewards are paid out in a liquid asset. This can literally change lives. Check out my dude @bendollars and how excited he and his family are with his first payout. Think about what an extra $5/day could do for some people. SBDs offer this opportunity. https://steemit.com/introducemyself/@bendollars/my-first-steem-payout-experience-on-steemit-and-more-expectations-bendollars-24-10-2018 This is a winner b/c of the high SBD price.
The Minnow (as a curator)
Simliar to the argument above. Community growth centers around minnow engagement and retention. A $0.25 comment could now be worth $1 b/c of the high SBD price. This is a winner b/c of the high SBD price.
Whales/Dolphins (and their tribe)
That $0.05 upvote you give someone actually means a lot more. You can support more of your tribe/community without taxing your VP. This is a winner b/c of the high SBD price.
Investor/Speculator
Look, some people will buy anything in this crypto market. These are the losers of gambling on an asset that should be at $1. You want your community to have a strong currency. Don't fall in to the Keynesian fallacy. While I agree that having a pegged asset is great, it's mostly great because of protection to the downside. If someone is willing to buy something from you for more than it is worth, then I believe it's a gift. Let them buy overvalued assets and let those who have more knowledge benefit from the additional time and experience that they have. These are the losers b/c of the high SBD price (assuming it eventually normalizes).
Conclusion:
By artificially restricting the up-side of SBD, you are hurting the community and it's ability to self fund at the expenses of speculators. This most notably hurts Minnows opportunities to make their first few dollars or rewards (especially in a liquid asset).
I agree Steemit has a retention problem, but I'm not sure STEEM does. It's an amazing cryptocurrency. I'm all about changed lives, but I also want to ensure people actually understand where the value comes from. It comes from investors increasing the value of STEEM which increases the rewards pool and the $ number people see on their posts which gets them excited about Steemit. You mention currators, but they are actually losing out with a high SBD price. People use bots for self-voting instead of curate because there's a better ROI there.
The Keynesian fallacy warnings are important. I'm certainly not wanting to artificially control anything. What I am trying to do is avoid boom and bust cycles which I think a broken peg allows for. If the SBD peg worked in both directions, that manipulation wouldn't be possible and the market cap of STEEM is large enough to not be easily manipulated compared to SBD (though it still needs to grow much larger).
Speculators would still be giving us a gift, we'd just be able to collect on it quickly as we convert STEEM to SBD to get more if it. Since the SBD could go right back to STEEM again, it wouldn't be creating new money out of nothing. That's the theory, anyway.
As to your conclusion, I do think it has validity. What I also see is people start to expect SBD to be worth something high. They hold it as it goes back to $1 instead of obtaining STEEM which (IMO) has a much, much higher upside. I want to get more people thinking long-term, not short-term. That's where the real value is. If they can't speculate on that future value, they they shouldn't speculate on a broken pegged coin either. It would serve them best to hold a stable coin.
I've voted you as witness for your insightful thoughts on this... your witness account is lukestokes.mhth yes? I'm sure it is, but still want to check...
I disagree with you in the timing, I'd personally prefer to bite the bullet and do the hard work now.... it might be harsh, it might be messy, but no time is ever going to feel like the right time, there's always going to be reasons to not... but the way I see it is if ecommerce and app developers are cautious to use this platform because they don't know what price they can set their products or services at... then that's a problem that slows the build of Planet Steem.
Regardless, you really seem to have thought it all through, and I couldn't ask for any more from a witness.
Thank you so much for your support. I really appreciate it.
As for the timing, I tried to make it clear that on this issue, I will go forward with what the community seems to want most. If people started voting based on those who are willing to support the peg or not, I may change my position on the timing and, as you said, bite the bullet. Ideally, we'd do it in such a way as to ensure as few people as possible get burned by the change.
In the meantime, my advice remains the same: as long as SBD is above $1, I sell for STEEM. I hope others will follow that example. If everyone did that as soon as they received post rewards, the only people who would get burned by an SBD correction would be the speculators who caused the peg to break in the first place.
I wouldn't be so quick to act. I don't think we fully understand the implications of a two way conversion, which is why these discussions are happening in the first place.
I'm more focused on economic stability first and foremost. Right now, I would consider things stable and well understood even if the peg is not working. Yes there do appear to be reasons to accelerate the peg, but the reverse conversion idea I'm very hesitant about.
Ultimately I am pro peg and it's like the post mentions, it's about timing and how we proceed.
Really enjoyed reading your thoughts on the topic and I hope to hear from more witnesses in this actual thread and hopefully it is upvoted for visability.
I think my concern mimics yours about the timing. Overall I think long term a pegged SBD may be the best course but I am not so certain on that because the use case and it vastly helping steem is speculative. That being said it was the original intent so I lean towards that solution. The thing is, I would like to give things plenty of time to see if the market corrects itself before action is taken. In an ideal world this sort of solution would be done before any of this happened or while the price is back to "normal".
A couple things I do notice is IMO from watching twitter and being active in chat is that it is driving traffic to the website, although that isnt some be all end all factor to me, just a consideration.
Another factor is the SBD price being high gives "normal" posters a chance to power up and get some of that steem easier than if SBD is one dollar. I see that as a chance to spread the Steem around more and I think that is actually beneficial for the system as a whole instead of Steem itself just increasing in price right away.
My thought is to watch it over the course of 4 or 5 months to see what happens to the price before seeing if anything needs to be done. I dont think that will cause Steem to miss out on some super special opportunity and gives SBD time to self correct as more is introduced to the exchanges etc.
I also like the idea of a better STEEM distribution and if people take high valued SBD rewards to buy STEEM and power it up, that could certainly help.
At the same time, a high SBD value may only further encourage those who are taking a massive amount of the rewards for themselves already. Example:
grumpycat transfer 3,014.813 SBD to bittrex
So it goes both ways. The new users could benefit and the entrenched holders could benefit more.
Thanks for chiming in and taking a broad view of the topic. There are costs, benefits, risks, and rewards on all sides of this discussion and it's important for us to understand things as best we can to make decisions which benefit the most number of people.
"a high SBD value may only further encourage those who are taking a massive amount of the rewards"
Oh yeah? ONLY the whales, aye? Have you ever had to worry about money in your life? Let alone do work to survive? I'm sorry to sound harsh, but the incentives are ENORMOUS because of SBD. You really don't need much to survive in this world, which is why I'm asking you if you understand how much the rewards make people happy. Again, sorry. But I had to ask.
$0.36 under this comment, which today is $2.16. Write a few other good comments and you've got a day's worth of salary for many people. Is that not encouragement enough in your view?
Hello Bobby. In answer to your question, yes, I have. When I was in high school, my parents lost the house we lived in and we moved on to a boat. Food was donated to us and money was very tight. You can read the whole story here:
That said, I won't get into a victim scoresheet process where my victimhood grants me a voice in any given discussion. Short-term, "poor" thinking leads to poverty. Long-term, "rich" thinking in terms of investment, time-value of money, compounding interest, understanding probabilities, etc, etc leads to abundance and prosperity.
Have you considered you may be thinking short-term which may actually harm the very people you want to support? If STEEM has gone up 46x and SBD only 7x, why are you pushing for the loser in that race? Why not further incentivize more exponential growth in STEEM which increases the entire rewards pool (both for authors and curators)?
I'm all about making people happy and fully recognize how the rewards do that. I'm not willing to automatically assume a high, non-pegged SBD is the best way to increase those rewards and I've spent many hours making my case in the original post.
About the influx of traffic, I don't think it's the high SBD. I think it's the visibility of STEEM in general due to both steem and sbd prices pumping. Most people coming here don't even understand how the two work.
Great post. You've pulled together all the resources and angles into one post which is a great repository.
I personally would tackle this problem with a stakeholder analysis first up and then try to find some sort of compromise between them. If you can't get people on board and agreeing to some commonality there will never be a solution.
I agree, looking at this in terms of stake holders is important, but I want to make sure we're using the correct definitions first so our premises can be accurately justified. The challenge with story telling in terms of stake holders is we can get caught into thinking correlation is causation. We might, for example, say "More users are joining now that the SBD value is high, so clearly we should keep it high to gain more users!" when the truth might more accurately be, "The rising value of the entire cryptocurrency market combined with STEEM / SBD being added to a Korean cryptocurrency exchange caused both to rise which increased the rewards pool and attracted more users because of their interest in cryptocurrency in general which increased due to the overall rise in the space."
Getting the definitions right is a good place to start as it makes sure the conversation is all happening on the same page and it's important to get the WHAT right.
I did a bit of a Stakeholder Analysis on this issue because I think it's important WHO is taking part in the conversation. I'd appreciate your feedback on it if you have the time.
SBD going back near $1 is one of my criteria to reevaluate my stance that we shouldn't convert now. I'm pro conversion eventually. Just not now.
Triggers:
SBD naturally falls back near $1
Coinbase wants to use us as a fiat exit
Ebay wants to price shit in SBD
Bittrex wants to replace tether with us
We hit a 10B marketcap
Doesn't have to be those, but those or something like it would make me reevaluate immediately. Those opportunities mark major events that would push the rise in steem over the current benefit of high SBD to posters.
Otherwise crashing the SBD market with this conversion now I think would cause harm to the network as a whole and I don't see how the millions, billions, or trillions suddenly materialize because we had a $1 SBD before and no one gave a shit.
@aggroed For those triggers to happen you need to fix the SBD peg first! Doh!
I'm not gonna use SBD as a Teher alternative if it is not dependable with its peg.
Same goes for Commerce. It cannot seriously get off the ground without a proven stable SBD.
If you're an ebay seller and want to sell a product for 300$ on SteemBay, with the current SBD it is a nightmare: you need to rely on a real time conversion system (ala BitPay/Coinbase), which still means converting to BTC (fees) then converting to FIAT (more fees) and all in a fluctuating market. Good luck with that.
Instead with a stable SBD I can set the price at 300 SBD (and not 50 SBD as it is now), and when I sell the product I can keep the 300 SBD in my account knowing my earnings will be unaffected by crypto market swings. And then the 300 SBD can be used at any time to buy products on SteemBay, without needing to return to the FIAT market! (no need to sell the SBD for FIAT= Steem Moon). This will be a game changer especially in heavily taxed countries.
The SBD has never been stable since it's conception, it has some stable periods...but that's not sufficient for a online shop to move it's operation to Steem unless the SBD peg is proven dependable . It needs to be within the narrow range as envisioned in the whitepaper.
Imagine a shop selling 300$ products for 50 SBD today, and then seeing the SBD tank shortly after. That would be immediate bankrupcy.
Btw posts are already receiving high payouts, the problem is that payouts are not distributed widely and always end up in the pockets of the few circle-jerkers. Overly greedy and shortsighted people are making us miss these big opportunities.
If the pegging had been done 7 months ago by now Steem would be among the top 5 cryptos and SBD would have been used as Tether alternative and we'd have a thriving market-place.
If SBD was stable right now I'd be using it rather than Tether which is untrustworthy, who wouldn't? This opportunity is probably lost though as new ETH based stable coins are soon to be introduced on exchanges.
I hope you enjoyed the SBD earnings, but you've done tremendous damage to Steem with your front page posts defending the broken SBD and you held us back. It's time to realize it.
Upvoted as a well-written and powerful expression of the "Pro Peg" case. I'm personally quite open minded about this and willing to consider both sides of the issue, but your comment has indeed swayed my views a bit in making clear in stark terms how ignoring the peg and savoring the increased rewards has come at a real cost, perhaps a catastrophic one in terms of lost opportunities now that we've squandered our early lead and competitors are arriving.
thanks. it was more of a disjointed frustrated rant, I'm glad I managed to somehow put some points across.
But I apologize to @aggroed for the tone of my post, I'm sure his posts defending the high SBD are NOT done with malice or nefarious intentions.
That's a good point. But I still think there is a strong case that defending the broken peg with whatever motive has done a lot of damage, and your comment was unusually clear and effective in making that case.
To be clear though, I don't view it as primarily a personalized issue, if at all. @aggroed is not at all the only one making that argument and certainly is not personally solely responsible for where things stand today.
Let's try not to make unsupported claims about what would have happened in a could of, should of, would of way. We can't possibly know what would make STEEM a top 5 given decisions made 7 months ago. We also don't get very far as a community making direct, personal accusations unless we have direct evidence of malice involved.
Instead, let's try socratic questioning and let people make up their own minds. Is it possible @aggroed's passionate love for this ecosystem and community caused him to miss some important parts of this discussion? Maybe. Is he solely to blame for the price of STEEM (either up or down)? Clearly not.
Let's be nice. We can disagree, even passionately so, but when we throw out unsubstantiated claims as accusations, it just makes people defensive and angry.
You should always rely on a real-time price feed. Depending on the peg is suicide. Even running a shop that hypothetically accepts Tether without actually checking a live price feed would be idiotic. It would be just as idiotic to do that with SBD, even if it had a hard peg.
Shop owners who accept any crypto should have live prices to guard against people who take advantage of shocks in the market.
quote out of context.
I was not referring to live price feed conversion (this can easily be implemented into Steem or any wallet), but to services like Bitpay which convert (exchange) the paid crypto instantly into FIAT and which merchants rely on in the bitcoin world. This is clear in the part you omitted from my quote. ;) ("ala BitPay", "fees", etc)
Of course it is wise to always keep an eye on the real live SBD price, that's common sense. In any case merchants wouldn't start adopting SBD until it's peg was fully proven and battle tested. So even if the proposed changes were to be implemented tomorrow and worked in controlling the SBD price, it would be months before online shops would even consider using it.
Market swings of around 1% are probably unavoidable but they would not be that much of an issue, especially considering all the savings in fees and possibly taxes compared to the FIAT system.
If the SBD had taken tether's place then it would also take its place when authorities choose to take action against Tether for the creation of money and various other schemes they've been up to. You do not want to be in that position. None of us should want to be in that position.
And as far as pegs go, you must not be a very good student of economic history to not know that pegs go terribly, terribly wrong all the time, and are very exploitable and ripe targets for manipulation. If you know there is an infinite buyer or seller on the other side, and you outweigh them or even just whittle away at them over time, you can destroy them. It leaves us at great risk to attempt any sort of peg, and the consequences would be far worse than letting the speculators get burned.
For instance do you think China's peg worked at all? What good has that brought the world. Deflated wages for Chinese workers, their country's soil, water and air is in ruins, and they've burned up all their capital reserves. Add to that the amount of new debt creation they had to endure just to stay afloat and it's just a total mess right now, even if they can claim to have the largest economy.
You make some valid points. But the current SBD already has a peg mechanism when it falls below 1$ (Steem needs to be printed to keep it afloat). So the current SBD has all the disadvantages of a pegged asset without any of the benefits. If we are to keep SBD lets peg it properly, if not lets get rid of it altogether.
Regarding the risk of authorities getting involved ....Steem is a decentralized blockchain what can they do about it? The Steemit website may face a shut down, but decentralized apps like Vessel would still operate and Steem based websites will still operate outside US jurisdiction. Frankly I wouldn't be surprised to see Steemit relocate HQ to some cryptohaven like Zug, Malta or Isle of Mann. The regulatory framework in the US has become way too oppressive for innovation
I am very, very uncertain about bitUSD's future, I mean I asked Stan right here on steemit about what Arise Bank's association with it is and he just vaguely said "on and off-ramps". That combined with what I've read about Arise Bank does not give me great confidence. And sadly for new users like me it's one of the few trading pairs we have access to off of the steemit website, so it's very troubling to me.
Literally every one of those items on your list except the first and last is guaranteed not to happen unless SBD becomes stable at $1 first. Since you saw fit to list them, you clearly recognize the importance of those opportunities and others like them to the Steem ecosystem. In order to have any chance to pursue them, we need to fix the peg first.
I don't see how the millions, billions, or trillions suddenly materialize because we had a $1 SBD before and no one gave a shit.
Read the post. The market conditions have changed dramatically. There was a time when Tether was a tiny little thing stuck at under $1 million market cap for years and no one gave a shit! Yes that's right, Tether went from $500000 to $1.6 billion. Likewise for BitUSD, NuBits and the others (though they are of course smaller; Tether is the current leader).
The answer to your (implied) question as to why this matters now when it didn't matter before is simply that it is 2018 now and not 2016 (however, I will say that even in 2016-2017, the Steem community was spawning its own SBD-based initiatives that could accomplish some of the same goals as items on your list, initiatives that were smothered in the cradle because we failed to act to fix SBD when it started to de-peg back then). The environment and market is completely different and the scale of the opportunity is vastly larger now. Given the other powerful attributes of Steem (large user base, ease of use, ability to on board users, speed and scalability of the blockchain, no/low fees, etc.) we are well positioned to pursue that opportunity but we have to fix SBD first, or we are just not even in the game.
I think you're right, because of the social media aspect we're still well positioned. Once the changes are brought in we can:
rebrand the SBD (Steem Backed Dolla)r to SBFD (Steem Backed Pegged Dollar). Or some new catchy name. This to show discontinuity with the old coin.
commision the influencers we have on the site (all the top crypto influencers are now here) to announce to their audiences the upgrade to this new pegged Dollar on Steem.
Normally it would take 6 to 12 months before anyone would trust a pegged asset with big money, especially after a somehow failed experiment like the SBD was. But if we are able to put across through the influencers the message that the SBD was only meant to be a coin with a 1$ floor (therefore pretending that it worked perfectly), and that SBPD is instead a new pegged stable dollar coin....then we can see adoption much sooner.
I don't know when the ERC 20 pegged coins will be production ready, but I believe because of the Ethereum brand they will be adopted immediately by the community. Ethereum has had more fuckups than any blockchain out there but somehow they can't seem to do wrong in the eyes of the investors for some reason which frankly I can't comprehend. Also their peg may be backed by real dollars in the bank (I don't know yet).
So it is possible that they might beat us in capturing the Fiat market on exchanges. Currently we only have Poloniex as potential market anyway. But for the retail and online shopping we're still in with a shot. Also lets not forget we have an internal market here on Steem which could skyrocket in volume.
To capture the retail market it would be wise to start already working on a SteemBay portal in preparation for the SBD changes. So it can launch as soon as the fork occurs.
Though it is very possible to imagine a future where retailers start accepting all battle tested pegged assets: OpenUSD, SBPD, ETHUSD, TETHER etc
Because of the integration with Steem social media and the 0 fees the SBPD could end up being the most convenient. Ultimately though no pegged asset can compete with a proven Dollar backed coin (meaning with dollars in the bank) like Tether was supposed to be.
So I might overstated the importance of having a properly pegged Steem backed Dollar, but we should at least give it a proper go. Even a small fraction of the finance and retail markets would bring enormous value to Steem.
Btw before announcing the replacement of the SBD with the new pegged Dollar coin it would be best to wait till it goes back towards 1$ so not to cause a major backclash in the market.
This is such an important point. We have to have a long, trusted history as a pegged asset before we'll be taken seriously as a pegged asset. It may take many months or even years and the longer we wait, the longer it will take to build that trust.
Tether went from $500000 to $1.6 billion
Daaaaamn. Either BitFinex is just friggen amazing at on-boarding new fiat into cryptocurrency or that sure seems like a nice money-printer they have there. Heheh... I won't get into that discussion here though. :)
USDT doesn't necessarily work the way people think it does in terms of so-called "on boarding" (i.e. people from outside crypto deposting new USD and getting USDT in return). It can also attract capital directly from crypto wealth and do so completely legitimately (i.e. without the rumors of fiat printing being accurate). Here's how.
Let's say people are selling their ETH, BTC, XRP, etc. (even STEEM) wealth into USDT, and this drives up the price of USDT (say to 1.01 or 1.02). Assume Tether/Bitfinex has $100 million of its own corporate working capital from VC, private backers, etc. They can use that $100 million to legitimately print 100 million USDT for their own account. At this point the printing is not fraudulent, fractional reserve, etc. because $100 million gets transferred from corporate working capital into the USDT escrow account. They then dump that USDT onto the market in exchange for BTC, ETH, etc., driving the price of USDT back down to 1.00.
Now the final step is interesting. Tether can take the BTC, ETH etc. they just bought and send it to a high-limit corporate account on a major fiat exchange, and sell it back for USD, replenishing the original $100 million corporate funds, to repeat the process again when needed.
I have a feeling this is actually where most of the USDT market cap growth has come from (assuming it isn't mostly fraud), but I have no proof it of, just inference.
Interesting. I question how they can keep printing new Tether and aren't burning it, but maybe that's just a sign of more people coming onboard. To my understanding, they can't print Tether unless it's backed by money in the escrow. If they keep printing, that implies real new money going towards the escrow, right? Maybe it's not "new" money, but money Tether/Bitfinex already has on hand, but it still seems to me when things fluctuate the other way, we should be seeing Tether burned and funds returned back from the escrow to BitFinex to cover real USD withdrawals. Maybe if the bull run turns bearish we'll see that.
I question how they can keep printing new Tether and aren't burning it, but maybe that's just a sign of more people coming onboard.
Again it isn't a question of onboarding necessarily, just capital flows, and quite possibly it is because with $400 billion or so in newly-added crypto wealth the overwhelming majority of capital flows are from other highly-appreciated cryptos (BTC, ETH, XRP, many others) toward USDT not away from it. Also keep in mind USDT's role in trading pairs, which itself creates added demand for it (especially as USD price of the other coin increases; more USDT needed for buy orders). Also, to me it sure looks like many of the paths by which new outside, so-called "onboarding" capital is entering crypto have little to nothing to do with USDT (Coinbase, Korea, Japan, etc.). Or perhaps it is all or part fraudulent as many suspect. I don't know (and in some sense it doesn't matter; part of the problem with the non-trustless peg model is that it simply can't be trusted).
Maybe if the bull run turns bearish we'll see that.
It isn't so much a matter of bull run vs. bear run as it is demand for stable crypto. It is quite plausible to me that demand for stable crypto has mostly just increased over the past year or so (and indeed this is mirrored by the other, smaller stable cryptos). But at some point when the demand for stable cryptos tops out and heads downward, there should indeed be burning of USDT.
BitFinex to cover real USD withdrawals
By all accounts BitFinex's ability to handle real USD withdrawals has, at best, been greatly hampered by banking issues. So this path by which capital could conceivably exit USDT may be quite small. But in any case given the natural friction of exchanging between crypto and fiat (and relative lack thereof in exchanging crypto-to-crypto) it may always (or at least for a long time) be that the dominant flows into and out of USDT are between USDT and other cryptos, not between USDT and USD directly.
Or! ... The witnesses wanting this shit could come together and create a THIRD, off-chain, dollar-pegged currency and hop the fuck off SBD. :) Just a thought ;)
It just makes me so mad that a FREE, DE-centralized (not centralized) community is SO quick to hop on a controlled, socialist-like mentality to try and regulate shit - exactly which was supposed to be PREVENTED on this DE-centralized platform. It makes me sick.
@boobysteem if you want "free market" for SBD then lets remove the bail-out rule for SBD. let's see how long it lasts next time it drops below 1 $..
In case you haven't noticed Steem has to be printed every time the SBD drops below 1$.to keep it afloat. The SBD is already a regulated coin, just a poorly regulated one.
Dan, which I have immense respect for, got 2 things wrong with SBD : 1- the SBD peg isn't working as the WhitePaper envisioned . 2- the reverse converse is not exploitable anymore in the way the Whitepaper describes
Have you read the white paper? Do you know it was written mostly by an anarcho-capitalist (Dan Larimer) who is not, at all, a fan of the "socialist-like mentality" you're describing? What's the point of creating another currency that is pegged with two unpegged, speculative currencies? Do you realize how confusing that would be and how much coding effort would be involved?
If you understood the conversion mechanisms built into this system, you'd have to come to the conclusions they aren't "controlled" by anyone. They are all done voluntarily by individual market actors without any centralized control at all.
I want to believe you're working to bring constructive discussion here, but this comment looks like trolling. Please, read all the sources I referenced in my post and then we can have a more informed discussion about what's really going on here.
I'll answer your questions using points below here:
"It's confusing"
There is nothing confusing about 700% more profits.
"If you understood the conversion mechanisms built into this system, you'd have to come to the conclusions they aren't "controlled" by anyone. They are all done voluntarily by individual market actors without any centralized control at all."
Yes, I do understand that, and it so has it that the vast majority of users have voluntarily chosen not to use the conversion mechanisms as shown by statistics which you can find over at https://steemit.com/@penguinpablo
"they aren't "controlled" by anyone"
If a couple of dozen people are capable of causing a 700% percent price crash on a platform consisting of 50 000 thousand active users who are here mostly because of economic incentives, how is that "not controlled by anyone"?
"written mostly by an anarcho-capitalist (Dan Larimer)"
Yes, it was written by him. And the words "SBD is now being traded as a regular alt-coin", which he didn't seem to have any problems with were, in fact, also said by him in a YouTube interview which you can watch here:
I said two separate currencies would be confusing. People are already confused with STEEM and Steem Dollars. How would STEEM, Steem Dollars, and Steem Dollars For Real This Time not be more confusing?
Of course they aren't using it now. Who would? They'd lose out big time because it currently only goes one direction. That's why it was removed from the steemit interface. The point being, anyone can use it. It's not some lever that only some people can pull. As long as enough people use it, the peg will be maintained (at least when it drops below $1).
Can you explain to me how that would happen? Do you really think witnesses would risk their position by doing something 500k people who voted them into that position wouldn't want? The whole point of this discussion is to figure out all perspectives for what's best for the network. There's a sound argument that we've lost quite a bit a money for everyone involved because we didn't fix this sooner and instead Tether went from $500k to $1.6B.
So Dan's opinion, considering he's no longer involved in STEEM, is more valid that the existing 20 witnesses and all the supporters and users we have here today? How is that decentralized? If the network sees the value in a pegged asset and wants one, then the Steem Dollar should be it, as designed. If we can do that after it naturally corrects back down to $1, why shouldn't we? That's what this discussion is all about.
I hear what you're saying though. We can't assume a conversion would automatically increase the value of STEEM (even though it's a compelling story, in my mind). At the same time, we can't assume the high SBD value is what is getting people excited about Steemit right now when it could just as well be (and as smooth argues and I mentioned in my post) more of a result of STEEM itself growing in value which increases the reward pool for everyone.
Those triggers sound mighty nice to me.
Do you have concerns about SBD going higher and making it even harder to bring the peg back in play? If not, why should we even bother with SBD at all? Why have two speculative tokens on the STEEM blockchain if we're going to abandon the peg? I'm also curious what you think about the argument that some in developing nations really do need and highly value a stable currency. For them to hold their money in a speculative cryptocurrency doesn't make sense if they have bills to pay.
"concerns about SBD going higher and making it even harder to bring the peg back"
Literally what is written here is this: "Do you have concerns about making too much money which makes it harder to become POOR again?"
These whales and witnesses literally don't live in real life and can therefore afford to DESTROY millions of dollars. Why? Because "muh fiat currencey!"
The more comments of yours I read, the more it looks like trolling. Did you even read my post? Did you even consider the possibility that the single greatest way to help the poor would be by giving them a stable asset to trust in while also increasing the value of STEEM which increases the entire rewards pool they enjoy?
What bothers me most about your comments is they seem to imply malicious intent where there is none.
@aggroed you may want to read what I mentioned to @lukestokes about yourself helding a panel with the top 20 or 25 witnesses specifically only to debate about the SBD.
This is something important I thin, very important to be discussed and people hearing the witnesses opinions will see the side of each, and then people can take their voting opportunities to see whats best to do.
Not all the witnesses are native english speakers so I'm not sure a panel discussion is the best way to flesh out this issue. Reading just my post on video took me over 21 minutes. This isn't a simple topic to be figured out on a short-from panel discussion. This should be done carefully and methodically with data-driven, well thought out proposals.
You are totally right @lukestokes ! Perhaps a panel can be done at the end, once everything has been analyzed properly as you mention. Or perhaps no panel is needed. Just thinking in a loud voice, and trying to find ways to help.
Why? Please explain yourself. Explain how those who are literally dying in Venezuela would not benefit from a pegged, free-to-use cryptocurrency they could put their life savings in? Explain to them why a speculative investment makes more sense? When SBD goes from $12 to $6, explain to them why they just lost half their life savings.
I've just been half hoping in the corner that some SBD whales were gonna buy giant chunks of STEEM in the internal market and drive the price of Steem way up in order to get the SBD value closer to a dollar... wishful thinking.
That said, a floating peg seems very hard to maintain theoretically, but would be well worth it in my opinion. Gives a better sense to newer users to understand the value of a post and see intrinsically what they earn. Should also add more liquidity (nominally, if not actually) to our internal markets.
I shudder to think how much liquid STEEM and SBD sits in Poloniex and Bittrex.
SBD whales were gonna buy giant chunks of STEEM in the internal market
There are no SBD whales, at least not within the community. Everyone here has just seen the SBD pump as an opportunity to grab some extra money by selling it off to speculators. When the speculators are done, they won't be using it to buy STEEM on the internal market, they will just dump it for BTC or fiat on an exchange and move on to the next game.
I shudder to think how much liquid STEEM and SBD sits in Poloniex and Bittrex
Essentially all of it (at least 80% if not more), because it has lost its utility for anything other than price speculation. There used to be people on this platform who held it for its price stability on this chain rather than cashing out, and services on this platform which used it as a stable value token for buying services. Nearly all of that is gone, with nearly all SBD drained off to exchanges for speculation. At least for now, hopefully we can soon get that utility back and more in the future.
As for the amount of STEEM/SBD out there, I run a weekly exchange transfer report so I see it first hand every weekend. It's a lot (which, of course, we can verify just by looking at their wallets on the blockchain).
I have a question: Why the fck does ANYTHING "need" to be "done"? What the hell is "wrong" with a STEEM price of $6 and an SBD price of $6-$7? Is this somehow bad? If yes, then why (the fck)? I'm sorry guys, but it makes me extremely mad how people on here want to regulate sh*t like some politician - EXACTLY the reason why people fled to Steemit in the first place! Most people here are libertarian anarchists who don't want economic regulations and price-controls, so I now ask you why in the world people are even CONSIDERING this. Please respond, because my anger is bubbling over.
Again, a price of $6 and $7 in TWO SEPERATE currencies is such a tragedy, right? I mean, seriously, guys? Are these people mad? Are they masochists? At least help me understand. Maybe I'm missing something, but I'm literally unable to find a fraction of a reason to try to STOP something literally amazing in terms of economic development. My brain has imploded...
I think you misunderstand a few things. First thing, there is nothing socialist/communist about creating a pegged asset. Those systems are based on people sharing resources, usually executed through a coercive government that forces compliance.
I'm assuming that when you use those terms you are referring to force and coercion? But that is still not the case because no one is forcing anyone to use steemit, steem, or sbd. The entire system is completely voluntary and we can all do what we wish as long as we follow the rules. If we don't like the rules, we can leave. One of the rules is that we can vote for witnesses and the witnesses can decide on rule changes.
Second, sbd are designed to be pegged at $1. That is the whole point of them. They are are debt instrument. Steem was designed to have the "steem" token that would rise or fall in value based on the value of the community and the "Steem Backed Dollars" (SBD) that would be a stable store of value. There is no point in having two currencies that do the same thing.
The only reason SBD are so high right now is because people who are buying them and holding them don't know or understand that the value will be driven back down to $1 over time. Once they realize that, the value will crash back down. How will everyone feel when suddenly their savings in SBD are wiped out when the price crashes back down? Keeping a good peg will prevent that confusion from happening. The average person shouldn't have to worry about how high or low SBD are from day to day, they should just be able to trust that it will stay at a stable value.
Right now, SBDs are in a bubble (true value at $1, market value $6) that will eventually pop. Creating a peg will stop a bubble from forming in the first place.
I am enjoying selling my SBD for these high prices as much as anyone else but I feel bad for whoever I am selling them to, they are going to lose a lot of money.
(I posted this on your blog post too but I thought I would reply here as well so more people can see it.)
Your brain is doing something alright. I've responded to you numerous times already, so I won't repeat myself here. It's clear to me from the comments you're making you don't fully understand what's going on here and your pre-conceived notions of control is causing you misplaced anger. Maybe go for a walk, get a glass of water, take a few deep breaths and then sit down and read the white paper a few times. My post outlined the potential issues and lost opportunities for the entire ecosystem when we continue on with a broken peg instead of pushing that value into STEEM and out of SBD. If my post wasn't helpful for you, then I'm not sure I'm the one to help you further. I've done all I can do to start with definitions and first principles and then move forward from there.
You mention libertarian anarchists which is a label many would apply to me as well. I'm no fan of the myth of authority nor do I want tribalism. What is frustrating to me is that you're attacking something here which is fundamentally voluntary. There is no "centralized control" as you keep describing. The proposal of a two-way conversion is something individuals, not some central authority) control.
If you have thoughts on this, please, post your first full blog post and explain yourself. You've been here since July of 2016 without posting a single root post. From that perspective, you're not even contributing to the community. Please, get involved and contribute and then your voice and opinion will carry much more weight based on the value of your contributions. That's how voluntaryism works.
There are certainly a ton of really good ideas thrown out there in this post. I think that pegging SBD at 1 usd while either dumping the extra weath of the 6-7 dollar price into steam or continuing to pay out accordingly with multiple SBD per one Steem would work- if what I’m saying is clear.
Both would make sure those who have been getting paid, continue to make a steady income..and also help the things aforementioned.
This was a nice look at SBDs - this is the first thing I’ve read/ listened to that was this in depth.
Thanks - super awesome.
I agree, it could work. Only the word "work" in this context means making everyone seven times poorer. So yeah, if that's your goal, it could probably work. =) Hey, maybe we should meet up and throw all our money in the river while we're at it? Or put it on fire over the open grill? I mean, it probably works, since money easily catches on fire and gets destroyed when soaked with water and all. It's worth a shot, right?
Thank you for saying so. I hope it was helpful. It was surprising how long it took to organize my thoughts on this and then record them in a video (I ended up recording it twice because I didn't like the first one). Then it took hours to upload and process.
This is truly the type of content that is worth curating and following here on steemit.. we all know that’s there is plenty of spam and reward pool “raping” that it makes it hard- or takes a long time for quality content to be recognized. Anyways- your hard work doesn’t go unnoticed.
I made a pathetic attempt to post about this earlier, so you can imagine my delight discovering your well written and thought out post on the subject. Now I can just resteem your post to express more on the subject of SBD as a pegged asset. Thank you for letting us know where you stand on this subject as a witness.
The funny thing to me is reading through the comments, some seem to think I’m in support of some drastic change which would “steal” from SBD holders. I would never want to make some drastic change which could hurt the entire ecosystem and yet some are convinced that’s what I and the witnesses want (even though I specifically said in my post it’s what I do not want and would not support unless the majority of the community forces the issue by unvoting witnesses unwilling to support the peg with a drastic change).
Wow, this is such a thorough explanation and has really helped me understand this whole situation so much better. Thank you for taking the time to really explain this in a clear, readable way. I'm learning so much from you!
I hope I don't come off as whiny, I just try to wrap my head around this by voicing my concerns:
A healthy economy is an economy where wealth is distributed from the bottom. In order for wealth to be distributed from the bottom, the majority of the wealth has to remain at/with the "bottom" (in circulation). Apostophes because I refer to bottom as the majority of the community/population, as opposed to the current world economy where most of the wealth resides with the top 10% (fictive number, but you catch my drift).
To achieve this with STEEM/Steemit we need to have a catch up mechanism in place that over time closes the gap between the big fish and the small ones. We got this in a non pegged SBD.
And now you advocate to take it away.
This whole situation is very interesting from a political viewpoint because it is in effect a conflict of interests between the whales and the rest of the community. By pegging SBD to the dollar you harm the rate of growth for a large part of the community, effectively enhancing the divide between big fish and the small (assuming the whales are not vote trading most of their voting power, in which case this divide will persist regardless).
And divides like this are not healthy in the long run.
I am still trying to learn about how the things works. It was an interesting article and I enjoyed reading the post. I am still in learning phase so maybe it'll take some time to understand how things works beneath this blockchain. But there,s one thing which keep popping in my head is that " If Steem is trying to peg the SBD at US $1, why they can't just remove SBD's from all the exchanges ( I maybe naive ), it will stay away from speculators and price won't fluctuate and steem could control it with internal conversion. But if we are trying to peg it after it's getting listed on various exchanges it will be very difficult".
They want to make people poor to satisfy their goals. People like me will have no choice but to power down and find other ways to make income aside from Steemit
I'm powering down and leaving Steemit. If the witnesses get what they want and I'm sure they will get their 1$ SBD , then there will be huge consequences and it'll look like another Bitconnect. This isn't decentralized. Witnesses are like the Feds, having control over a market, the power to destroy it. If the reverse conversion happens, what makes you think they won't do the same for Steem to hyper inflate it? Lost of trust. I'm sorry, I loved Steem, Steemit in the beginning and had great times here, met great people like @steemitqa though to me Steemit is going downhill. It won't be just be me leaving, many others will
The witnesses want what's best for the platform long term. Why is this in question? To compare STEEM to Bitconnect is absurd. Witnesses can't "control the market." How would we? Why would we implement a policy the community doesn't want which then lose us our position as a Witness?
"They want to make people poor" is such a gross misrepresentation of reality. It's truly discouraging to see. Please, read my post again and understand I'm trying to make everyone here rich. A broken peg may not be the best way to do that, nor the best thing for those whose local currency is completely broken and they need something stable in order to build a functioning economy. Increasing the rewards pool by increasing the value of STEEM might be the best forward, especially if that speculative token has a stable place for them to store their value.
Which market is artificially controlled? Are you saying the pegged floor of SBD is a mistake and SBDs shouldn't exist at all?
Do you think bitUSD is an artificially controlled market or a well-functioning pegged asset backed by real collateral value?
I really don't understand where you're coming from. If you have some reasonable evidence to support your claims, I'd enjoy seeing it. All cryptocurrency markets get pushed around by whales, but you seem to be directly accusing witnesses of something nefarious. I want to know what that is.
We can't control what exchanges list, nor would we want to. This isn't about centralized control, but about providing individuals with tools to profit from speculators who, as the white paper describes, are "manipulating" the SBD peg. If we allow for a STEEM -> SBD conversion, more SBD will be created which will eventually drive down the price to something stable. Other assets like Tether and bitUSD (and all the others listed in the paper I included in my post) have done it. We can too.
Oh thank you, I got to know more about Dan's vision about steem, in the post you have shared ... I could minutely understand why peg is important ... and steem could be in future if everything worked the same way as it was planned ... but I just wanna add something ... if people need to work on the pegging they should delay that a little bit... cause high sbd is attracting people to this platform maybe after we have acquired 20 million and more, they could start working on the vision. cause by then we'll have several marketplaces here on top on steemit like steemgigs and more, and people we'll be willing to have a pegged currency at place.
Disclaimer : I maybe Naive and I haven't read the whitepaper
By far the best post discussing the sbd peg, yet. Thank You, Luke! One factor I would love to see some statistics on is how much value is being added to steem itself because of the failed peg. Surely users are powering up more now than, ever. This is a boon, in the short run of things.
It's really hard for me to imagine any kind of stable peg in the type of market we currently face. In the next few years I expect the market for the largest tokens to stablize quite a bit. But we may be chasing the dragon on this atm.
I've been studying on it for quite some time, enough to understand how it's currently working...
Ultimately to maintain a peg, I believe, we would need a dynamic volume of sbd. Inflating supply as more demand is put on it, and deflating supply as the demand weakens. Allowing conversion both ways is a mechanism that would allow for such a thing..
the problem is that those conversions are up to the will of the user base. Even allowing for reverse conversion, it would (I believe) require a number of users with high liquidity who were determined to maintain that peg. We would also need to be able to trust that users wouldn't use that reverse conversion to take advantage of the blockchain. In order for it to work properly I almost imagine a governance being necessary for the maintenance of the peg via conversions rather than leaving it to the users at large to implement.
In the very short term, the converters could do so at a profit, but they would quickly begin to "lose money" by converting Steem to sbd, while increasing the value of steem (by reducing supply)....
The more I think about it, this might be a perfect opportunity for the 1% of steemit to reduce stake a bit while boosting the value of Steem as a whole, by enabling a peg, while reducing how "top heavy" Steem currently is.
Lots of thinking left to be done on this.
Will be grateful for corrections or furthering the thought process.
The whitepaper outlined that pretty well. The way I see this working best is via some governance method as I suggested above. Trusted individuals who's role would be to maintain the peg via conversions... Then again, one would thing any large stakeholder willing to convert large quantities of Steem to sbd would be inherently trustworthy. Would we need to pool Steem together from said stakeholders? Does it all just work because individuals volunteer to "sacrifice" large portions of their Steem for sbd? Would this voluntary system then empower "bad actors" who don't choose to do conversions to have a much larger sway over the rewards pool? Or perhaps Steem itself might volunteer to convert a large portion of stake, thus allaying investor concerns of a disproportionate control over Steem?
Current market cap: $49,144,061 USD
Minus Current supply of SBD: 7,099,445
-------------------
41,840,540 % $6.4 (price of steem)
Steem required to convert to peg : 6,537,584.375
It assumes that a trader who 'sees a big spike' not only knows that the price is going to go back down but that it will go back down in precisely the right rate and timescale to line up with the 3.5 day price averaging window that is built into the conversion process. What happens if the spike was actually the first leg up of a big bull run and is followed not by the price going down, but by another big leg up? The trader loses his or her shirt.
If this were a real issue (it isn't because no one can predict prices that accurately), it would already exist with the SBD to STEEM conversions. A trader who sees a big spike down could convert SBD to STEEM at the low prices and profit as the price recovers. That doesn't work either.
The mechanism of not setting the price for some time in the future is quite effective in combating these schemes.
Does it all just work because individuals volunteer to "sacrifice" large portions of their Steem for sbd?
No, it is assumed (reasonably) that people would buy up STEEM to convert into SBD. It is a good bet when SBD is worth more than $1 that converting $1 worth of STEEM will be profitable. Is it guaranteed? No, because SBD may not be worth $1 by the time the conversion finishes, or because the STEEM that was converted might then be worth more. But it is a good bet and people able to take the risk will do it.
Steem required to convert to peg : 6,537,584.375
Not necessarily. Prices fluctuate and it doesn't necessarily translate that way. Today when SBD fluctuates from $7 to $6 or from $7 to $8 that does not mean that millions of dollars were poured into it or drained out of it. That could be a much smaller amount being exchanged among traders to set the new price.
Shifts in supply and demand are what moves prices, not necessary a set market cap difference being spent. The actual amount needed is impossible to predict. The best we can do is have the right mechanisms in place and give them an opportunity to work.
Yes, may be a way for some to reduce stake and therein diversify themselves, but overall the process sounds more intricate and requires more diligent consistency than a lot of seemingly haphazard things that occur here, not sure if there can be enough consensus to implement competently, imho. Ty
Yes, may be a way for some to reduce stake and therein diversify themselves, but overall the process sounds more intricate and requires more diligent consistency than a lot of seemingly haphazard things that occur here, not sure if there can be enough consensus to implement competently, imho. Ty
Agree with these thoughts as well. It may be that steem and SBD are such a small ecosystem at this point that it really cant support a peg. I also was thinking of the term "chasing the dragon", I would hate to see such an important decision rushed.
It may not be big enough yet, but the flip side of that is if SBD grows too much more and continues to increase in value, will we completely lose the opportunity and have to make a tougher decision in the future if we do want a stable peg? Also, if the peg is fully broken for a long period of time, why would this blockchain even bother having two speculative coins? It's just confusing.
"There are three kinds of lies: lies, damned lies, and statistics."
The challenge with statistics to create stores is, well, we're still stuck with stories. Those stories may or may not directly be proven by the data. I think it's quite difficult (impossible maybe?) to know exactly how much the high SBD value is impacting things verses the whole STEEM ecosystem driving things up on it's own both in terms of user adoption and rewards pool value via an increased STEEM value.
We may be chasing the dragon, but I also think if we start now and show a long history of something that actually works and secure, that's really valuable. This is world domination stuff after all, right? :)
I think that plegging SBD to the US dollars is a great idea.
First because SBD brings also confusion to new users that are coming on Steemit.
It is supposed to be valued around 1$ and then it is worth around 7$. I heard of people struggling to understand why they should buy Steem and not SBD and oppositea and not understand how this is supposed to work.
Second, Tether will collaps and we need to enter the market. As you said, people need a pegged assets because it's a safe heaven during crash. And the Steem blockchain will be more than able to handle the new upcomings transactions when crash occurs. The free fee will be also a positive point for new users.
I think many agree a pegged SBD makes sense. The trick is getting there without screwed anyone over or angering people who really do enjoy high SBD values right now.
Hey @lukestokes, I read your article this morning, thought about making a whole post about why a well pegged SBD is beneficial, but your comment here sums it all up. There is already consensus in the witness ranks leaning towards a well-maintained 1 SBD = 1 USD peg. The discussion is only about when and how to enforce + how to smoothly get there without screwing anyone over.
This tells me:
the problems and consequences of an out of control SBD value is signaled and recognized
the arguments made (on different sides of the debate) nearly all reflect answers to the most basic question: "What is most beneficial to the Steem community in general?"
I think this is just another very fine testament on how open, transparent, efficient and well-thought out governance can be executed in a DPOS eco-system. This is what happens when the incentives of users, stake-holders and developers are in alignment!
I'd advise Bitcoin to take notice, also some governments could learn a thing or two here. It's beautiful.
Thanks for laying that out in terms most can understand. The issue is most users don’t want the price to fall and will consider a peg at $1 or even $2 to be heavily undervalued given recent prices!
I understand that, but for some who rely on a pegged asset because their own national currency is out of whack, what can we offer them? They have to leave the ecosystem and go to bitUSD or Tether because they can't handle the fluctuations from $8 to $6. Also, to me, the value lost in terms of SBD could be recovered with an increase in STEEM which increases the reward pool for everyone.
Instead of one SBD worth $7 on the open market (but still $1 worth of STEEM as far as the blockchain is concerned), I'd certainly prefer people get 7 SBDs worth $1 worth of STEEM and $1 on the open market.
I agree it has utility but see is as very problematic to implement. It is supposed to be pegged now yet clearly isn’t. Added to the fact that people would reject the idea as anyone holding SBD would lose, I don’t see it going anywhere. Unless you propose a peg at a higher level than current prices. That is likely to be popular. Or perhaps an agreement that SDB will be pegged at $2 on date X but can be redeemed at current value as SP up until that date?
It works on the downside. But nothing for the upset. Ideally, I'd like to implement something in the future that doesn't hurt people now. To do that, we may need more SBD printed. A reverse conversion might help with that.
I think this is a more important question than most people on here realize -- and also a little more complicated than most people (myself included) realize. Firstly, I'll admit that I'm (in my own eyes at least) still super new here -- but I've been actively trying to wrap my head around everyone for about 2 months now. That being said, I have thoughts on this that could go for either side of the argument -- and I wont pretend to have any sweeping conclusions.
There is aboloutely no question in my mind that stability would be a good thing. I'm a civil engineer when I'm not pretending to be a rock-climbing on Steemit, so I interact with a fair amount of people on a daily basis that have lots and lots of resources. The number one thing I hear from every single owner of infrastructure, or land developer, or whathaveyou, is that they want to try to minimize risk as much as possible.
Currently, the volatility of crypto is general isn't doing itself any favors for mass adoption. In the case of STEEM, when I first approached it, I was confused for quite a long time by the concept of SBD's. I've been trying to convince a lot of buddies & co-workers that they should get into STEEM while it's still early adopter, but they're all very put off by the crazy volatility, and the generally confusing roles that SBD & STEEM play in the ecosystem (remember, I'm working with engineering professionals).
My generally thoughts on the matter, I think, can be summed up in two or three points:
Stability itself is a good thing;
The question needs to be asked eventually -- "Stable to what?", since a large part of the point is trying to get away from centralized currencies.
In the short-term though -- stability could be seen as a bridge for people to come over comfortably.
If a stable SBD peg is to be actively pursued, it makes sense to me that it should be done ASAP (maybe a hard-fork where a quantity of SBD's are issued proportionally to all holders such that it drives the price to 1USD = 1SBD?), and then abandoned once the user-base grows large enough to be self sustaining.
At which point, maybe STEEM / SBD's can become their own reference point?
I'd like to finish my comment by reiterating that I'm very new to all of this, and this is just the opinion of an average Joe, while he sips beer and gets ready to write his daily climbing post (shameless plug to yesterdays post).
Doing an airdrop of SBD on everyone is quite a radical solution and probably not something I'd consider stable. I can imagine people (especially speculators on exchanges) would freak out about that and it would probably seriously damage the reputation of the STEEM blockchain. It's certainly an interesting idea to radically fix the peg though. I often use the word "interesting" for things that I would never actually do in real life though. :)
I agree, we should always be focused on minimizing risk, especially systemic risk. I also think stability is really important and the broken peg right now with prices on posts that don't make sense really add to a lot of unnecessary confusion. Hopefully we can fix that going forward.
Hey if you say thanks for commenting -- I should say thanks for listening.
I agree that doing an 'airdrop' (awesome name, btw) of SBD is a radical solution. I'll admit to personally having some left leanings in my line of thinking (I also have the fortunate situation of not living paycheque to paycheque), but I am curious to hear why you think it would be an unstable solution -- the overall value of everyones 'total number of tokens' would stay the same, and SBDs are pretty divisible already, aren't they? There's little doubt in my mind that you know what you're talking about and have thought about it extensively -- just curious.
Also -- in my line of work (I deal with a lot of municpal infrastructure that people interact with extensively) people are often freaking about changes. And I'm compelled to ask:
Just because someone (speculators) is freaking out about something changing, does that automatically disqualify it as a bad course of action?
Should the reputation of the STEEM blockchain be a content curation site that is technologically efficient, streamlined, and effective? Or should it be a sound investment strategy?
I should include that there's obviously a huge gray area between the two points above, and it ideally would be both of the above.
At some point, ideally, Steem should become something more than an investment platform, shouldn't it? Is it not supposed to be, first and foremost, a 'decentralized content curation platform'?
EDIT: I should clarify my last question as: "Is it not supposed to be, first and foremost, a 'decentralized content curation platform' -- so then would it not be best served by becoming as immediately accessible by as many creators as possible via stability?"
The 'unstability' of airdropping SBD is that it sets a precedent, making the future outlook for the system completely unstable. If loads of SBD just fell out of the sky today, who says that won't happen tomorrow?
Also, the value of any crypto-currency at the moment comes from supply and demand on the crypto markets. Therefore being an attractive investment opportunity benefits its users immensely (it simply makes the rewards for content curation and creation higher).
Revolutionary and principal about Steem is the fact that rewards in crypto-tokens are built into content creation and curation. You can imagine that the value of those rewards (i.e. the value of the tokens) is vital and a driving factor for adoption as well.
When it comes to cryptocurrency, the commitments made to investors about the supply is one of the single most important promises made. When a token violates that trust, it can hurt the community for many years. It's certainly not something anyone who understands the economics involved should seriously consider without very, VERY careful thought. Even then, I have trouble thinking of a situation where it would be justified unless it avoids some type of systemic risk which could destroy everyone's value.
Thanks for taking the time to ask these questions and follow up in discussion on them -- I appreciate it, have found it very informative, and have given you a vote for witness because of it.
I've seen a couple UBI posts floating around -- thanks for sharing these other ones. I'll definitely give them a read.
Now I am beginning to grasp the SBD /STEEM stuff after going through the post and comments. It is beginning to sink in. You are one of the witness I voted for and you know what I'm glad I did because you care. Thank you for being you.
IMO, steem price high because of sbd being manipulated or being adapt massively.
1 is to 1 doesn't really happend to sbd, well, If we think 1 usd is = to 0.80 sbd is not really 1:1 ratio, or 1 usd is = to 1.20 sbd.. i've seen that many times.
Once the token was in the market, the traders makes what is the value that asset. if we want a fixed 1:1 sbd, then it will not be a decentralised anymore. We will make a centralised exchanger that it will not rise or down the value of sbd which is pretty hard to do.
you are correct about lots of steemians do care so much of rewards, that only covers the greedy whales, maybe a 35% to 25% from dolphine to orca to whales who have lots of steem power. But in the eyes of minnow and redfish, it does not affect especially those beginners and earns $0.50, $0.30 of their post unless rely on bidbots.
in the other hand, the effect of drastic rise up of value of sbdm brings back the inactive steemians and gain more attention to the world that steemit is worthy enough to invest with.
If sbd doesnt spike that $7 currently and strong to not go back to $1,, Do you think STEEMIT will be hot now as of back October or november were lots of steemians start to power down and leave steemit?
It may pose a risk knowing sbd is pegged to $1 yet surpasses that, but it gains so much attention and bring steemit to high level as of now.
A two way conversion,? I dont know how that gonna work or does it really pose risk instead to the current event in steem/sbd price.
I'm curious why, in your evaluation, it's all about the rise of SBD and not the rise of STEEM? As I mentioned in my post, STEEM has gone up 46x and SBD only 7x and a rise in STEEM increases the entire rewards pool payout amount, not just the SBD portion.
I totally agree with you. From your point of view, I totally understand the original post. Thank you! It's best when the market forces are left untouched.
in what I have observe, the massive upwards of steem was drive of sbd.
In june 2017, steem rise up to $6 in a second but fail because sbd was $1.
why is that, Lots of people are holding already steem in hand. either liquid or lock up.
when Sbd spike at December, maybe because of manipulation or massive adaption, we can't deny that steem follow the spike not because it was manipulated, but because of what sbd's surging price.
I doubt steem value will remain $5 strong in weeks or months if sbd is just $1. thats my observation.
it's the scarcity of sbd makes it value skyrockets.
I see already that steem fails to hold $6 each when sbd is $1, but as what happened now, Steem stronger than ever as sbd value are more than what steem has now..
if your are not convinced about this, let's see what will happened to steem value without sbd or sbd at $1 only.
Wow, thank you so much for this comment @albertvhons! I've been sending SBD a couple of times to Bittrex and selling em there at $8, $10 and once even $13 per SBD, constantly wondering:
"Who are these people, paying more than 1 USD for an asset which is described in its own whitepaper to be worth 1 USD worth of Steem???"
But reading your comment, now I finally understand some would just correlate the success of the Steem platform to a high SBD price.
I do have a question for you: do you also consider the USDT (Tether) at $1 to be 'cheap', or 'a buying opportunity'?
PS Personally I think Steem value will go to $100 with SBD at $1 only.
But I am fascinated by your position on this matter.
PS Personally I think Steem value will go to $100 with SBD at $1 only.
I doubt that! We must weigh the total supply of steem compared to sbd. You can't leave sbd $1 and wanting steem to go $100 with so much steem supply. the reason why sbd surges up because nobody stacking sbd. You can look up it's total supply less compared to steem.
USDT (Tether) at $1 to be 'cheap', or 'a buying opportunity'?
IMO. tether will always be pegged to $1, They can simply issue tether and reissue again without informing us. Compared to sbd, With limited supply and can be created "only" via post rewards.
sir @smooth, the chart doesn't tell everything, Please look at the date between june to august of steem and sbd. And you will find out That steem fail to hold $6 to $4 in a day while SBD is at $1. and that's the chart all about.
We may say that as Korean people adapt steemit, it also the start of steemit success to the moon in terms of price, let this be a blessings in disguise,
I think you're falling for the correlation is causation trap. Please, please, please, be very careful about the information you share and the conclusions you come to without solid premises. Many people see pretty graphs and think, "Oh, I get it now! It all makes sense!" even though they are just being told a story. Unfortunately that can lead to actions which end up hurting people, even when the intentions are to help.
Comparing the initial spike in STEEM price to what is happening now is completely unjustified as the inflation model was entirely different as was the marketcap and the entire cryptocurrency environment, not to mention the initial pump that follows many new project launches.
Thanks for this. To be honest, it is above my head but glad its being discussed with transparency. I'm just glad my initial investment appears to have been a worthwhile investment and I have an interesting blogging platform to use for my personal benefit.
There's been some discussions about the conversion being lossy, but if we add too much resistance to it, I think people will decide not to use it and choose something else like bitUSD.
I wonder if this market cycle will end or if people will just keep pumping SBD up. From a certain perspective, it's a better token than BTC (lower supply, free to transfer, 3 second confirmation times, hard floor of always being worth at least $1 USD in STEEM, etc).
IMO we can start with a lossy (spread) conversion and if it turns out that everything is working great but the only problem we still have is that he peg has only a bit too much slack (which would still be such as huge improvement from the status quo obviously) then we can tweak it again to tighten/remove the spread. That is a a relatively small change.
Yeah, I do like taking steps to make it safer if and when we do implement something. Paying a small price to do the conversion may be a good way to introduce it. It's still possible some systemic risk exists we haven't yet seen and would only find once we see it in production (unless we develop ways to model this ideas effectively beforehand).
I think considering indeterminacy due to Steem price fluctuations during 3.5 days of convertion no average user would ever pay attention for 1% extra spread.
Average users aren't really the price setters though. That's more a function of what bigger traders do and bigger traders will pay attention to it. I still think a small spread is okay, and can be reduced/removed later if it isn't.
Yes, I fully agree that this option is going to attract big traders, probably even traders from the outside of the current Steem ecosystem.
It's sort of introducing 'futures market' or 'prediction market' for Steem. I wouldn't be surprised to see really big volumes converted back and forth.
So I feel like we could demand some contribution )
Thanks for the transparency @lukestokes. I did what I felt would be the most helpful thing for you aside from upvoting (already did). I voted you for Steem Witness. I hope you represent us well and thank you for putting time making this an improved community.
What's the better authority on value - the market or the whitepaper? Isn't it the market? If it's the market, than the whitepaper is a very weak argument, isn't it?
A stable pegged SBD asset might be an asset someday if we keep growing. But the growth is currently fueled by the high SBD. And let's be real, commerce on the blockchain is pretty much non-existent if you don't count the meta businesses and steem isn't really being adopted by exchanges the world over as is. Why would we implement something to stifle our growth, decrease our market cap and in the worst case scenario (which I think is very likely), create and artificial crash and destroy investor trust?
I think people should worry less about the intent of the creators of the blockchain and more about what the market has found value in.
But the growth is currently fueled by the high SBD.
Do you have evidence to back this up? As I mentioned in my post, STEEM went up 46x compared to SBD only going up 7x. The value displayed on a post payout is what matters to most people psychologically. That number goes up (i.e. the rewards pool goes up) when the value of STEEM goes up. I'd argue most new users don't even understand what a SBD is or how it's valued on an external market.
You did see in my post about how Tether grew to $1.5B in market value. Aren't we ignoring that market signal by not fixing our own peg and marketing it as a much more attractive option for exchanges and investors? Tether can't be trusted or audited. Ours can.
Seems to me, if people could make money converting STEEM to SBD, that would increase demand for STEEM and increase the market cap (STEEM) which actually impacts the rewards pool payout amounts according to how the blockchain functions.
Investors are investing in STEEM.
Speculators are speculating on SBD even as the supply is increasing and no one is converting SBD back to STEEM to decrease supply.
It's not about "the white paper" as much as it's about a broken functionality on the blockchain. Either it should be fixed or removed. If we remove it, then we lose a potentially huge opportunity in the pegged token market. I don't think ignoring that opportunity is good stewardship of this ecosystem.
Do you have evidence to back this up? As I mentioned in my post, STEEM went up 46x compared to SBD only going up 7x.
Yep, Steem broke into never breached before price territories only after SBD exploded. The 46x vs 7x is correct only if you look at a time frame that doesn't make sense to look at in this context. Look at only the period for which SBD was pumping and see if that correlates to growth in Steem. You will not find Steem outgrowing SBD there by any means and there is nothing like a 46x growth for Steem there. To me this is either an irrelevant or a misleading figure to put into this discussion.
The value displayed on a post payout is what matters to most people psychologically. That number goes up (i.e. the rewards pool goes up) when the value of STEEM goes up. I'd argue most new users don't even understand what a SBD is or how it's valued on an external market.
It takes only 7 days to understand that you are currently making significantly more than what the post displays. That is the psychological effect that makes people tell their friends to join. We are seeing unprecedented growth in new signups and activity. Do you dispute that? Isn't the data clear on that? Do you think we'll retain that if we create huge changes that destroy a lot of that value people are seeing? What would the psychological effect of not getting what you used to get up until recently because "the government of the blockchain" decided you don't deserve it anymore? You can bet all your Steem on a lot of churn if that happens.
Seems to me, if people could make money converting STEEM to SBD, that would increase demand for STEEM and increase the market cap (STEEM) which actually impacts the rewards pool payout amounts according to how the blockchain functions.
That can be true only if they continue to trust the blockchain. I have no doubt that a portion of the investors will view the blockchain as untrustworthy after implementing such a huge change with the flip of a switch and would not care to get involved in neither Steem, nor SBD. And with money flowing out of the system because of that, would the conversions be enough to take care of the problem?
It's not about "the white paper" as much as it's about a broken functionality on the blockchain. Either it should be fixed or removed. If we remove it, then we lose a potentially huge opportunity in the pegged token market. I don't think ignoring that opportunity is good stewardship of this ecosystem.
Broken is correct only if you care first and foremost about the vision in the whitepaper. The current setup is working to our advantage as of now and swooping in to destroy that makes no sense. Even if we assume that there is something broken, one should select a time to fix it that would not create other problems or mistrust in the blockchain itself. Things should be fixed in a way that doesn't
That's what HERO has done, and it's certainly interesting but not useful for most of the people who rely on USD for daily purchases (both in the United States and in other countries which peg to the dollar). We're trying to come up with something reasonable and if most merchants have goods and services they have to pay for directly, saying "this token is worth 1 USD" is the easiest approach, not a token which requires some math to figure out today's value.
In the future, as USD becomes less relevant, I'd be all about pegging to something else. Maybe a basket of currencies or SDRs or gold or silver or something. The point would be to pet to whatever most people are most comfortable using.
You take away the current price of SBD and put it back to 1usd...there goes the majority of steemians. Don't expect minnows that make cents and a few dollars to stay on this platform if the SBD is pegged.
Good suggestion and you can see that I suggested that in the github issue that was linked from the post. However, it has downsides in that liquid rewards don't encourage people to have a stake in the platform, as intended with 50/50 or 100% SP.
Note that we already do have a version of this. People choose 50/50 when SBD is more valuable and often choose 100% when it is not. So the supply adjusts, just not very much and not quickly enough.
I've heard this discussed as well, but here's my main concern: The blockchain itself is secured by SP holders voting in competent witnesses. If we disincentivized holding SP, we could in theory decrease the distribution of SP which could be seen as a decrease in decentralization and thus a weakening of the security of the blockchain. For that reason (and the no-commitment / spam concerns), I’d be strongly against a full SBD payout option. I think it could potentially create systemic risk by creating too much SBD too quickly. Maybe if we designed it in such a way that the payout option, on a blockchain level, is only available when the price of SBD is too far outside the peg... but that adds other complexities, like witnesses providing a price feed on SBD as well as STEEM.
I think that this would not create a problem. People would want to be paid in SBD not because they like the SBD but because it is the more profitable option. They would get SBD - and quickly transfer it to steem. Steam price would increase relative to the SBD, SBD would fall. People wanting to be paid in SBD is in my view not equal to people wanting to own SBD.
What about those who need stability? Either because they have to pay for real world services or because they are poor and should not be risking their value on speculations?
I think there would very soon be stability - because people would realize that the mechanism which brings down the SBD price is too strong to speculate against. At least I would think it would work like this.
I think we have to accept that all we can do is creating a mechanism which results in a peg if people react rational. For a real peg, you would have to make sure that the value at any tie is really worth exactly 1 SBD. For this to reach, there needs to be an arbitrage possibility. For example if could would have the opportunity to create new SBD at any time by paying 1 USD and to get your 1 USD back it would certainly be closely pegged to the USD. However, this is not possible and wanted I think. The only other way is to create a mechanism which is sensitive to the USD.
I think, if you would pay out the SBD part also based on its USD value as you do with steam, the price would sky rocket even more because inflation would go down massively.
I think pegging SBD (i.e. allowing SBD/Steem conversions in both directions) would be abused. For example, manipulators could pump Steem and then instead of dumping Steem they could convert Steem to SBD without worrying about market forces dropping the price of Steem during their conversion (i.e. dump) to SBD which would leave the Steem community holding the bag. I think the author of the Steem whitepaper probably realized this when they wrote, "If people could freely convert in both directions then traders could take advantage of the blockchains conversion rates by trading large volumes without changing the price."
I've been citing that quite often as well, but @smooth made a great point in response to my pointing this out. The short end of it is: it actually would be hard to abuse, especially with the 3.5 day delay. And the proposal includes a spread/fee that goes back to the STEEM blockchain, so perhaps it might be made to work.
I've commented independently here as well, but I'm more concerned about the ratios of SBD vs the STEEM market cap.
The kind of abuse of the two way conversion that I was thinking about couldn't be prevented with a 3.5 delay or a spread/fee. For example, as a crude example to illustrate my point, if someone had $100 million to execute a pump and dump/convert, then on day 1 they could buy $20 million worth of STEEM and start the 3.5 day conversion process on that $20 million worth of STEEM, and do the same thing on days 2, 3, and 4, and it is reasonable to assume that buying $80 million worth of STEEM in 4 days should result in the price of STEEM rising quite a lot, and then they could use their remaining $20 million to buy enough STEEM to keep the STEEM price propped up as much as possible at the elevated prices until almost all of their 3.5 day conversions of STEEM into SBD completed at the elevated STEEM prices. At this point they could sell whatever STEEM they bought with their last $20 million before the end of day 7 which is when the first wave of power downs would hit the markets (i.e. the surge in the price of STEEM might encourage some people to start power downs to try and get some profits but they have to wait 7 days for their first power down). I'm not sure how much the price of STEEM would go up if someone were to buy $80 million worth of STEEM in 4 days, but even if the price only went up by 50%, then this crude plan could still probably turn $100 million into at least 125 million SBD. However, the scary part would be if someone could execute this type of plan and manage increase the price of STEEM by 5x or 10x and complete STEEM to SBD conversions at those 5x to 10x price ranges because that would turn $100 million into 500 million to 1 billion SBD. This is like a "pump and dump" except it is a "pump and convert", but unlike a pump and dump, the pump and convert wouldn't need to con people into buying offloaded STEEM at pumped up prices because the STEEM would be dumped through the STEEM to SBD conversion process which would leave the Steem community left "holding the bag". In the crude example above, $80 million worth of STEEM could be dumped into SBD without directly affecting the market price of STEEM. This is one of the things I think the author of the white paper may have been warning about when they said, "If people could freely convert in both directions then traders could take advantage of the blockchains conversion rates by trading large volumes without changing the price."
This is an interesting exercise. I did suggest pump and dump type but I did not really think through the whole scenario. To summarize into steps:
Buy/Have lots of STEEM. Wait for things to settle.
Start 3.5 day conversion.
Buy more STEEM. Manipulate the price upwards.
Sell SBD?
This carries a significant amount of risk as stated, because SBD is not guaranteed to hold its value during this time. To complete the cycle you need to try to exploit the reverse conversion. Let me try...
Let's say P(t) is the STEEM price feed over time.
Buy/Have X amount of STEEM.
Start 3.5 day [reverse] conversion at 1 STEEM --> P USD
Buy more STEEM to pump price.
Now have P(t_4) * X SBDs.
Start 3.5 day conversion back. 1 SBD --> 1/P STEEM
Dump the STEEM to tank the price.
Now have P(t_4) / P(t_7) * X STEEM.
The amount of STEEM you just gained is now whatever difference you were able to manipulate the price of STEEM by. The scary part here is the SBD price does not factor into this scheme at all! Even if you add a spread, as you say it may not help here.
Hmm.. I can't seem to find a flaw... it's possible that it's not that easy to pump and dump STEEM with STEEM being more mature. The motion of steps 3 and 6 may also end up in a local loss for that amount too? I'm not familiar with how pump and dumps work in general, but my impression is that you need tokens with sufficiently low circulation / trade volumes to carry out the scheme.
The scenarios we are discussing really do illustrate how easy it would be for someone with a lot of money and a little bit of thought to exploit the reverse peg idea that is currently being considered by witnesses.
Regarding your comment about it not being easy to pump and dump a mature cryptocurrency such as STEEM. I agree, and I think it would be nearly impossible to make a profit pumping and dumping STEEM by buying STEEM on the markets and then selling STEEM on the markets. However, the reason I think a pump and dump like that won't work isn't because the pump is difficult because anybody with a huge amount of money could easily pump STEEM. The pumping isn't the difficult part, and the problem with the pump and dump is that once you've pumped the price of STEEM up, then you wouldn't be able to find enough people willing to buy STEEM from you at the pumped up price. You couldn't exit your STEEM position without crashing the price. However, the reverse peg idea currently being proposed makes the dump a very solvable problem because you wouldn't have to convince a single person to buy your STEEM at the pumped up price because you could just dump your STEEM at the pumped up price on the Steem blockchain by converting it into SBD, and the only challenge you would face would be to keep the price of STEEM pumped up for a 3.5 day conversion process which shouldn't be overly difficult since most STEEM is powered up and it would take at least 7 days for 1/13th of it to hit the markets. Also, you wouldn't need to sell a penny worth of the STEEM you bought on the markets. In my crude example I didn't get into how you could cash out of SBD, but if you were able pump STEEM up to 5x or 10x and turn $100 million into 500 million SBD, then I don't think it would be too difficult to get roughly $500 million back out over time especially if the SBD is designed to be pegged at a dollar.
Oh of course... SBD being pegged would certainly make this easy to cash out over time. So that really would be enough then. I am now realizing that the reverse direction conversion really is not symmetric at all to the forward conversion because the price feed is on the steem side. Wow.
About my scenario, it's a fun cycle scenario where you can keep multiplying the steem holdings, and tanking the price is part of the scheme. So if tanking the steem takes even less time/volume, you end up with much more steem.
I feel these scenarios need to be addressed before anyone agrees to this.
Your cycle scenario provides a nice window to see the major problem with the proposed two-way SBD peg which is that conversions (even very large conversions) can be done without directly impacting the market price, and this is the feature of the two-way SBD conversions that can be exploited.
I find it interesting that your step 2 conversion is essentially selling STEEM without the sale directly impacting the markets and your step 3 is buying STEEM with impacting the markets.
I've also written a separate post related to what we've been discussing, and I think it can be helpful for people to see both your example of how to exploit the two-way SBD as well as my example.
I agree this issue needs to be addressed. We're doing our part with trying to get the word out there. It would be nice if someone could make a cartoon video explaining the problem in simple terms that is easy to see visually.
as long as we have things like tether in place, crypto will never take over the fiat world in its entirety. Its sad that people think a safe place to put their money during the dip is tether. Doing so just impedes the ecosystem, it doesn't improve it.
I can respect that perception, but I don't think I agree with it right now. We're just barely getting started here in terms of world population that's in cryptocurrency. Until it's completely ubiquitous, expecting stable cryptocurrency at this stage isn't realistic (yet). People still need to pay their bills and such. Poor people especially should not be gambling with speculations. They need something stable to keep the lights on and right now, that's still the USD for most people. If we can get a stable peg, we can speed up the conversion process to cryptocurrency.
Firstly, I'm not sure why you say that conversions are only in one direction. Go to the internal Market and one can freely exchange STEEM for SBD and vice versa. Indeed, when SBD spiked in December, there was a point when about 8 STEEM could be bought for each SBD. Having such a lucrative trade suddenly available meant holders of SBD who participate within Steemit could power up at a very attractive rate. The trade itself slowly created the re-balance between the two currencies.
What I am seeing is that any very profitable trade quickly becomes known, and as more people do the same transaction the prices reach a new balance.
So, although this does not appear to have been the plan within the White Paper, what I am seeing is that the "peg" is not between SBD and US$, but rather between SBD and STEEM. Possibly an unintended consequence, it strikes me that having two currencies is proving to be a useful buffer.
These are still early days and we are seeing changing dynamics happening with price changes. I would not change any code until there is enough data to see clearly how the market adapts to these changes.
The internal market counts as a swap, not a conversion. A conversion will destroy the input token and create the output token. How that affects the market is slightly different.
The peg is most definitely not between SBD and STEEM. The underlying mechanism is the feed price which is how the witnesses determine how SBD is printed and converted.
By the way, high steem prices means more SBD is being printed. Long term there is natural downward pressure on SBD price.
I've just picked this topic up in my most recent post concerning the liquid steem author rewards and i've linked to this post under "further reading"
You've got my vote-for-witness! Way to go, being unbiased, reasonable and educational on the matter!
Does it need to happen right away while SBDs are still high? Maybe not. Maybe we should let inflation run its course as more and more SBDs are printed.
I wish, but unfortunately the market still wants to drive up the price of SBD:
Until people stop doing this, then any attempt to fix SBD will be considered manipulation by those who benefit from it free-floating. It's a challenging problem to solve.
If they Peg SBD to 1$ or 2$ ...what will happen to we the minnow.. Not even a full minnow like to say "Steemit Kid" that have not to depend on when we are not capable enough to purchase STEEM and we depend on the 0.01$ low Upvotes as little penny we are using to maintain ourselves..... They are many whales out there who are only after themselves when we the nothing are much this plenty..
The fact that pegging SBD is might be a Good decision but from my own view, it will only benefit the whales and never the less we the rest is gonna suffer.
Let take my Blog for perfect example; the biggest payouts is 1$ .now imagine we having 0.5$ and less on our post from maybe like 5 newbies like me which what they can only upvote with 0.01$(biggest) while most is 0.00$(with their 100% Upvotes) at the end of the week the biggest amount to claim is 0.02SBD and 0.001SP. So with the penny we are claiming imagine Steem rises and SBD peg at 1$, imagine how many times and articles to post with 0.01$ claim to get just one STEEM(approximatly A Month).
Quite a read. I don't have a big opinion of it, as I have little SBD and steem, but I'm always content to vest steem with a higher ratio than the SBD I traded it for since my curation rewards aren't that great.
Hi Luke, coming from an economics background, I've penned a post on the SBD peg - how it should have worked, why it is not working, how to get it working and whether we really want the peg.
You asked the question "Are pegged assets valuable?" IMO, the answer to that depends on whether users of the asset value its stability. If SBD is only meant to be a short-term asset, kind of like loose change in your pocket, and people convert SBD to other cryptos or Steem upon having enough of these small change, then the price of SBD does not actually matter that much. I'm only holding on to a small amount of SBD at any point in time, a fluctuation of 10% affects my $5 holding by a small amount.
Currently, the peg is broken and has been for a long time. Once people stop believing in a peg, there's no reason for it to hold anymore. There is nothing inevitable about the peg just because it's announced, but the platform is not willing to take costly and painful measures to defend it. Once nobody believes in the peg, it then becomes profitable for users to hold on to SBD as an investment for short-term gains if I think the price will rise in the future.
In short, maintaining a peg is not a cost-free measure. That's an idea that seems to have been missing in a lot of conversations about the peg.
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Excellent post good analyses thanks for sharing.
But what if having a working peg could bring us to that domination that much faster? If Tether dies, there will be a lot of people looking for a stable option.
A slow but steady growth would be cooler than a bush fire. I think steem and sbd should rid their bitcoindependency first so people can buy and sell steem directly. Bitcoin is dropping again and steem follows
Odd. I wonder if they are blocking it in your country or maybe a local thing based on an internal network? I'm curious if it works if you try to view it directly on YouTube?
It was my computer that was the problem. It works when I try on my phone.
I should have tried that before commenting... I thought YouTube must have been feeling threatened by the steem blockchain and putting restrictions on you 😉
This is why it's important to vote for witnesses. Because even with you explaining it, it still kind of goes over my head a little bit. I am happy either way, whatever is best for the steem blockchain. Of course I and many others are thoroughly enjoying the high SBD price, but I do appreciate the discussions going on, I like to at least try & get a better understanding of what is going on with steem. Appreciate it! This is why I vote for you ^_^
I usually try very hard to simplify these complex discussions and break them down in simple terms so everyone can grasp the idea. In this case, I found myself wanting to unload the whole discussion from start to finish so that those who are discussing this topic the loudest can at least work from first principles and really support their positions with reasoned evidence. That made this post much more difficult to follow than I usually go for. Thanks for putting some trust in witnesses that earn it. We are working hard to earn that trust.
What are the risks of a reverse conversion if the SBD market cap does grow and take on a BitUSD or Tether type role?
I recall in the days when Steem was very low in value and dropping, no SBD were printed and burning of SBD was encouraged to keep the debt ratio under control which was always regarded to be a very small % of Steem market cap. What are the economics of having a large amount of debt hanging over the Steem asset?
In general though, I agree with the sentiment of defending the peg or eliminating SBD as having no purpose without a peg.
The expectation is that profitable conversions from STEEM to SBD would tend to increase the price of STEEM because people would buy up STEEM in order to convert, and in doing so reduce the supply of STEEM on the market. In the situation you describe (taking on Tether with its $1.6 billion market cap or even its lesser cousins) would be very strongly bullish for the price of STEEM (increasing its market cap and allowing it to support more SBD at the same ratio).
So it would effectively work like SMTs in terms of economic impact on Steem, with all money passing through Steem.
Does the internal conversion process create a form of smart contract where the Steem is held for conversions back the other way, similar to OpenLedger assets on Bitshares? Or is Steem actually burned/lost in any way with redemptions later being filled with new Steem?
In a sense, SBD is a smart contract but it is hard coded (I guess in Bitshares that is the case as well). The STEEM that backs outstanding SBD is accounted for in the blockchain virtual_supply counter. When SBD is created (currently when posts are paid out, but if conversions could do so then via those as well), the STEEM is moved to virtual supply and when SBD is converted back to STEEM it moves back out of virtual supply and into total supply.
Yes, early on when the amount of SBD in existence (the debt) was too high, things had to adjust. Going the other direction, I don't see too much of a concern unless someone did a coordinated attack and tried to convert so much as to create too much debt right away. Again though, the 3.5 day conversion time and the high market cap may not make that much of a concern.
To me, the difference here is we're using STEEM to do it, not some made up currency we print out nothing. If the STEEM supply goes down to create more SBD to cover demand, then in theory the value of everyone's STEEM goes up. In a way, it's still somewhat of a closed loop between STEEM and SBD. The only difference (again in theory) is that value shifts away from SBD into STEEM (or the other direction) whenever SBD is not in line. The thing which keeps this in place is individuals taking advantage of an arbitrage opportunity via the smart contract conversion. It's hard for me to see where the cost is to do this, other than for the speculators who buy or sell too far outside of the $1 peg range.
SHOULD Bitcoin be a pegged asset? If so, what should we peg it to? Hmm... Discuss!
i would like to bring witness t0 me ye i.d. 0 w/(h) e (a)d https://steemit.com/g0fig/@xubrnt/ned-steemit
Great post Luke. This is a very interesting topic and from my personal experience the Steem Dollar getting way out of wack caused me to cancel my power down in the fall and then ultimately led me to powering up 0.5 BTC worth because I anticipated the price of STEEM getting pulled up because of the SBD being so high.
I personally do like the idea of the dollar peg and I'm blown away that the reward pool has increased 46X with these increases. To be honest it is kind of weird because a lot of us bloggers aren't really feeling it. I feel like I was making more money when STEEM was worth $2 and I had less followers than I am now.
It might be because there is tons of self voting and that is draining a lot of the pool. I'm not really sure. I would say some of my videos that I have uploaded on DTube have been some of the best work I have ever done on this platform especially my video on EOS which made maybe $15 or so.
Payouts are wacky and we have just accepted it but I'm also surprised no one mentioned NuBits anymore in the dollar peg conversation. It is unfortunately only on Bittrex but I have used it before and it seems to have a mechanism to keep it fairly stable.
It Tether blows up then I'm assuming my BitShares investment could payoff big if people feel they can't go to SBD because of the increased prices.
Thanks Brian. Yes, payouts our funky and whenever we set expectations about them, we're bound to be disappointed. On the plus side, you do currently have a potential payout of $123 on a Picard meme on Dmania. :)
Interesting that you're confident a rise in SBD will directly lead to a STEEM rise. I see them usually happening together (especially when the combo gets added to a new exchange), but I'm not fully confident STEEM will always rise and fall with the price of SBD directly. Time will tell, I guess, but even then, it's still a correlation, not necessarily a causation. Most likely, they both go up and down based on the larger cryptocurrency market movements.
I'm not as familiar with NuBits. I'll have to look into it. I remember hearing about it as one of the pegs that broke, but it seems like it's doing well recently. I'll have to give it a second look. And yes, I think BitShares has a lot of room for growth for many reasons.
You know... I can disappear for a long time (say weeks) on your posts. Not intentionally.. just "life happens".
...so then a few weeks pass... I come back to your blog, and I always ready myself "what if @lukestokes has sold out in the time I've been gone?"
Nope. Your morals are always intact. Money flows. It doesn't change who you are... You continually post, share your important thoughts... and never go silent.
I love steem. I like the price of steem.
Without being able to go to sleep at night knowing that @timcliff and @lukestokes are a key part of every block solved, I don't think I'd ever develop the confidence I do.
This is the long way of me saying @lukestokes -- you lead by example and thank you so very much... :)
Wow. Thank you so much. That's one of the nicest compliments I've ever received. I love steem also and how it rewards individuals like me very well for helping as best I can.
hello sir @lukestokes, I am @princessjoyesto and I also chose you and vote you as my witness in the steemit community I hope it is okay with you. Have a good day ahead sir.
@intelliguy is as his nickname implies, great! ( :
No, but it does kind of seem like they have a crush on me, huh? :)
Great topic and video Luke! I think we need something that's pegged to the dollar. Steem currency is already living it's own life and to not create confusion it's essential that we have a separate currency that's stable.
I think many see this as well. The real question we have to answer is, what to do about the broken peg and when should we do it?
True!
thanks for the detailed article, @lukestokes. A stable currency definitely has utility and value for a community and I would like to continue down the path of incentives and trying to find potential losers when SBD is much greater than $1.
The Minnow (as an author)
Steem(it) has a retention problem and much of it is b/c new users never make their first $5. With a high SBD price, this helps minnows the most and hopefully they will see rewards to incentivize them to stay around. Also, the majority of their rewards are paid out in a liquid asset. This can literally change lives. Check out my dude @bendollars and how excited he and his family are with his first payout. Think about what an extra $5/day could do for some people. SBDs offer this opportunity. https://steemit.com/introducemyself/@bendollars/my-first-steem-payout-experience-on-steemit-and-more-expectations-bendollars-24-10-2018 This is a winner b/c of the high SBD price.
The Minnow (as a curator)
Simliar to the argument above. Community growth centers around minnow engagement and retention. A $0.25 comment could now be worth $1 b/c of the high SBD price. This is a winner b/c of the high SBD price.
Whales/Dolphins (and their tribe)
That $0.05 upvote you give someone actually means a lot more. You can support more of your tribe/community without taxing your VP. This is a winner b/c of the high SBD price.
Investor/Speculator
Look, some people will buy anything in this crypto market. These are the losers of gambling on an asset that should be at $1. You want your community to have a strong currency. Don't fall in to the Keynesian fallacy. While I agree that having a pegged asset is great, it's mostly great because of protection to the downside. If someone is willing to buy something from you for more than it is worth, then I believe it's a gift. Let them buy overvalued assets and let those who have more knowledge benefit from the additional time and experience that they have. These are the losers b/c of the high SBD price (assuming it eventually normalizes).
Conclusion:
By artificially restricting the up-side of SBD, you are hurting the community and it's ability to self fund at the expenses of speculators. This most notably hurts Minnows opportunities to make their first few dollars or rewards (especially in a liquid asset).
Thanks again for the great post :)
I agree Steemit has a retention problem, but I'm not sure STEEM does. It's an amazing cryptocurrency. I'm all about changed lives, but I also want to ensure people actually understand where the value comes from. It comes from investors increasing the value of STEEM which increases the rewards pool and the $ number people see on their posts which gets them excited about Steemit. You mention currators, but they are actually losing out with a high SBD price. People use bots for self-voting instead of curate because there's a better ROI there.
The Keynesian fallacy warnings are important. I'm certainly not wanting to artificially control anything. What I am trying to do is avoid boom and bust cycles which I think a broken peg allows for. If the SBD peg worked in both directions, that manipulation wouldn't be possible and the market cap of STEEM is large enough to not be easily manipulated compared to SBD (though it still needs to grow much larger).
Speculators would still be giving us a gift, we'd just be able to collect on it quickly as we convert STEEM to SBD to get more if it. Since the SBD could go right back to STEEM again, it wouldn't be creating new money out of nothing. That's the theory, anyway.
As to your conclusion, I do think it has validity. What I also see is people start to expect SBD to be worth something high. They hold it as it goes back to $1 instead of obtaining STEEM which (IMO) has a much, much higher upside. I want to get more people thinking long-term, not short-term. That's where the real value is. If they can't speculate on that future value, they they shouldn't speculate on a broken pegged coin either. It would serve them best to hold a stable coin.
Great comments, @ashe-oro. Thanks!
I've voted you as witness for your insightful thoughts on this... your witness account is lukestokes.mhth yes? I'm sure it is, but still want to check...
I disagree with you in the timing, I'd personally prefer to bite the bullet and do the hard work now.... it might be harsh, it might be messy, but no time is ever going to feel like the right time, there's always going to be reasons to not... but the way I see it is if ecommerce and app developers are cautious to use this platform because they don't know what price they can set their products or services at... then that's a problem that slows the build of Planet Steem.
Regardless, you really seem to have thought it all through, and I couldn't ask for any more from a witness.
Yes that is his witness account.
Thanks heaps Smooth!
Thank you so much for your support. I really appreciate it.
As for the timing, I tried to make it clear that on this issue, I will go forward with what the community seems to want most. If people started voting based on those who are willing to support the peg or not, I may change my position on the timing and, as you said, bite the bullet. Ideally, we'd do it in such a way as to ensure as few people as possible get burned by the change.
In the meantime, my advice remains the same: as long as SBD is above $1, I sell for STEEM. I hope others will follow that example. If everyone did that as soon as they received post rewards, the only people who would get burned by an SBD correction would be the speculators who caused the peg to break in the first place.
I wouldn't be so quick to act. I don't think we fully understand the implications of a two way conversion, which is why these discussions are happening in the first place.
I'm more focused on economic stability first and foremost. Right now, I would consider things stable and well understood even if the peg is not working. Yes there do appear to be reasons to accelerate the peg, but the reverse conversion idea I'm very hesitant about.
Ultimately I am pro peg and it's like the post mentions, it's about timing and how we proceed.
Really enjoyed reading your thoughts on the topic and I hope to hear from more witnesses in this actual thread and hopefully it is upvoted for visability.
I think my concern mimics yours about the timing. Overall I think long term a pegged SBD may be the best course but I am not so certain on that because the use case and it vastly helping steem is speculative. That being said it was the original intent so I lean towards that solution. The thing is, I would like to give things plenty of time to see if the market corrects itself before action is taken. In an ideal world this sort of solution would be done before any of this happened or while the price is back to "normal".
A couple things I do notice is IMO from watching twitter and being active in chat is that it is driving traffic to the website, although that isnt some be all end all factor to me, just a consideration.
Another factor is the SBD price being high gives "normal" posters a chance to power up and get some of that steem easier than if SBD is one dollar. I see that as a chance to spread the Steem around more and I think that is actually beneficial for the system as a whole instead of Steem itself just increasing in price right away.
My thought is to watch it over the course of 4 or 5 months to see what happens to the price before seeing if anything needs to be done. I dont think that will cause Steem to miss out on some super special opportunity and gives SBD time to self correct as more is introduced to the exchanges etc.
I also like the idea of a better STEEM distribution and if people take high valued SBD rewards to buy STEEM and power it up, that could certainly help.
At the same time, a high SBD value may only further encourage those who are taking a massive amount of the rewards for themselves already. Example:
grumpycat transfer 3,014.813 SBD to bittrexSo it goes both ways. The new users could benefit and the entrenched holders could benefit more.
Thanks for chiming in and taking a broad view of the topic. There are costs, benefits, risks, and rewards on all sides of this discussion and it's important for us to understand things as best we can to make decisions which benefit the most number of people.
"a high SBD value may only further encourage those who are taking a massive amount of the rewards"
Oh yeah? ONLY the whales, aye? Have you ever had to worry about money in your life? Let alone do work to survive? I'm sorry to sound harsh, but the incentives are ENORMOUS because of SBD. You really don't need much to survive in this world, which is why I'm asking you if you understand how much the rewards make people happy. Again, sorry. But I had to ask.
$0.36 under this comment, which today is $2.16. Write a few other good comments and you've got a day's worth of salary for many people. Is that not encouragement enough in your view?
Hello Bobby. In answer to your question, yes, I have. When I was in high school, my parents lost the house we lived in and we moved on to a boat. Food was donated to us and money was very tight. You can read the whole story here:
Living on a Boat for Two Years Shaped My Life.
That said, I won't get into a victim scoresheet process where my victimhood grants me a voice in any given discussion. Short-term, "poor" thinking leads to poverty. Long-term, "rich" thinking in terms of investment, time-value of money, compounding interest, understanding probabilities, etc, etc leads to abundance and prosperity.
Have you considered you may be thinking short-term which may actually harm the very people you want to support? If STEEM has gone up 46x and SBD only 7x, why are you pushing for the loser in that race? Why not further incentivize more exponential growth in STEEM which increases the entire rewards pool (both for authors and curators)?
I'm not ignorant about how some people's lives are radically changed here because of simple upvotes. I've tried to delegate my witness earnings to help support important communities here.
I'm all about making people happy and fully recognize how the rewards do that. I'm not willing to automatically assume a high, non-pegged SBD is the best way to increase those rewards and I've spent many hours making my case in the original post.
will vote for witness after this game, XD
I'm with you there about timing. I also don't think we have seen the effects of the current rate of printing due to steem prices rising.
About the influx of traffic, I don't think it's the high SBD. I think it's the visibility of STEEM in general due to both steem and sbd prices pumping. Most people coming here don't even understand how the two work.
Great post. You've pulled together all the resources and angles into one post which is a great repository.
I personally would tackle this problem with a stakeholder analysis first up and then try to find some sort of compromise between them. If you can't get people on board and agreeing to some commonality there will never be a solution.
I agree, looking at this in terms of stake holders is important, but I want to make sure we're using the correct definitions first so our premises can be accurately justified. The challenge with story telling in terms of stake holders is we can get caught into thinking correlation is causation. We might, for example, say "More users are joining now that the SBD value is high, so clearly we should keep it high to gain more users!" when the truth might more accurately be, "The rising value of the entire cryptocurrency market combined with STEEM / SBD being added to a Korean cryptocurrency exchange caused both to rise which increased the rewards pool and attracted more users because of their interest in cryptocurrency in general which increased due to the overall rise in the space."
Getting the definitions right is a good place to start as it makes sure the conversation is all happening on the same page and it's important to get the WHAT right.
I did a bit of a Stakeholder Analysis on this issue because I think it's important WHO is taking part in the conversation. I'd appreciate your feedback on it if you have the time.
Great post! I'll add a link to it in my root post. I like how you outlined the various stakeholders involved.
Thanks for taking the time to check it out, and for the link. Much appreciated!
SBD going back near $1 is one of my criteria to reevaluate my stance that we shouldn't convert now. I'm pro conversion eventually. Just not now.
Triggers:
SBD naturally falls back near $1
Coinbase wants to use us as a fiat exit
Ebay wants to price shit in SBD
Bittrex wants to replace tether with us
We hit a 10B marketcap
Doesn't have to be those, but those or something like it would make me reevaluate immediately. Those opportunities mark major events that would push the rise in steem over the current benefit of high SBD to posters.
Otherwise crashing the SBD market with this conversion now I think would cause harm to the network as a whole and I don't see how the millions, billions, or trillions suddenly materialize because we had a $1 SBD before and no one gave a shit.
@aggroed For those triggers to happen you need to fix the SBD peg first! Doh!
I'm not gonna use SBD as a Teher alternative if it is not dependable with its peg.
Same goes for Commerce. It cannot seriously get off the ground without a proven stable SBD.
If you're an ebay seller and want to sell a product for 300$ on SteemBay, with the current SBD it is a nightmare: you need to rely on a real time conversion system (ala BitPay/Coinbase), which still means converting to BTC (fees) then converting to FIAT (more fees) and all in a fluctuating market. Good luck with that.
Instead with a stable SBD I can set the price at 300 SBD (and not 50 SBD as it is now), and when I sell the product I can keep the 300 SBD in my account knowing my earnings will be unaffected by crypto market swings. And then the 300 SBD can be used at any time to buy products on SteemBay, without needing to return to the FIAT market! (no need to sell the SBD for FIAT= Steem Moon). This will be a game changer especially in heavily taxed countries.
The SBD has never been stable since it's conception, it has some stable periods...but that's not sufficient for a online shop to move it's operation to Steem unless the SBD peg is proven dependable . It needs to be within the narrow range as envisioned in the whitepaper.
Imagine a shop selling 300$ products for 50 SBD today, and then seeing the SBD tank shortly after. That would be immediate bankrupcy.
Btw posts are already receiving high payouts, the problem is that payouts are not distributed widely and always end up in the pockets of the few circle-jerkers. Overly greedy and shortsighted people are making us miss these big opportunities.
If the pegging had been done 7 months ago by now Steem would be among the top 5 cryptos and SBD would have been used as Tether alternative and we'd have a thriving market-place.
If SBD was stable right now I'd be using it rather than Tether which is untrustworthy, who wouldn't? This opportunity is probably lost though as new ETH based stable coins are soon to be introduced on exchanges.
I hope you enjoyed the SBD earnings, but you've done tremendous damage to Steem with your front page posts defending the broken SBD and you held us back. It's time to realize it.
Upvoted as a well-written and powerful expression of the "Pro Peg" case. I'm personally quite open minded about this and willing to consider both sides of the issue, but your comment has indeed swayed my views a bit in making clear in stark terms how ignoring the peg and savoring the increased rewards has come at a real cost, perhaps a catastrophic one in terms of lost opportunities now that we've squandered our early lead and competitors are arriving.
thanks. it was more of a disjointed frustrated rant, I'm glad I managed to somehow put some points across.
But I apologize to @aggroed for the tone of my post, I'm sure his posts defending the high SBD are NOT done with malice or nefarious intentions.
It doesn't have to involve malice to still do tremendous damage (and I don't think you suggested any). Often that happens with the best of intentions.
I kind of implied blind greed and author short term self interest as the reasons why he supported the high SBD, and I might be wrong on that.
That's a good point. But I still think there is a strong case that defending the broken peg with whatever motive has done a lot of damage, and your comment was unusually clear and effective in making that case.
To be clear though, I don't view it as primarily a personalized issue, if at all. @aggroed is not at all the only one making that argument and certainly is not personally solely responsible for where things stand today.
Let's try not to make unsupported claims about what would have happened in a could of, should of, would of way. We can't possibly know what would make STEEM a top 5 given decisions made 7 months ago. We also don't get very far as a community making direct, personal accusations unless we have direct evidence of malice involved.
Instead, let's try socratic questioning and let people make up their own minds. Is it possible @aggroed's passionate love for this ecosystem and community caused him to miss some important parts of this discussion? Maybe. Is he solely to blame for the price of STEEM (either up or down)? Clearly not.
Let's be nice. We can disagree, even passionately so, but when we throw out unsubstantiated claims as accusations, it just makes people defensive and angry.
I'd say it should go without saying the @aggroed has the ecosystem's best interest at heart and so do you, that should be obvious to everybody!
But in this particular case, I think he is the one making the more sober and realistic analysis.
You should always rely on a real-time price feed. Depending on the peg is suicide. Even running a shop that hypothetically accepts Tether without actually checking a live price feed would be idiotic. It would be just as idiotic to do that with SBD, even if it had a hard peg.
Shop owners who accept any crypto should have live prices to guard against people who take advantage of shocks in the market.
quote out of context.
I was not referring to live price feed conversion (this can easily be implemented into Steem or any wallet), but to services like Bitpay which convert (exchange) the paid crypto instantly into FIAT and which merchants rely on in the bitcoin world. This is clear in the part you omitted from my quote. ;) ("ala BitPay", "fees", etc)
Of course it is wise to always keep an eye on the real live SBD price, that's common sense. In any case merchants wouldn't start adopting SBD until it's peg was fully proven and battle tested. So even if the proposed changes were to be implemented tomorrow and worked in controlling the SBD price, it would be months before online shops would even consider using it.
Market swings of around 1% are probably unavoidable but they would not be that much of an issue, especially considering all the savings in fees and possibly taxes compared to the FIAT system.
If the SBD had taken tether's place then it would also take its place when authorities choose to take action against Tether for the creation of money and various other schemes they've been up to. You do not want to be in that position. None of us should want to be in that position.
And as far as pegs go, you must not be a very good student of economic history to not know that pegs go terribly, terribly wrong all the time, and are very exploitable and ripe targets for manipulation. If you know there is an infinite buyer or seller on the other side, and you outweigh them or even just whittle away at them over time, you can destroy them. It leaves us at great risk to attempt any sort of peg, and the consequences would be far worse than letting the speculators get burned.
For instance do you think China's peg worked at all? What good has that brought the world. Deflated wages for Chinese workers, their country's soil, water and air is in ruins, and they've burned up all their capital reserves. Add to that the amount of new debt creation they had to endure just to stay afloat and it's just a total mess right now, even if they can claim to have the largest economy.
Pegs always fail. Do not think otherwise.
You make some valid points. But the current SBD already has a peg mechanism when it falls below 1$ (Steem needs to be printed to keep it afloat). So the current SBD has all the disadvantages of a pegged asset without any of the benefits. If we are to keep SBD lets peg it properly, if not lets get rid of it altogether.
Regarding the risk of authorities getting involved ....Steem is a decentralized blockchain what can they do about it? The Steemit website may face a shut down, but decentralized apps like Vessel would still operate and Steem based websites will still operate outside US jurisdiction. Frankly I wouldn't be surprised to see Steemit relocate HQ to some cryptohaven like Zug, Malta or Isle of Mann. The regulatory framework in the US has become way too oppressive for innovation
Do you think the bitUSD peg is being manipulated or has failed or will fail terribly?
I am very, very uncertain about bitUSD's future, I mean I asked Stan right here on steemit about what Arise Bank's association with it is and he just vaguely said "on and off-ramps". That combined with what I've read about Arise Bank does not give me great confidence. And sadly for new users like me it's one of the few trading pairs we have access to off of the steemit website, so it's very troubling to me.
Literally every one of those items on your list except the first and last is guaranteed not to happen unless SBD becomes stable at $1 first. Since you saw fit to list them, you clearly recognize the importance of those opportunities and others like them to the Steem ecosystem. In order to have any chance to pursue them, we need to fix the peg first.
Read the post. The market conditions have changed dramatically. There was a time when Tether was a tiny little thing stuck at under $1 million market cap for years and no one gave a shit! Yes that's right, Tether went from $500000 to $1.6 billion. Likewise for BitUSD, NuBits and the others (though they are of course smaller; Tether is the current leader).
The answer to your (implied) question as to why this matters now when it didn't matter before is simply that it is 2018 now and not 2016 (however, I will say that even in 2016-2017, the Steem community was spawning its own SBD-based initiatives that could accomplish some of the same goals as items on your list, initiatives that were smothered in the cradle because we failed to act to fix SBD when it started to de-peg back then). The environment and market is completely different and the scale of the opportunity is vastly larger now. Given the other powerful attributes of Steem (large user base, ease of use, ability to on board users, speed and scalability of the blockchain, no/low fees, etc.) we are well positioned to pursue that opportunity but we have to fix SBD first, or we are just not even in the game.
I think you're right, because of the social media aspect we're still well positioned. Once the changes are brought in we can:
Normally it would take 6 to 12 months before anyone would trust a pegged asset with big money, especially after a somehow failed experiment like the SBD was. But if we are able to put across through the influencers the message that the SBD was only meant to be a coin with a 1$ floor (therefore pretending that it worked perfectly), and that SBPD is instead a new pegged stable dollar coin....then we can see adoption much sooner.
I don't know when the ERC 20 pegged coins will be production ready, but I believe because of the Ethereum brand they will be adopted immediately by the community. Ethereum has had more fuckups than any blockchain out there but somehow they can't seem to do wrong in the eyes of the investors for some reason which frankly I can't comprehend. Also their peg may be backed by real dollars in the bank (I don't know yet).
So it is possible that they might beat us in capturing the Fiat market on exchanges. Currently we only have Poloniex as potential market anyway. But for the retail and online shopping we're still in with a shot. Also lets not forget we have an internal market here on Steem which could skyrocket in volume.
To capture the retail market it would be wise to start already working on a SteemBay portal in preparation for the SBD changes. So it can launch as soon as the fork occurs.
Though it is very possible to imagine a future where retailers start accepting all battle tested pegged assets: OpenUSD, SBPD, ETHUSD, TETHER etc
Because of the integration with Steem social media and the 0 fees the SBPD could end up being the most convenient. Ultimately though no pegged asset can compete with a proven Dollar backed coin (meaning with dollars in the bank) like Tether was supposed to be.
So I might overstated the importance of having a properly pegged Steem backed Dollar, but we should at least give it a proper go. Even a small fraction of the finance and retail markets would bring enormous value to Steem.
Btw before announcing the replacement of the SBD with the new pegged Dollar coin it would be best to wait till it goes back towards 1$ so not to cause a major backclash in the market.
This is such an important point. We have to have a long, trusted history as a pegged asset before we'll be taken seriously as a pegged asset. It may take many months or even years and the longer we wait, the longer it will take to build that trust.
Daaaaamn. Either BitFinex is just friggen amazing at on-boarding new fiat into cryptocurrency or that sure seems like a nice money-printer they have there. Heheh... I won't get into that discussion here though. :)
USDT doesn't necessarily work the way people think it does in terms of so-called "on boarding" (i.e. people from outside crypto deposting new USD and getting USDT in return). It can also attract capital directly from crypto wealth and do so completely legitimately (i.e. without the rumors of fiat printing being accurate). Here's how.
Let's say people are selling their ETH, BTC, XRP, etc. (even STEEM) wealth into USDT, and this drives up the price of USDT (say to 1.01 or 1.02). Assume Tether/Bitfinex has $100 million of its own corporate working capital from VC, private backers, etc. They can use that $100 million to legitimately print 100 million USDT for their own account. At this point the printing is not fraudulent, fractional reserve, etc. because $100 million gets transferred from corporate working capital into the USDT escrow account. They then dump that USDT onto the market in exchange for BTC, ETH, etc., driving the price of USDT back down to 1.00.
Now the final step is interesting. Tether can take the BTC, ETH etc. they just bought and send it to a high-limit corporate account on a major fiat exchange, and sell it back for USD, replenishing the original $100 million corporate funds, to repeat the process again when needed.
I have a feeling this is actually where most of the USDT market cap growth has come from (assuming it isn't mostly fraud), but I have no proof it of, just inference.
Interesting. I question how they can keep printing new Tether and aren't burning it, but maybe that's just a sign of more people coming onboard. To my understanding, they can't print Tether unless it's backed by money in the escrow. If they keep printing, that implies real new money going towards the escrow, right? Maybe it's not "new" money, but money Tether/Bitfinex already has on hand, but it still seems to me when things fluctuate the other way, we should be seeing Tether burned and funds returned back from the escrow to BitFinex to cover real USD withdrawals. Maybe if the bull run turns bearish we'll see that.
Again it isn't a question of onboarding necessarily, just capital flows, and quite possibly it is because with $400 billion or so in newly-added crypto wealth the overwhelming majority of capital flows are from other highly-appreciated cryptos (BTC, ETH, XRP, many others) toward USDT not away from it. Also keep in mind USDT's role in trading pairs, which itself creates added demand for it (especially as USD price of the other coin increases; more USDT needed for buy orders). Also, to me it sure looks like many of the paths by which new outside, so-called "onboarding" capital is entering crypto have little to nothing to do with USDT (Coinbase, Korea, Japan, etc.). Or perhaps it is all or part fraudulent as many suspect. I don't know (and in some sense it doesn't matter; part of the problem with the non-trustless peg model is that it simply can't be trusted).
It isn't so much a matter of bull run vs. bear run as it is demand for stable crypto. It is quite plausible to me that demand for stable crypto has mostly just increased over the past year or so (and indeed this is mirrored by the other, smaller stable cryptos). But at some point when the demand for stable cryptos tops out and heads downward, there should indeed be burning of USDT.
By all accounts BitFinex's ability to handle real USD withdrawals has, at best, been greatly hampered by banking issues. So this path by which capital could conceivably exit USDT may be quite small. But in any case given the natural friction of exchanging between crypto and fiat (and relative lack thereof in exchanging crypto-to-crypto) it may always (or at least for a long time) be that the dominant flows into and out of USDT are between USDT and other cryptos, not between USDT and USD directly.
Or! ... The witnesses wanting this shit could come together and create a THIRD, off-chain, dollar-pegged currency and hop the fuck off SBD. :) Just a thought ;)
It just makes me so mad that a FREE, DE-centralized (not centralized) community is SO quick to hop on a controlled, socialist-like mentality to try and regulate shit - exactly which was supposed to be PREVENTED on this DE-centralized platform. It makes me sick.
@boobysteem if you want "free market" for SBD then lets remove the bail-out rule for SBD. let's see how long it lasts next time it drops below 1 $..
In case you haven't noticed Steem has to be printed every time the SBD drops below 1$.to keep it afloat. The SBD is already a regulated coin, just a poorly regulated one.
Dan, which I have immense respect for, got 2 things wrong with SBD : 1- the SBD peg isn't working as the WhitePaper envisioned . 2- the reverse converse is not exploitable anymore in the way the Whitepaper describes
Have you read the white paper? Do you know it was written mostly by an anarcho-capitalist (Dan Larimer) who is not, at all, a fan of the "socialist-like mentality" you're describing? What's the point of creating another currency that is pegged with two unpegged, speculative currencies? Do you realize how confusing that would be and how much coding effort would be involved?
If you understood the conversion mechanisms built into this system, you'd have to come to the conclusions they aren't "controlled" by anyone. They are all done voluntarily by individual market actors without any centralized control at all.
I want to believe you're working to bring constructive discussion here, but this comment looks like trolling. Please, read all the sources I referenced in my post and then we can have a more informed discussion about what's really going on here.
I'll answer your questions using points below here:
"It's confusing"
"If you understood the conversion mechanisms built into this system, you'd have to come to the conclusions they aren't "controlled" by anyone. They are all done voluntarily by individual market actors without any centralized control at all."
"they aren't "controlled" by anyone"
"written mostly by an anarcho-capitalist (Dan Larimer)"
Thanks!
I said two separate currencies would be confusing. People are already confused with STEEM and Steem Dollars. How would STEEM, Steem Dollars, and Steem Dollars For Real This Time not be more confusing?
Of course they aren't using it now. Who would? They'd lose out big time because it currently only goes one direction. That's why it was removed from the steemit interface. The point being, anyone can use it. It's not some lever that only some people can pull. As long as enough people use it, the peg will be maintained (at least when it drops below $1).
Can you explain to me how that would happen? Do you really think witnesses would risk their position by doing something 500k people who voted them into that position wouldn't want? The whole point of this discussion is to figure out all perspectives for what's best for the network. There's a sound argument that we've lost quite a bit a money for everyone involved because we didn't fix this sooner and instead Tether went from $500k to $1.6B.
So Dan's opinion, considering he's no longer involved in STEEM, is more valid that the existing 20 witnesses and all the supporters and users we have here today? How is that decentralized? If the network sees the value in a pegged asset and wants one, then the Steem Dollar should be it, as designed. If we can do that after it naturally corrects back down to $1, why shouldn't we? That's what this discussion is all about.
I gave a shit. I gave many shits, aggroed. Heheh.
I hear what you're saying though. We can't assume a conversion would automatically increase the value of STEEM (even though it's a compelling story, in my mind). At the same time, we can't assume the high SBD value is what is getting people excited about Steemit right now when it could just as well be (and as smooth argues and I mentioned in my post) more of a result of STEEM itself growing in value which increases the reward pool for everyone.
Those triggers sound mighty nice to me.
Do you have concerns about SBD going higher and making it even harder to bring the peg back in play? If not, why should we even bother with SBD at all? Why have two speculative tokens on the STEEM blockchain if we're going to abandon the peg? I'm also curious what you think about the argument that some in developing nations really do need and highly value a stable currency. For them to hold their money in a speculative cryptocurrency doesn't make sense if they have bills to pay.
"concerns about SBD going higher and making it even harder to bring the peg back"
Literally what is written here is this: "Do you have concerns about making too much money which makes it harder to become POOR again?"
These whales and witnesses literally don't live in real life and can therefore afford to DESTROY millions of dollars. Why? Because "muh fiat currencey!"
Nice.
The more comments of yours I read, the more it looks like trolling. Did you even read my post? Did you even consider the possibility that the single greatest way to help the poor would be by giving them a stable asset to trust in while also increasing the value of STEEM which increases the entire rewards pool they enjoy?
What bothers me most about your comments is they seem to imply malicious intent where there is none.
@aggroed you may want to read what I mentioned to @lukestokes about yourself helding a panel with the top 20 or 25 witnesses specifically only to debate about the SBD.
This is something important I thin, very important to be discussed and people hearing the witnesses opinions will see the side of each, and then people can take their voting opportunities to see whats best to do.
Looking forward to your thoughts!
Regards, @gold84
Not all the witnesses are native english speakers so I'm not sure a panel discussion is the best way to flesh out this issue. Reading just my post on video took me over 21 minutes. This isn't a simple topic to be figured out on a short-from panel discussion. This should be done carefully and methodically with data-driven, well thought out proposals.
You are totally right @lukestokes ! Perhaps a panel can be done at the end, once everything has been analyzed properly as you mention. Or perhaps no panel is needed. Just thinking in a loud voice, and trying to find ways to help.
Regards, @gold84
I don't thing it should be pegged right now we should wait and watch little more
Never peg!
Why? Please explain yourself. Explain how those who are literally dying in Venezuela would not benefit from a pegged, free-to-use cryptocurrency they could put their life savings in? Explain to them why a speculative investment makes more sense? When SBD goes from $12 to $6, explain to them why they just lost half their life savings.
I've just been half hoping in the corner that some SBD whales were gonna buy giant chunks of STEEM in the internal market and drive the price of Steem way up in order to get the SBD value closer to a dollar... wishful thinking.
That said, a floating peg seems very hard to maintain theoretically, but would be well worth it in my opinion. Gives a better sense to newer users to understand the value of a post and see intrinsically what they earn. Should also add more liquidity (nominally, if not actually) to our internal markets.
I shudder to think how much liquid STEEM and SBD sits in Poloniex and Bittrex.
Great discussion, as always @lukestokes.
There are no SBD whales, at least not within the community. Everyone here has just seen the SBD pump as an opportunity to grab some extra money by selling it off to speculators. When the speculators are done, they won't be using it to buy STEEM on the internal market, they will just dump it for BTC or fiat on an exchange and move on to the next game.
Essentially all of it (at least 80% if not more), because it has lost its utility for anything other than price speculation. There used to be people on this platform who held it for its price stability on this chain rather than cashing out, and services on this platform which used it as a stable value token for buying services. Nearly all of that is gone, with nearly all SBD drained off to exchanges for speculation. At least for now, hopefully we can soon get that utility back and more in the future.
I used to use @tipu often because it was fun. Now, the price is just too high and the value of my tip is too unknown. It's quite sad, really.
Oh yeah? You've been hoping thatSteemians become poorer? =) Interesting mentality
Seriously, I'm about to start flagging your comments. This isn't 4chan. If you want to troll, go somewhere else.
Please mathematically explain how I said that.. you've activated my almonds.
Thanks Blake.
As for the amount of STEEM/SBD out there, I run a weekly exchange transfer report so I see it first hand every weekend. It's a lot (which, of course, we can verify just by looking at their wallets on the blockchain).
I have a question: Why the fck does ANYTHING "need" to be "done"? What the hell is "wrong" with a STEEM price of $6 and an SBD price of $6-$7? Is this somehow bad? If yes, then why (the fck)? I'm sorry guys, but it makes me extremely mad how people on here want to regulate sh*t like some politician - EXACTLY the reason why people fled to Steemit in the first place! Most people here are libertarian anarchists who don't want economic regulations and price-controls, so I now ask you why in the world people are even CONSIDERING this. Please respond, because my anger is bubbling over.
Again, a price of $6 and $7 in TWO SEPERATE currencies is such a tragedy, right? I mean, seriously, guys? Are these people mad? Are they masochists? At least help me understand. Maybe I'm missing something, but I'm literally unable to find a fraction of a reason to try to STOP something literally amazing in terms of economic development. My brain has imploded...
I think you misunderstand a few things. First thing, there is nothing socialist/communist about creating a pegged asset. Those systems are based on people sharing resources, usually executed through a coercive government that forces compliance.
I'm assuming that when you use those terms you are referring to force and coercion? But that is still not the case because no one is forcing anyone to use steemit, steem, or sbd. The entire system is completely voluntary and we can all do what we wish as long as we follow the rules. If we don't like the rules, we can leave. One of the rules is that we can vote for witnesses and the witnesses can decide on rule changes.
Second, sbd are designed to be pegged at $1. That is the whole point of them. They are are debt instrument. Steem was designed to have the "steem" token that would rise or fall in value based on the value of the community and the "Steem Backed Dollars" (SBD) that would be a stable store of value. There is no point in having two currencies that do the same thing.
The only reason SBD are so high right now is because people who are buying them and holding them don't know or understand that the value will be driven back down to $1 over time. Once they realize that, the value will crash back down. How will everyone feel when suddenly their savings in SBD are wiped out when the price crashes back down? Keeping a good peg will prevent that confusion from happening. The average person shouldn't have to worry about how high or low SBD are from day to day, they should just be able to trust that it will stay at a stable value.
Right now, SBDs are in a bubble (true value at $1, market value $6) that will eventually pop. Creating a peg will stop a bubble from forming in the first place.
I am enjoying selling my SBD for these high prices as much as anyone else but I feel bad for whoever I am selling them to, they are going to lose a lot of money.
(I posted this on your blog post too but I thought I would reply here as well so more people can see it.)
Your brain is doing something alright. I've responded to you numerous times already, so I won't repeat myself here. It's clear to me from the comments you're making you don't fully understand what's going on here and your pre-conceived notions of control is causing you misplaced anger. Maybe go for a walk, get a glass of water, take a few deep breaths and then sit down and read the white paper a few times. My post outlined the potential issues and lost opportunities for the entire ecosystem when we continue on with a broken peg instead of pushing that value into STEEM and out of SBD. If my post wasn't helpful for you, then I'm not sure I'm the one to help you further. I've done all I can do to start with definitions and first principles and then move forward from there.
You mention libertarian anarchists which is a label many would apply to me as well. I'm no fan of the myth of authority nor do I want tribalism. What is frustrating to me is that you're attacking something here which is fundamentally voluntary. There is no "centralized control" as you keep describing. The proposal of a two-way conversion is something individuals, not some central authority) control.
If you have thoughts on this, please, post your first full blog post and explain yourself. You've been here since July of 2016 without posting a single root post. From that perspective, you're not even contributing to the community. Please, get involved and contribute and then your voice and opinion will carry much more weight based on the value of your contributions. That's how voluntaryism works.
There are certainly a ton of really good ideas thrown out there in this post. I think that pegging SBD at 1 usd while either dumping the extra weath of the 6-7 dollar price into steam or continuing to pay out accordingly with multiple SBD per one Steem would work- if what I’m saying is clear.
Both would make sure those who have been getting paid, continue to make a steady income..and also help the things aforementioned.
This was a nice look at SBDs - this is the first thing I’ve read/ listened to that was this in depth.
Thanks - super awesome.
I agree, it could work. Only the word "work" in this context means making everyone seven times poorer. So yeah, if that's your goal, it could probably work. =) Hey, maybe we should meet up and throw all our money in the river while we're at it? Or put it on fire over the open grill? I mean, it probably works, since money easily catches on fire and gets destroyed when soaked with water and all. It's worth a shot, right?
Thank you for saying so. I hope it was helpful. It was surprising how long it took to organize my thoughts on this and then record them in a video (I ended up recording it twice because I didn't like the first one). Then it took hours to upload and process.
This is truly the type of content that is worth curating and following here on steemit.. we all know that’s there is plenty of spam and reward pool “raping” that it makes it hard- or takes a long time for quality content to be recognized. Anyways- your hard work doesn’t go unnoticed.
Thanks. :)
I made a pathetic attempt to post about this earlier, so you can imagine my delight discovering your well written and thought out post on the subject. Now I can just resteem your post to express more on the subject of SBD as a pegged asset. Thank you for letting us know where you stand on this subject as a witness.
The funny thing to me is reading through the comments, some seem to think I’m in support of some drastic change which would “steal” from SBD holders. I would never want to make some drastic change which could hurt the entire ecosystem and yet some are convinced that’s what I and the witnesses want (even though I specifically said in my post it’s what I do not want and would not support unless the majority of the community forces the issue by unvoting witnesses unwilling to support the peg with a drastic change).
Wow, this is such a thorough explanation and has really helped me understand this whole situation so much better. Thank you for taking the time to really explain this in a clear, readable way. I'm learning so much from you!
Thanks, sister. As you can see, it's a very passionate discussion. :)
I hope I don't come off as whiny, I just try to wrap my head around this by voicing my concerns:
A healthy economy is an economy where wealth is distributed from the bottom. In order for wealth to be distributed from the bottom, the majority of the wealth has to remain at/with the "bottom" (in circulation). Apostophes because I refer to bottom as the majority of the community/population, as opposed to the current world economy where most of the wealth resides with the top 10% (fictive number, but you catch my drift).
To achieve this with STEEM/Steemit we need to have a catch up mechanism in place that over time closes the gap between the big fish and the small ones. We got this in a non pegged SBD.
And now you advocate to take it away.
This whole situation is very interesting from a political viewpoint because it is in effect a conflict of interests between the whales and the rest of the community. By pegging SBD to the dollar you harm the rate of growth for a large part of the community, effectively enhancing the divide between big fish and the small (assuming the whales are not vote trading most of their voting power, in which case this divide will persist regardless).
And divides like this are not healthy in the long run.
I am still trying to learn about how the things works. It was an interesting article and I enjoyed reading the post. I am still in learning phase so maybe it'll take some time to understand how things works beneath this blockchain. But there,s one thing which keep popping in my head is that " If Steem is trying to peg the SBD at US $1, why they can't just remove SBD's from all the exchanges ( I maybe naive ), it will stay away from speculators and price won't fluctuate and steem could control it with internal conversion. But if we are trying to peg it after it's getting listed on various exchanges it will be very difficult".
"Earning 7 times more is such a tragedy" - is basically what I'm hearing from the whales in favor of this seemingly mad idea.
They want to make people poor to satisfy their goals. People like me will have no choice but to power down and find other ways to make income aside from Steemit
Yeah, I know. It's a crazy and destructive idea and I hope it NEVER comes to fruition.
I'm powering down and leaving Steemit. If the witnesses get what they want and I'm sure they will get their 1$ SBD , then there will be huge consequences and it'll look like another Bitconnect. This isn't decentralized. Witnesses are like the Feds, having control over a market, the power to destroy it. If the reverse conversion happens, what makes you think they won't do the same for Steem to hyper inflate it? Lost of trust. I'm sorry, I loved Steem, Steemit in the beginning and had great times here, met great people like @steemitqa though to me Steemit is going downhill. It won't be just be me leaving, many others will
The witnesses want what's best for the platform long term. Why is this in question? To compare STEEM to Bitconnect is absurd. Witnesses can't "control the market." How would we? Why would we implement a policy the community doesn't want which then lose us our position as a Witness?
"They want to make people poor" is such a gross misrepresentation of reality. It's truly discouraging to see. Please, read my post again and understand I'm trying to make everyone here rich. A broken peg may not be the best way to do that, nor the best thing for those whose local currency is completely broken and they need something stable in order to build a functioning economy. Increasing the rewards pool by increasing the value of STEEM might be the best forward, especially if that speculative token has a stable place for them to store their value.
artificially controlling a market is never the answer
Which market is artificially controlled? Are you saying the pegged floor of SBD is a mistake and SBDs shouldn't exist at all?
Do you think bitUSD is an artificially controlled market or a well-functioning pegged asset backed by real collateral value?
I really don't understand where you're coming from. If you have some reasonable evidence to support your claims, I'd enjoy seeing it. All cryptocurrency markets get pushed around by whales, but you seem to be directly accusing witnesses of something nefarious. I want to know what that is.
We can't control what exchanges list, nor would we want to. This isn't about centralized control, but about providing individuals with tools to profit from speculators who, as the white paper describes, are "manipulating" the SBD peg. If we allow for a STEEM -> SBD conversion, more SBD will be created which will eventually drive down the price to something stable. Other assets like Tether and bitUSD (and all the others listed in the paper I included in my post) have done it. We can too.
Oh thank you, I got to know more about Dan's vision about steem, in the post you have shared ... I could minutely understand why peg is important ... and steem could be in future if everything worked the same way as it was planned ... but I just wanna add something ... if people need to work on the pegging they should delay that a little bit... cause high sbd is attracting people to this platform maybe after we have acquired 20 million and more, they could start working on the vision. cause by then we'll have several marketplaces here on top on steemit like steemgigs and more, and people we'll be willing to have a pegged currency at place.
Disclaimer : I maybe Naive and I haven't read the whitepaper
What if those marketplaces won't form without a pegged asset to support them first?
Why is it high SBD attracting people and not high STEEM which has more impact on the total rewards pool and post payouts?
By far the best post discussing the sbd peg, yet. Thank You, Luke! One factor I would love to see some statistics on is how much value is being added to steem itself because of the failed peg. Surely users are powering up more now than, ever. This is a boon, in the short run of things.
It's really hard for me to imagine any kind of stable peg in the type of market we currently face. In the next few years I expect the market for the largest tokens to stablize quite a bit. But we may be chasing the dragon on this atm.
This is a hell of an article/post. Honestly, I understand the issues at stake very poorly and really haven't any strong opinion on the matter.
I've been studying on it for quite some time, enough to understand how it's currently working...
Ultimately to maintain a peg, I believe, we would need a dynamic volume of sbd. Inflating supply as more demand is put on it, and deflating supply as the demand weakens. Allowing conversion both ways is a mechanism that would allow for such a thing..
the problem is that those conversions are up to the will of the user base. Even allowing for reverse conversion, it would (I believe) require a number of users with high liquidity who were determined to maintain that peg. We would also need to be able to trust that users wouldn't use that reverse conversion to take advantage of the blockchain. In order for it to work properly I almost imagine a governance being necessary for the maintenance of the peg via conversions rather than leaving it to the users at large to implement.
In the very short term, the converters could do so at a profit, but they would quickly begin to "lose money" by converting Steem to sbd, while increasing the value of steem (by reducing supply)....
The more I think about it, this might be a perfect opportunity for the 1% of steemit to reduce stake a bit while boosting the value of Steem as a whole, by enabling a peg, while reducing how "top heavy" Steem currently is.
Lots of thinking left to be done on this.
Will be grateful for corrections or furthering the thought process.
What are some of the ways you think this might be possible?
The whitepaper outlined that pretty well. The way I see this working best is via some governance method as I suggested above. Trusted individuals who's role would be to maintain the peg via conversions... Then again, one would thing any large stakeholder willing to convert large quantities of Steem to sbd would be inherently trustworthy. Would we need to pool Steem together from said stakeholders? Does it all just work because individuals volunteer to "sacrifice" large portions of their Steem for sbd? Would this voluntary system then empower "bad actors" who don't choose to do conversions to have a much larger sway over the rewards pool? Or perhaps Steem itself might volunteer to convert a large portion of stake, thus allaying investor concerns of a disproportionate control over Steem?
Current market cap: $49,144,061 USD
Minus Current supply of SBD: 7,099,445
-------------------
41,840,540 % $6.4 (price of steem)
Steem required to convert to peg : 6,537,584.375
likely much less as market reacts.
help me out if I did that wrong
I don't agree that it did.
It assumes that a trader who 'sees a big spike' not only knows that the price is going to go back down but that it will go back down in precisely the right rate and timescale to line up with the 3.5 day price averaging window that is built into the conversion process. What happens if the spike was actually the first leg up of a big bull run and is followed not by the price going down, but by another big leg up? The trader loses his or her shirt.
If this were a real issue (it isn't because no one can predict prices that accurately), it would already exist with the SBD to STEEM conversions. A trader who sees a big spike down could convert SBD to STEEM at the low prices and profit as the price recovers. That doesn't work either.
The mechanism of not setting the price for some time in the future is quite effective in combating these schemes.
No, it is assumed (reasonably) that people would buy up STEEM to convert into SBD. It is a good bet when SBD is worth more than $1 that converting $1 worth of STEEM will be profitable. Is it guaranteed? No, because SBD may not be worth $1 by the time the conversion finishes, or because the STEEM that was converted might then be worth more. But it is a good bet and people able to take the risk will do it.
Not necessarily. Prices fluctuate and it doesn't necessarily translate that way. Today when SBD fluctuates from $7 to $6 or from $7 to $8 that does not mean that millions of dollars were poured into it or drained out of it. That could be a much smaller amount being exchanged among traders to set the new price.
Shifts in supply and demand are what moves prices, not necessary a set market cap difference being spent. The actual amount needed is impossible to predict. The best we can do is have the right mechanisms in place and give them an opportunity to work.
Yes, may be a way for some to reduce stake and therein diversify themselves, but overall the process sounds more intricate and requires more diligent consistency than a lot of seemingly haphazard things that occur here, not sure if there can be enough consensus to implement competently, imho. Ty
Yes, may be a way for some to reduce stake and therein diversify themselves, but overall the process sounds more intricate and requires more diligent consistency than a lot of seemingly haphazard things that occur here, not sure if there can be enough consensus to implement competently, imho. Ty
Agree with these thoughts as well. It may be that steem and SBD are such a small ecosystem at this point that it really cant support a peg. I also was thinking of the term "chasing the dragon", I would hate to see such an important decision rushed.
It may not be big enough yet, but the flip side of that is if SBD grows too much more and continues to increase in value, will we completely lose the opportunity and have to make a tougher decision in the future if we do want a stable peg? Also, if the peg is fully broken for a long period of time, why would this blockchain even bother having two speculative coins? It's just confusing.
The challenge with statistics to create stores is, well, we're still stuck with stories. Those stories may or may not directly be proven by the data. I think it's quite difficult (impossible maybe?) to know exactly how much the high SBD value is impacting things verses the whole STEEM ecosystem driving things up on it's own both in terms of user adoption and rewards pool value via an increased STEEM value.
We may be chasing the dragon, but I also think if we start now and show a long history of something that actually works and secure, that's really valuable. This is world domination stuff after all, right? :)
Yes, and because of this post I'm finally starting to grow the whole idea a bit better. Way to post this as I was about to go to sleep :)
Hahah. Get some sleep man. The blockchain will be here when you come back. :)
Hi @lukestokes
I think that plegging SBD to the US dollars is a great idea.
First because SBD brings also confusion to new users that are coming on Steemit.
It is supposed to be valued around 1$ and then it is worth around 7$. I heard of people struggling to understand why they should buy Steem and not SBD and oppositea and not understand how this is supposed to work.
Second, Tether will collaps and we need to enter the market. As you said, people need a pegged assets because it's a safe heaven during crash. And the Steem blockchain will be more than able to handle the new upcomings transactions when crash occurs. The free fee will be also a positive point for new users.
I definitely support your thoughts.
Joris
I think many agree a pegged SBD makes sense. The trick is getting there without screwed anyone over or angering people who really do enjoy high SBD values right now.
Hey @lukestokes, I read your article this morning, thought about making a whole post about why a well pegged SBD is beneficial, but your comment here sums it all up. There is already consensus in the witness ranks leaning towards a well-maintained 1 SBD = 1 USD peg. The discussion is only about when and how to enforce + how to smoothly get there without screwing anyone over.
This tells me:
I think this is just another very fine testament on how open, transparent, efficient and well-thought out governance can be executed in a DPOS eco-system. This is what happens when the incentives of users, stake-holders and developers are in alignment!
I'd advise Bitcoin to take notice, also some governments could learn a thing or two here. It's beautiful.
:)
I'm a huge fan of DPOS.
Thanks for laying that out in terms most can understand. The issue is most users don’t want the price to fall and will consider a peg at $1 or even $2 to be heavily undervalued given recent prices!
I understand that, but for some who rely on a pegged asset because their own national currency is out of whack, what can we offer them? They have to leave the ecosystem and go to bitUSD or Tether because they can't handle the fluctuations from $8 to $6. Also, to me, the value lost in terms of SBD could be recovered with an increase in STEEM which increases the reward pool for everyone.
Instead of one SBD worth $7 on the open market (but still $1 worth of STEEM as far as the blockchain is concerned), I'd certainly prefer people get 7 SBDs worth $1 worth of STEEM and $1 on the open market.
I agree it has utility but see is as very problematic to implement. It is supposed to be pegged now yet clearly isn’t. Added to the fact that people would reject the idea as anyone holding SBD would lose, I don’t see it going anywhere. Unless you propose a peg at a higher level than current prices. That is likely to be popular. Or perhaps an agreement that SDB will be pegged at $2 on date X but can be redeemed at current value as SP up until that date?
It works on the downside. But nothing for the upset. Ideally, I'd like to implement something in the future that doesn't hurt people now. To do that, we may need more SBD printed. A reverse conversion might help with that.
I think this is a more important question than most people on here realize -- and also a little more complicated than most people (myself included) realize. Firstly, I'll admit that I'm (in my own eyes at least) still super new here -- but I've been actively trying to wrap my head around everyone for about 2 months now. That being said, I have thoughts on this that could go for either side of the argument -- and I wont pretend to have any sweeping conclusions.
There is aboloutely no question in my mind that stability would be a good thing. I'm a civil engineer when I'm not pretending to be a rock-climbing on Steemit, so I interact with a fair amount of people on a daily basis that have lots and lots of resources. The number one thing I hear from every single owner of infrastructure, or land developer, or whathaveyou, is that they want to try to minimize risk as much as possible.
Currently, the volatility of crypto is general isn't doing itself any favors for mass adoption. In the case of STEEM, when I first approached it, I was confused for quite a long time by the concept of SBD's. I've been trying to convince a lot of buddies & co-workers that they should get into STEEM while it's still early adopter, but they're all very put off by the crazy volatility, and the generally confusing roles that SBD & STEEM play in the ecosystem (remember, I'm working with engineering professionals).
My generally thoughts on the matter, I think, can be summed up in two or three points:
I'd like to finish my comment by reiterating that I'm very new to all of this, and this is just the opinion of an average Joe, while he sips beer and gets ready to write his daily climbing post (shameless plug to yesterdays post).
Doing an airdrop of SBD on everyone is quite a radical solution and probably not something I'd consider stable. I can imagine people (especially speculators on exchanges) would freak out about that and it would probably seriously damage the reputation of the STEEM blockchain. It's certainly an interesting idea to radically fix the peg though. I often use the word "interesting" for things that I would never actually do in real life though. :)
I agree, we should always be focused on minimizing risk, especially systemic risk. I also think stability is really important and the broken peg right now with prices on posts that don't make sense really add to a lot of unnecessary confusion. Hopefully we can fix that going forward.
Thanks for commenting.
Hey if you say thanks for commenting -- I should say thanks for listening.
I agree that doing an 'airdrop' (awesome name, btw) of SBD is a radical solution. I'll admit to personally having some left leanings in my line of thinking (I also have the fortunate situation of not living paycheque to paycheque), but I am curious to hear why you think it would be an unstable solution -- the overall value of everyones 'total number of tokens' would stay the same, and SBDs are pretty divisible already, aren't they? There's little doubt in my mind that you know what you're talking about and have thought about it extensively -- just curious.
Also -- in my line of work (I deal with a lot of municpal infrastructure that people interact with extensively) people are often freaking about changes. And I'm compelled to ask:
At some point, ideally, Steem should become something more than an investment platform, shouldn't it? Is it not supposed to be, first and foremost, a 'decentralized content curation platform'?
EDIT: I should clarify my last question as: "Is it not supposed to be, first and foremost, a 'decentralized content curation platform' -- so then would it not be best served by becoming as immediately accessible by as many creators as possible via stability?"
The 'unstability' of airdropping SBD is that it sets a precedent, making the future outlook for the system completely unstable. If loads of SBD just fell out of the sky today, who says that won't happen tomorrow?
Also, the value of any crypto-currency at the moment comes from supply and demand on the crypto markets. Therefore being an attractive investment opportunity benefits its users immensely (it simply makes the rewards for content curation and creation higher).
Revolutionary and principal about Steem is the fact that rewards in crypto-tokens are built into content creation and curation. You can imagine that the value of those rewards (i.e. the value of the tokens) is vital and a driving factor for adoption as well.
On the STEEM vs. Steemit question, this post may help: STEEM Is NOT Steemit. STEEM Is More Valuable Than Steemit.
As for leaning left, you might enjoy these posts:
When it comes to cryptocurrency, the commitments made to investors about the supply is one of the single most important promises made. When a token violates that trust, it can hurt the community for many years. It's certainly not something anyone who understands the economics involved should seriously consider without very, VERY careful thought. Even then, I have trouble thinking of a situation where it would be justified unless it avoids some type of systemic risk which could destroy everyone's value.
Thanks for taking the time to ask these questions and follow up in discussion on them -- I appreciate it, have found it very informative, and have given you a vote for witness because of it.
I've seen a couple UBI posts floating around -- thanks for sharing these other ones. I'll definitely give them a read.
Thank you for your support. :)
Now I am beginning to grasp the SBD /STEEM stuff after going through the post and comments. It is beginning to sink in. You are one of the witness I voted for and you know what I'm glad I did because you care. Thank you for being you.
Thanks for saying so. :)
IMO, steem price high because of sbd being manipulated or being adapt massively.
1 is to 1 doesn't really happend to sbd, well, If we think 1 usd is = to 0.80 sbd is not really 1:1 ratio, or 1 usd is = to 1.20 sbd.. i've seen that many times.
Once the token was in the market, the traders makes what is the value that asset. if we want a fixed 1:1 sbd, then it will not be a decentralised anymore. We will make a centralised exchanger that it will not rise or down the value of sbd which is pretty hard to do.
you are correct about lots of steemians do care so much of rewards, that only covers the greedy whales, maybe a 35% to 25% from dolphine to orca to whales who have lots of steem power. But in the eyes of minnow and redfish, it does not affect especially those beginners and earns $0.50, $0.30 of their post unless rely on bidbots.
in the other hand, the effect of drastic rise up of value of sbdm brings back the inactive steemians and gain more attention to the world that steemit is worthy enough to invest with.
If sbd doesnt spike that $7 currently and strong to not go back to $1,, Do you think STEEMIT will be hot now as of back October or november were lots of steemians start to power down and leave steemit?
It may pose a risk knowing sbd is pegged to $1 yet surpasses that, but it gains so much attention and bring steemit to high level as of now.
A two way conversion,? I dont know how that gonna work or does it really pose risk instead to the current event in steem/sbd price.
I'm curious why, in your evaluation, it's all about the rise of SBD and not the rise of STEEM? As I mentioned in my post, STEEM has gone up 46x and SBD only 7x and a rise in STEEM increases the entire rewards pool payout amount, not just the SBD portion.
As for bid bots, be an owner, not a renter is my perspective. I've never used them. Building value here is about reputation and relationships with rewards coming later.
I totally agree with you. From your point of view, I totally understand the original post. Thank you! It's best when the market forces are left untouched.
in what I have observe, the massive upwards of steem was drive of sbd.
In june 2017, steem rise up to $6 in a second but fail because sbd was $1.
why is that, Lots of people are holding already steem in hand. either liquid or lock up.
when Sbd spike at December, maybe because of manipulation or massive adaption, we can't deny that steem follow the spike not because it was manipulated, but because of what sbd's surging price.
I doubt steem value will remain $5 strong in weeks or months if sbd is just $1. thats my observation.
it's the scarcity of sbd makes it value skyrockets.
if your are not convinced about this, let's see what will happened to steem value without sbd or sbd at $1 only.
Wow, thank you so much for this comment @albertvhons! I've been sending SBD a couple of times to Bittrex and selling em there at $8, $10 and once even $13 per SBD, constantly wondering:
"Who are these people, paying more than 1 USD for an asset which is described in its own whitepaper to be worth 1 USD worth of Steem???"
But reading your comment, now I finally understand some would just correlate the success of the Steem platform to a high SBD price.
I do have a question for you: do you also consider the USDT (Tether) at $1 to be 'cheap', or 'a buying opportunity'?
PS Personally I think Steem value will go to $100 with SBD at $1 only.
But I am fascinated by your position on this matter.
Which would probably be a mistake and a misunderstanding of the actual economics at work here. Please see my reply to the comment you also replied to.
it could be true or not
I also understand your point view, But let's accept that steemit.inc love the high price of the steem/sbd.
It is not true that 1:1 ration to sbd/usd coz it is not the steemic inc gives the price-but the market.
What you gonna do as the current moment of high sbd price to make it 1:1?
1:1 of sbd/usd fail even the first it was implemented. Why, We know crypto was heavily paired to btc, if btc fall so as the value of sbd.
Now, about your view of sbd correlation to steemit success, we may say that it does hold any solid evidence that it was, but Is it not?
With all due respect sir, This is the beauty of decentralization, Let's becareful of changing what is current price of sbd now,
I do believe that sbd was created for the success of steem. COz if not, why create sbd.
Because a pegged asset is valuable. See the "world domination" post I linked to in my original post.
I doubt that! We must weigh the total supply of steem compared to sbd. You can't leave sbd $1 and wanting steem to go $100 with so much steem supply. the reason why sbd surges up because nobody stacking sbd. You can look up it's total supply less compared to steem.
IMO. tether will always be pegged to $1, They can simply issue tether and reissue again without informing us. Compared to sbd, With limited supply and can be created "only" via post rewards.
The time scale on your charts does not line up.
sir @smooth, the chart doesn't tell everything, Please look at the date between june to august of steem and sbd. And you will find out That steem fail to hold $6 to $4 in a day while SBD is at $1. and that's the chart all about.
We may say that as Korean people adapt steemit, it also the start of steemit success to the moon in terms of price, let this be a blessings in disguise,
I think you're falling for the correlation is causation trap. Please, please, please, be very careful about the information you share and the conclusions you come to without solid premises. Many people see pretty graphs and think, "Oh, I get it now! It all makes sense!" even though they are just being told a story. Unfortunately that can lead to actions which end up hurting people, even when the intentions are to help.
Comparing the initial spike in STEEM price to what is happening now is completely unjustified as the inflation model was entirely different as was the marketcap and the entire cryptocurrency environment, not to mention the initial pump that follows many new project launches.
Thanks for this. To be honest, it is above my head but glad its being discussed with transparency. I'm just glad my initial investment appears to have been a worthwhile investment and I have an interesting blogging platform to use for my personal benefit.
I have said this elsewhere.
SBD should be pegged, else, why have it. Just give everyone STEEM for their SBD.
Should we do this peg now? I wouldn't. I would wait until this market cycle is over. There is too much up pressure on SBD right now.
And that up pressure will have to be taken into account in any future convertibility factors.
I would suggest a way of converting both directions, but it should be lossy. As in, if you convert one way, then back, you lose 1%.
There's been some discussions about the conversion being lossy, but if we add too much resistance to it, I think people will decide not to use it and choose something else like bitUSD.
I wonder if this market cycle will end or if people will just keep pumping SBD up. From a certain perspective, it's a better token than BTC (lower supply, free to transfer, 3 second confirmation times, hard floor of always being worth at least $1 USD in STEEM, etc).
IMO we can start with a lossy (spread) conversion and if it turns out that everything is working great but the only problem we still have is that he peg has only a bit too much slack (which would still be such as huge improvement from the status quo obviously) then we can tweak it again to tighten/remove the spread. That is a a relatively small change.
Yeah, I do like taking steps to make it safer if and when we do implement something. Paying a small price to do the conversion may be a good way to introduce it. It's still possible some systemic risk exists we haven't yet seen and would only find once we see it in production (unless we develop ways to model this ideas effectively beforehand).
I think considering indeterminacy due to Steem price fluctuations during 3.5 days of convertion no average user would ever pay attention for 1% extra spread.
Average users aren't really the price setters though. That's more a function of what bigger traders do and bigger traders will pay attention to it. I still think a small spread is okay, and can be reduced/removed later if it isn't.
Yes, I fully agree that this option is going to attract big traders, probably even traders from the outside of the current Steem ecosystem.
It's sort of introducing 'futures market' or 'prediction market' for Steem. I wouldn't be surprised to see really big volumes converted back and forth.
So I feel like we could demand some contribution )
Thanks for the transparency @lukestokes. I did what I felt would be the most helpful thing for you aside from upvoting (already did). I voted you for Steem Witness. I hope you represent us well and thank you for putting time making this an improved community.
Thank you so much for that. I really do appreciate your support.
What's the better authority on value - the market or the whitepaper? Isn't it the market? If it's the market, than the whitepaper is a very weak argument, isn't it?
A stable pegged SBD asset might be an asset someday if we keep growing. But the growth is currently fueled by the high SBD. And let's be real, commerce on the blockchain is pretty much non-existent if you don't count the meta businesses and steem isn't really being adopted by exchanges the world over as is. Why would we implement something to stifle our growth, decrease our market cap and in the worst case scenario (which I think is very likely), create and artificial crash and destroy investor trust?
I think people should worry less about the intent of the creators of the blockchain and more about what the market has found value in.
Do you have evidence to back this up? As I mentioned in my post, STEEM went up 46x compared to SBD only going up 7x. The value displayed on a post payout is what matters to most people psychologically. That number goes up (i.e. the rewards pool goes up) when the value of STEEM goes up. I'd argue most new users don't even understand what a SBD is or how it's valued on an external market.
You did see in my post about how Tether grew to $1.5B in market value. Aren't we ignoring that market signal by not fixing our own peg and marketing it as a much more attractive option for exchanges and investors? Tether can't be trusted or audited. Ours can.
Seems to me, if people could make money converting STEEM to SBD, that would increase demand for STEEM and increase the market cap (STEEM) which actually impacts the rewards pool payout amounts according to how the blockchain functions.
Investors are investing in STEEM.
Speculators are speculating on SBD even as the supply is increasing and no one is converting SBD back to STEEM to decrease supply.
It's not about "the white paper" as much as it's about a broken functionality on the blockchain. Either it should be fixed or removed. If we remove it, then we lose a potentially huge opportunity in the pegged token market. I don't think ignoring that opportunity is good stewardship of this ecosystem.
Yep, Steem broke into never breached before price territories only after SBD exploded. The 46x vs 7x is correct only if you look at a time frame that doesn't make sense to look at in this context. Look at only the period for which SBD was pumping and see if that correlates to growth in Steem. You will not find Steem outgrowing SBD there by any means and there is nothing like a 46x growth for Steem there. To me this is either an irrelevant or a misleading figure to put into this discussion.
It takes only 7 days to understand that you are currently making significantly more than what the post displays. That is the psychological effect that makes people tell their friends to join. We are seeing unprecedented growth in new signups and activity. Do you dispute that? Isn't the data clear on that? Do you think we'll retain that if we create huge changes that destroy a lot of that value people are seeing? What would the psychological effect of not getting what you used to get up until recently because "the government of the blockchain" decided you don't deserve it anymore? You can bet all your Steem on a lot of churn if that happens.
That can be true only if they continue to trust the blockchain. I have no doubt that a portion of the investors will view the blockchain as untrustworthy after implementing such a huge change with the flip of a switch and would not care to get involved in neither Steem, nor SBD. And with money flowing out of the system because of that, would the conversions be enough to take care of the problem?
Broken is correct only if you care first and foremost about the vision in the whitepaper. The current setup is working to our advantage as of now and swooping in to destroy that makes no sense. Even if we assume that there is something broken, one should select a time to fix it that would not create other problems or mistrust in the blockchain itself. Things should be fixed in a way that doesn't
When pegging the SBD becomes necessary (and it will), we need to be careful as to not only WHAT we peg it to, but also WHEN we peg it to.
If pegging to the USD, I would peg it to the purchasing power of the USD of 1912.
That would make the SBD have the purchasing power of about 185 USD today.
Pegging the value of a currency to the PRICE of a currency which a governent/corporation can devalue is utter madness.
Pegging it to the purchasing value of a given currency at a specific time in the past is the only reasonable solution in my mind.
That's what HERO has done, and it's certainly interesting but not useful for most of the people who rely on USD for daily purchases (both in the United States and in other countries which peg to the dollar). We're trying to come up with something reasonable and if most merchants have goods and services they have to pay for directly, saying "this token is worth 1 USD" is the easiest approach, not a token which requires some math to figure out today's value.
In the future, as USD becomes less relevant, I'd be all about pegging to something else. Maybe a basket of currencies or SDRs or gold or silver or something. The point would be to pet to whatever most people are most comfortable using.
You take away the current price of SBD and put it back to 1usd...there goes the majority of steemians. Don't expect minnows that make cents and a few dollars to stay on this platform if the SBD is pegged.
@lukestokes: I have a very simple idea, but I am not an expert and thus not sure if it is working together with the existing rules:
Allow the individual user to freely set the ratio between SBD and Steem for rewards. Up to 100% SBD is allowed.
Fix the inflation of steem and keep the inflation of SBD variable.
If the SBD price is above 1 USD, people will ask for payouts 100% in SBD
Inflation of SBD would increase, hardly any new Steem would be issued.
This would result in significantly increasing vote values - and the amount of SBD issued would increase even more.
I am pretty sure that this would reduce the value of SBD to 1 USD pretty quickly and automatically.
What do you think?
Good suggestion and you can see that I suggested that in the github issue that was linked from the post. However, it has downsides in that liquid rewards don't encourage people to have a stake in the platform, as intended with 50/50 or 100% SP.
Note that we already do have a version of this. People choose 50/50 when SBD is more valuable and often choose 100% when it is not. So the supply adjusts, just not very much and not quickly enough.
I've heard this discussed as well, but here's my main concern: The blockchain itself is secured by SP holders voting in competent witnesses. If we disincentivized holding SP, we could in theory decrease the distribution of SP which could be seen as a decrease in decentralization and thus a weakening of the security of the blockchain. For that reason (and the no-commitment / spam concerns), I’d be strongly against a full SBD payout option. I think it could potentially create systemic risk by creating too much SBD too quickly. Maybe if we designed it in such a way that the payout option, on a blockchain level, is only available when the price of SBD is too far outside the peg... but that adds other complexities, like witnesses providing a price feed on SBD as well as STEEM.
I think that this would not create a problem. People would want to be paid in SBD not because they like the SBD but because it is the more profitable option. They would get SBD - and quickly transfer it to steem. Steam price would increase relative to the SBD, SBD would fall. People wanting to be paid in SBD is in my view not equal to people wanting to own SBD.
What about those who need stability? Either because they have to pay for real world services or because they are poor and should not be risking their value on speculations?
I think there would very soon be stability - because people would realize that the mechanism which brings down the SBD price is too strong to speculate against. At least I would think it would work like this.
I think we have to accept that all we can do is creating a mechanism which results in a peg if people react rational. For a real peg, you would have to make sure that the value at any tie is really worth exactly 1 SBD. For this to reach, there needs to be an arbitrage possibility. For example if could would have the opportunity to create new SBD at any time by paying 1 USD and to get your 1 USD back it would certainly be closely pegged to the USD. However, this is not possible and wanted I think. The only other way is to create a mechanism which is sensitive to the USD.
I think, if you would pay out the SBD part also based on its USD value as you do with steam, the price would sky rocket even more because inflation would go down massively.
I think pegging SBD (i.e. allowing SBD/Steem conversions in both directions) would be abused. For example, manipulators could pump Steem and then instead of dumping Steem they could convert Steem to SBD without worrying about market forces dropping the price of Steem during their conversion (i.e. dump) to SBD which would leave the Steem community holding the bag. I think the author of the Steem whitepaper probably realized this when they wrote, "If people could freely convert in both directions then traders could take advantage of the blockchains conversion rates by trading large volumes without changing the price."
I've been citing that quite often as well, but @smooth made a great point in response to my pointing this out. The short end of it is: it actually would be hard to abuse, especially with the 3.5 day delay. And the proposal includes a spread/fee that goes back to the STEEM blockchain, so perhaps it might be made to work.
I've commented independently here as well, but I'm more concerned about the ratios of SBD vs the STEEM market cap.
The kind of abuse of the two way conversion that I was thinking about couldn't be prevented with a 3.5 delay or a spread/fee. For example, as a crude example to illustrate my point, if someone had $100 million to execute a pump and dump/convert, then on day 1 they could buy $20 million worth of STEEM and start the 3.5 day conversion process on that $20 million worth of STEEM, and do the same thing on days 2, 3, and 4, and it is reasonable to assume that buying $80 million worth of STEEM in 4 days should result in the price of STEEM rising quite a lot, and then they could use their remaining $20 million to buy enough STEEM to keep the STEEM price propped up as much as possible at the elevated prices until almost all of their 3.5 day conversions of STEEM into SBD completed at the elevated STEEM prices. At this point they could sell whatever STEEM they bought with their last $20 million before the end of day 7 which is when the first wave of power downs would hit the markets (i.e. the surge in the price of STEEM might encourage some people to start power downs to try and get some profits but they have to wait 7 days for their first power down). I'm not sure how much the price of STEEM would go up if someone were to buy $80 million worth of STEEM in 4 days, but even if the price only went up by 50%, then this crude plan could still probably turn $100 million into at least 125 million SBD. However, the scary part would be if someone could execute this type of plan and manage increase the price of STEEM by 5x or 10x and complete STEEM to SBD conversions at those 5x to 10x price ranges because that would turn $100 million into 500 million to 1 billion SBD. This is like a "pump and dump" except it is a "pump and convert", but unlike a pump and dump, the pump and convert wouldn't need to con people into buying offloaded STEEM at pumped up prices because the STEEM would be dumped through the STEEM to SBD conversion process which would leave the Steem community left "holding the bag". In the crude example above, $80 million worth of STEEM could be dumped into SBD without directly affecting the market price of STEEM. This is one of the things I think the author of the white paper may have been warning about when they said, "If people could freely convert in both directions then traders could take advantage of the blockchains conversion rates by trading large volumes without changing the price."
This is an interesting exercise. I did suggest pump and dump type but I did not really think through the whole scenario. To summarize into steps:
This carries a significant amount of risk as stated, because SBD is not guaranteed to hold its value during this time. To complete the cycle you need to try to exploit the reverse conversion. Let me try...
Let's say P(t) is the STEEM price feed over time.
The amount of STEEM you just gained is now whatever difference you were able to manipulate the price of STEEM by. The scary part here is the SBD price does not factor into this scheme at all! Even if you add a spread, as you say it may not help here.
Hmm.. I can't seem to find a flaw... it's possible that it's not that easy to pump and dump STEEM with STEEM being more mature. The motion of steps 3 and 6 may also end up in a local loss for that amount too? I'm not familiar with how pump and dumps work in general, but my impression is that you need tokens with sufficiently low circulation / trade volumes to carry out the scheme.
The scenarios we are discussing really do illustrate how easy it would be for someone with a lot of money and a little bit of thought to exploit the reverse peg idea that is currently being considered by witnesses.
Regarding your comment about it not being easy to pump and dump a mature cryptocurrency such as STEEM. I agree, and I think it would be nearly impossible to make a profit pumping and dumping STEEM by buying STEEM on the markets and then selling STEEM on the markets. However, the reason I think a pump and dump like that won't work isn't because the pump is difficult because anybody with a huge amount of money could easily pump STEEM. The pumping isn't the difficult part, and the problem with the pump and dump is that once you've pumped the price of STEEM up, then you wouldn't be able to find enough people willing to buy STEEM from you at the pumped up price. You couldn't exit your STEEM position without crashing the price. However, the reverse peg idea currently being proposed makes the dump a very solvable problem because you wouldn't have to convince a single person to buy your STEEM at the pumped up price because you could just dump your STEEM at the pumped up price on the Steem blockchain by converting it into SBD, and the only challenge you would face would be to keep the price of STEEM pumped up for a 3.5 day conversion process which shouldn't be overly difficult since most STEEM is powered up and it would take at least 7 days for 1/13th of it to hit the markets. Also, you wouldn't need to sell a penny worth of the STEEM you bought on the markets. In my crude example I didn't get into how you could cash out of SBD, but if you were able pump STEEM up to 5x or 10x and turn $100 million into 500 million SBD, then I don't think it would be too difficult to get roughly $500 million back out over time especially if the SBD is designed to be pegged at a dollar.
Oh of course... SBD being pegged would certainly make this easy to cash out over time. So that really would be enough then. I am now realizing that the reverse direction conversion really is not symmetric at all to the forward conversion because the price feed is on the steem side. Wow.
About my scenario, it's a fun cycle scenario where you can keep multiplying the steem holdings, and tanking the price is part of the scheme. So if tanking the steem takes even less time/volume, you end up with much more steem.
I feel these scenarios need to be addressed before anyone agrees to this.
I have been collecting our discussion into another post which I hope to augment soon.
Your cycle scenario provides a nice window to see the major problem with the proposed two-way SBD peg which is that conversions (even very large conversions) can be done without directly impacting the market price, and this is the feature of the two-way SBD conversions that can be exploited.
I find it interesting that your step 2 conversion is essentially selling STEEM without the sale directly impacting the markets and your step 3 is buying STEEM with impacting the markets.
I've also written a separate post related to what we've been discussing, and I think it can be helpful for people to see both your example of how to exploit the two-way SBD as well as my example.
I agree this issue needs to be addressed. We're doing our part with trying to get the word out there. It would be nice if someone could make a cartoon video explaining the problem in simple terms that is easy to see visually.
as long as we have things like tether in place, crypto will never take over the fiat world in its entirety. Its sad that people think a safe place to put their money during the dip is tether. Doing so just impedes the ecosystem, it doesn't improve it.
I can respect that perception, but I don't think I agree with it right now. We're just barely getting started here in terms of world population that's in cryptocurrency. Until it's completely ubiquitous, expecting stable cryptocurrency at this stage isn't realistic (yet). People still need to pay their bills and such. Poor people especially should not be gambling with speculations. They need something stable to keep the lights on and right now, that's still the USD for most people. If we can get a stable peg, we can speed up the conversion process to cryptocurrency.
Hi @lukestokes, this will take me 2 or 3 more sittings to go through all the comments. So, apologies if these points have been covered already.
I wrote about this here and here.
Firstly, I'm not sure why you say that conversions are only in one direction. Go to the internal Market and one can freely exchange STEEM for SBD and vice versa. Indeed, when SBD spiked in December, there was a point when about 8 STEEM could be bought for each SBD. Having such a lucrative trade suddenly available meant holders of SBD who participate within Steemit could power up at a very attractive rate. The trade itself slowly created the re-balance between the two currencies.
What I am seeing is that any very profitable trade quickly becomes known, and as more people do the same transaction the prices reach a new balance.
So, although this does not appear to have been the plan within the White Paper, what I am seeing is that the "peg" is not between SBD and US$, but rather between SBD and STEEM. Possibly an unintended consequence, it strikes me that having two currencies is proving to be a useful buffer.
These are still early days and we are seeing changing dynamics happening with price changes. I would not change any code until there is enough data to see clearly how the market adapts to these changes.
The internal market counts as a swap, not a conversion. A conversion will destroy the input token and create the output token. How that affects the market is slightly different.
The peg is most definitely not between SBD and STEEM. The underlying mechanism is the feed price which is how the witnesses determine how SBD is printed and converted.
By the way, high steem prices means more SBD is being printed. Long term there is natural downward pressure on SBD price.
OK, thanks, now I get why "conversions" are spoken of differently to just trading the two currencies internally.
Hello @lukestokes
I would like to add an economic view on the discussion, based on fiat currency economics. I think it is a needed perspective, since we are talking about how Steem economics should works. Could you take a look?
https://steemit.com/witness-category/@phgnomo/sbd-usd-peg-taking-exemples-from-the-real-world-economics
I've just picked this topic up in my most recent post concerning the liquid steem author rewards and i've linked to this post under "further reading"
You've got my vote-for-witness! Way to go, being unbiased, reasonable and educational on the matter!
Well... I think the time may be here?!
I wish, but unfortunately the market still wants to drive up the price of SBD:
Until people stop doing this, then any attempt to fix SBD will be considered manipulation by those who benefit from it free-floating. It's a challenging problem to solve.
Yeah, I guess it's tricky politics.
The way the markets will react to these mixed rewards might even drive it up further considering the supply is getting constrained... meh
Shamed be he who thinks evil of it.
Thanks for your support on my post!!
If they Peg SBD to 1$ or 2$ ...what will happen to we the minnow.. Not even a full minnow like to say "Steemit Kid" that have not to depend on when we are not capable enough to purchase STEEM and we depend on the 0.01$ low Upvotes as little penny we are using to maintain ourselves..... They are many whales out there who are only after themselves when we the nothing are much this plenty..
Steemians like @surpassinggoogle is trying so hard to adjust the newbies With less payouts but he can do it alone. I wish am also like him with huge Steem power to help and let people benefit from, I also want to curate and promote and also to bring up the newbies if I have Steem powers or someone to sponsor me, I WANT TO HELP.
You can check this post I made for the newbies not quite long out
https://steemit.com/introduceyourself/@gprince/short-message-for-newbies-and-everybody-on-steemit-currency-currency-don-t-get-discourage-and-have-hope
Now The Question is
What's gonna happen to Us the Steemit Kids when steem rises and sbd peg to 1$?
or it will be better SBD is totally cancel as payout and start using STEEM instead.
very interesting explanation I like it @syampadusen
Quite a read. I don't have a big opinion of it, as I have little SBD and steem, but I'm always content to vest steem with a higher ratio than the SBD I traded it for since my curation rewards aren't that great.
Bitcoin price has decreased for the last few weeks.SBD and STEEM value is also increasing and decreasing.
Hi Luke, coming from an economics background, I've penned a post on the SBD peg - how it should have worked, why it is not working, how to get it working and whether we really want the peg.
You asked the question "Are pegged assets valuable?" IMO, the answer to that depends on whether users of the asset value its stability. If SBD is only meant to be a short-term asset, kind of like loose change in your pocket, and people convert SBD to other cryptos or Steem upon having enough of these small change, then the price of SBD does not actually matter that much. I'm only holding on to a small amount of SBD at any point in time, a fluctuation of 10% affects my $5 holding by a small amount.
Currently, the peg is broken and has been for a long time. Once people stop believing in a peg, there's no reason for it to hold anymore. There is nothing inevitable about the peg just because it's announced, but the platform is not willing to take costly and painful measures to defend it. Once nobody believes in the peg, it then becomes profitable for users to hold on to SBD as an investment for short-term gains if I think the price will rise in the future.
In short, maintaining a peg is not a cost-free measure. That's an idea that seems to have been missing in a lot of conversations about the peg.
Thank you sir ammazing boss
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It is about making you think from a different perspective..
It is about writing without any expectations of UPVOTES..
Excellent post good analyses thanks for sharing.
Even if, peg it after steemit went out of beta and has started to dominate the cryptos scene, not now
But what if having a working peg could bring us to that domination that much faster? If Tether dies, there will be a lot of people looking for a stable option.
A slow but steady growth would be cooler than a bush fire. I think steem and sbd should rid their bitcoindependency first so people can buy and sell steem directly. Bitcoin is dropping again and steem follows
@lukestokes FYI the video link won't work, it says it is restricted. I'm not sure if anyone else is having issues watching it?
Works for me.
must be my computer. thanks for the reply
Odd. I wonder if they are blocking it in your country or maybe a local thing based on an internal network? I'm curious if it works if you try to view it directly on YouTube?
It was my computer that was the problem. It works when I try on my phone.
I should have tried that before commenting... I thought YouTube must have been feeling threatened by the steem blockchain and putting restrictions on you 😉
This is why it's important to vote for witnesses. Because even with you explaining it, it still kind of goes over my head a little bit. I am happy either way, whatever is best for the steem blockchain. Of course I and many others are thoroughly enjoying the high SBD price, but I do appreciate the discussions going on, I like to at least try & get a better understanding of what is going on with steem. Appreciate it! This is why I vote for you ^_^
I usually try very hard to simplify these complex discussions and break them down in simple terms so everyone can grasp the idea. In this case, I found myself wanting to unload the whole discussion from start to finish so that those who are discussing this topic the loudest can at least work from first principles and really support their positions with reasoned evidence. That made this post much more difficult to follow than I usually go for. Thanks for putting some trust in witnesses that earn it. We are working hard to earn that trust.
Very interesting post friend thanks greetings support me with a vote
What are the risks of a reverse conversion if the SBD market cap does grow and take on a BitUSD or Tether type role?
I recall in the days when Steem was very low in value and dropping, no SBD were printed and burning of SBD was encouraged to keep the debt ratio under control which was always regarded to be a very small % of Steem market cap. What are the economics of having a large amount of debt hanging over the Steem asset?
In general though, I agree with the sentiment of defending the peg or eliminating SBD as having no purpose without a peg.
The expectation is that profitable conversions from STEEM to SBD would tend to increase the price of STEEM because people would buy up STEEM in order to convert, and in doing so reduce the supply of STEEM on the market. In the situation you describe (taking on Tether with its $1.6 billion market cap or even its lesser cousins) would be very strongly bullish for the price of STEEM (increasing its market cap and allowing it to support more SBD at the same ratio).
So it would effectively work like SMTs in terms of economic impact on Steem, with all money passing through Steem.
Does the internal conversion process create a form of smart contract where the Steem is held for conversions back the other way, similar to OpenLedger assets on Bitshares? Or is Steem actually burned/lost in any way with redemptions later being filled with new Steem?
In a sense, SBD is a smart contract but it is hard coded (I guess in Bitshares that is the case as well). The STEEM that backs outstanding SBD is accounted for in the blockchain
virtual_supplycounter. When SBD is created (currently when posts are paid out, but if conversions could do so then via those as well), the STEEM is moved to virtual supply and when SBD is converted back to STEEM it moves back out of virtual supply and into total supply.Yes, early on when the amount of SBD in existence (the debt) was too high, things had to adjust. Going the other direction, I don't see too much of a concern unless someone did a coordinated attack and tried to convert so much as to create too much debt right away. Again though, the 3.5 day conversion time and the high market cap may not make that much of a concern.
Tether will implode, taking down all prices and many exchanges with it.
Many economies have imploded in their futile attempts to maintain currency pegs.
Don't be like those other economies. Learn from their lessons.
There is some truth to this statement as well because I tend to favor the peg but I see the reality of trying to control the "beast".
To me, the difference here is we're using STEEM to do it, not some made up currency we print out nothing. If the STEEM supply goes down to create more SBD to cover demand, then in theory the value of everyone's STEEM goes up. In a way, it's still somewhat of a closed loop between STEEM and SBD. The only difference (again in theory) is that value shifts away from SBD into STEEM (or the other direction) whenever SBD is not in line. The thing which keeps this in place is individuals taking advantage of an arbitrage opportunity via the smart contract conversion. It's hard for me to see where the cost is to do this, other than for the speculators who buy or sell too far outside of the $1 peg range.