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.