Lately there has been discussion around SBD which should be a token pegged to US dollar. The peg hasn't been holding very well. The situation isn't catastrophic because the error has been in the upper side (SBD is worth more than one dollar), but the system is still broken, nonetheless.
Root cause is the fact that the amount of SBD doesn't change according to the supply and demand of the markets. There has been a lot more demand for SBD so the price has gone way too much up. If the Steem blockchain can't print more SBD when there is more demand, the peg won't hold.
But if the blockchain starts to print more SBD, there is a systemic risk. If the price of steem goes down, the liability for backing the SBD token will be much bigger.
The usecase for a stable cryptocurrency is to help normal people to use it as a currency. Most people aren't interested in using very volatile currency in daily activities. SBD was supposed to help with this. But so far we haven't seen market places or any other real usecases for SBD although it has been existed for more than a year.
So we have two facts that speak against SBD: it can't hold the peg, and pretty much nobody is using it for what is was created for.
And here his a third. A while ago @dwinblood wondered where have some of the anarchism/voluntarism celebrities gone. It seems that they were motivated mostly by money, so when the price of steem went down, they didn't find writing here profitable enough anymore.
The dollar sum indicating how much a post has earned goes down when the price of steem goes down. I think we have now pretty good evidence that when users see dollars, they think in dollars. They forget that they earn also steem tokens which will become more valuable if the demand goes back up someday.
The funny thing is, those successful authors who left the platform when the price went down, would have multiplied the value of their earnings if they had stayed and taken their rewards in SP instead of SBD.
But they didn't do so. Why? Because the dollar amount in the posts is so misleading. It's depressing to see it go down.
The solution is simple: Ditch the SBD and start paying rewards only with steem and SP.
When there is no dollar amount in the posts but steem amount instead, it doesn't change everyday depending on volatility of the price. What you see and get is the amount of steem that you are rewarded by the upvotes. That is more accurate showing you if you have been successful because you write so well. Currently authors can have a fake feeling of success just because they wrote their piece when the price of steem was high which made the dollar amount big.
Now you could be developing as writer and become more successful in here, but you don't really see and feel that because your rewards depend more on the price of steem than your writing abilities and popularity.
When users start to think in "reward points" (in this case steem tokens) rather than dollars they will become much more engaged. They don't get discouraged just because cryptocurrency markets happened to go down when they wrote a few good posts.
Because I don't see any good reasons to have stable cryptocurrency on this platform, I suggest we remove it. It will make the user experience better, remove unnecessary systemic risk and make the system overall simpler.
I see that @ned resteemed this post. I would like to know if Steemit, Inc. agrees with this assessment...that SBDs should be removed. This isn't the first time that they've shown interest/support for calls to eliminate SBDs. Rather than remaining quiet/silent about it, why not state their position and engage in the discussions?
I think these repeated calls for eliminating SBDs are absurd. There's always some reason or another.
When the STEEM price was low and the debt ratio was high, everyone panicked about it and wanted to eliminate SBDs, even though the peg was held.
When STEEM prices are higher and SBDs are trading at a high premium, people are now calling to eliminate them because "the pegging is broken."
What has been true since last fall is that SBDs can be bought/sold for at least one U.S. Dollar. There has been a stable floor for the token. That was the primary intent for it. As long as they're worth at least one U.S. Dollar, I'd say that the experiment with them has been wildly successful. Eliminating them because they currently trade at a premium is just preposterous, in my opinion.
We need long-term thinking here. These reactions to relatively short-term price fluctuations in STEEM/SBDs really should stop. And Steemit, Inc. putting weight behind some of the calls/panic is a little unsettling, to say the least.
It's fine. For now we can give it some time to correct itself naturally, now that there has been a constant supply for a bit. If it still trades high, a mechanism like the one @timcliff made a post about could be an option.
For the reasons why it should be kept, I left a handful of comments in this post: https://steemit.com/ned/@krnel/ned-on-sbd-does-the-community-want-to-continue-to-be-paid-out-in-steem-dollars
I've noticed that it's movements are kinda correlated with bitcoin's movements. If it keeps this correlation, a very large and fast drop in bitcoin's value could mean a fast drop in sdb value, which could damage the peg, and harmfully affect the ecosystem.
Of course, this analysis could be inaccurate, as steem's price and the entire crypto currency market's market cap are also correlated in the same way, so it might be connected to other price movements. But it still raises the same fear, could a sharp drop in another currency cause a sharp drop in SBD value, damaging the peg, and thus the site as a whole?
What could be done to mitigate such connections in the future?
Are you talking in terms of USD value or BTC value? Its price in BTC is meant to inversely correlate with BTC's USD value.
The SBD is a token that can be converted (with a 3.5 day delay) to roughly $1 worth of STEEM. It is this guarantee floor that keeps SBD pegged from below. The theory of pegging from above comes from emission of SBD. If over time it's observed that the pegging pressure from above is inadequate, then we can address that with a limited STEEM->SBD conversion option.
But for now, because of the botched reward pool migration in HF17/18 happening concurrently with irregular market conditions, the recent experience with SBD price isn't enough to say "let's kill SBD." We're on track to it normalizing.
I meant it's movements, with respect to the dollar, correlate proportionally with bitcoin's movements with respect to the dollar. As bitcoin rose, SBD lost it's peg and rose above the dollar. Then, as bitcoin traced back, SBD started falling back towards it's expected value.
I guess the peg from below is a lot stronger than the peg from above, that does make me feel better about it.
I doesn't correct itself naturally because the pegging mechanism doesn't work. It lacks a proper feedback loop to print more SBD according to the demand. SBD demand doesn't have any direct feedback mechanism to encourage more supply.
Total SBD amount is directly linked to the price of steem. To fix the mechanism, it should be directly linked to the supply and demand of SBD. That's the way to achieve price stability.
A major factor of why SBDs ended up losing their peg upwards is because the supply was severely restricted for over a month thanks to the poorly implemented transition of the reward pool. That context should not be ignored in the recent price history of the SBD. Now that supply has returned, we are seeing the value of SBD come down closer and closer to where it's meant to be. Have patience :)
Even if we take that into account, the feedback mechanism for adjusting SBD supply is still far from perfect.
If you think there could be a better way to address SBD supply, why jump straight to the conclusion that SBD has got to go?
I gave also two other reasons: nobody is using it in commerce and paying rewards denominated in dollars distorts users perception of their success on the platform.
There are many reasons why this has not happened on a larger scale yet, but just because there isn't a large STEEM/SBD economy right now isn't a reason to scrap the SBD token.
As I wrote in my post about this - we shouldn't be reactionary to short-term issues. We need to think long-term.
Also - there isn't much commerce...yet. I'll have an announcement this week that will hopefully start moving things in the right direction.
To the first of those reasons, give it some time. Things happen fast in this blockchain world and it takes time for things outside of it to keep up. Patience is key.
The second issue does exist to some extent but it's not a huge problem and does in no way justify removal of SBD in my opinion. The reasons to keep SBD over this are far and away heavier on the scales.
If you're still looking to support commerce, here's something you can get behind. It's what I alluded to a few days ago.
https://steemit.com/steem/@bloggingforbeans/blogging-for-beans-a-coffee-venture
Right on, @timcliff's idea is perfect IMO. It's an elegant solution that doesn't require any huge changes.
Steem dollars were never meant to peg strongly to the dollar. Dan always said he EXPECTED SBD to carry a premium and that it was meant to as often as possible be a weak peg with a premium essentially.
If u want a tight peg go with bitusd and other bitassets.
Having sbd removed imo is the worst idea there is. Simply because if u have steem backed dollars...EVERYONE knows what dollars are and that this association in and of itself is a huge marketing and mass acceptance bonus.
I've used to think this way. But not anymore, because I just don't see any evidence of this. It hurts the marketing by attracting low quality users and causes suspicions on potentially great users.
I see no evidence of what u say. :/
But i still love u :]
Indeed. It makes sense that an author's worth will be evaluated both by their ability and long term investment. Steem Power does exactly that. I also think that there should be a choice (perhaps a mini exchange widget within the wallet widget) where the user turns their Steem into SDB.
You may be right that we don't need the SBDs.
However, I don't think there is a need to ditch SBDs if the only reason is to display the rewards in STEEM.
I think that changing the display of rewards to STEEMs may be done now, without the need to ditch SBDs at the same time..
Displaying in dollars is a better way of fulfilling Steem's mission, which is to get every day people onboard and using a blockchain. Grandma doesn't care what STEEM is and has no association with it being anything of value. $ = dollar, money, value, etc.
I don't think so. Displaying dollar can be misunderstood, as I suggested here:
Thanks for linking this, I had forgotten it.
Yes. I like seeing dollar Signs!
Sure. I am not saying that we SHOULD ditch the SBD.
What I am saying is that there are two separate issues.
IF we were to ditch the SBDs, the display for reward
$190.48
could be changed to:
191.03 STEEM ~ $190.48
In fact we could do that now.
In all honesty I don't think Grandma is ever getting on this site. I have to explain from letter A what Bitcoin is to multiple people a day. I am SHOCKED to see how many people have never even heard the word. Circling back to Steem, the difference between Steem, SP, and SBD is highly confusing at the start and I've helped build a few websites. Grandma has no chance. I think I change to showing Steem for value would actually be an improvement. We can only hope Bitcoin continues to have market penetration to pique individuals interest in dipping a toe in other crypto or platforms.
There are multiple grandparents on this site. :) Some of them have not touched anything regarding smart money /cryptocurrency until getting their Steem account.
:) You know what I meant. But in regards to your last point...fair enough.
I'm one of them also.
I was just reading up on witnesses. I saw that you are one. Any guidance on getting in the mix? I would love a Layman's Term link or quick message about what I would need. I'm 4 days in but I plan on continuing to be more and more involved. This possibly could be out of my level of expertise/time commitment. I am completely fine with "its a lot more involved than it looks" comment. I will have to find other avenues to get more involved. Thanks
I disagree with this. By focusing on making money we are getting lots of low quality users. People who just want to get rich quick and do not care about the platform itself or the community. They will leave when they see their rewards going down, just like what has happened.
I think it has been really bad move marketing-wise.
We can't have majority of the people, like grandmas, until we have enough early adopters. To get more early adopters we need to have high-quality community.
Focusing on rewards that have value is focusing on the major selling point of Steem for now. The reality is that other websites have Steem beat on UI and network effect. This can change with better UI and more users down the road but this is the territory we are in. To hide away Steem's killer feature for adopting new users that have no experience with decentralized smart money platforms would be a mistake.
I'm mostly repeating myself here. I've made these arguments before in my comments when this was first given a serious discussion. https://steemit.com/ned/@krnel/ned-on-sbd-does-the-community-want-to-continue-to-be-paid-out-in-steem-dollars
I'm very well aware of those arguments, I've used them also in the past. But I think it's time to admit that we are not seeing any merchants adopting SBD as a currency. There is no other use besides cryptocurrency speculation and that's not a core business of Steem.
And what I'm saying is that it shouldn't be. Users who come because of money are too low quality to be good early adopters.
Focusing on money has caused some bad publicity and made good people suspicious about the platform. For example: Andreas Antonopoulos and Publicism.
Even if we change the display currency, the problem will still exist if users are paid with SBD.
Hm... Guys. If there is choice between @timcliff's proposal of fixing the SBD peg by making it more complex and removing SBD interely, then I'll choose get rid of SBD, instead of adding additional risks for platform.
Luckily, we don't have to choose, so let it be the status quo.
It's settling down. I don't think this last aberration is proof that it's a bad idea.
It's a proof that the pegging mechanism doesn't work.
because we didn't had any mechanism for pushing price down. We just need to add what timcliff proposed, and thats it.
Market demand trumped price controls. What a surprise. But that demand bubble is tapering off rapidly. I do like the volatility mitigation concept even if it doesn't entirely work as planned.
The pegging mechanism should work in different situations, including the one we are in now. Of course nothing can guarantee a perfect peg but if the price is seriously off for more than 24 hours, the system is broken.
So there has been huge demand for our derivative token in recent months, but it's a problem because of a display issue which we could easily fix on the front end?
The extra purchasing power of the SBD is more a benefit than a problem. The display and perception problems can be tackled on the front end before you eliminate one of the central premises of the system. The high price is evidence of high demand for the product. It would be shooting ourselves in the foot to eliminate a high demand token from the system.
Quite right.
These are two different problems that could be fixed by removing the SBD. I generally support simple solutions that affect more than one problem.
I agree that the brokeness of SBD hasn't been catastrophic (so far), but it's still a problem. If there is no price stability, SBD won't ever going to be used in commercial markets. It will stay only in the hands of cryptocurrency speculators.
And our users would have benefited more if they were paid with steem instead of SBD. With SBD they made only modest profits, with steem they would have multiplied the value of their earnings.
Yeah, there is high demand. But doesn't mean we should be serving that market. By keeping the system simple we can focus on the most important things. It's a common mistake for startups to focus too much for anything that seems to get some traction and forget the fundamentals of their business. The derivate markets are not and shouldn't be a focus of Steem.
I don't think the dollar amount shown on a post does any favours for steemit as a serious blogging site, I would rather a more discreet value indicator.
SBD is doing just fine.
So far I've made quit a bit of money just trading on the difference between it and steem
it's not broke...so don't fix it.
Congratulations @samupaha!
Your post was mentioned in my hit parade in the following category:
I am kind agree with you. The only benefit of SBD is flooring rewards for authors. But its cost is quite bigger (i.e. publishing price feed, adjusting witness policy, additional selling pressure when STEEM price is going down, etc.). By removing SBD, we can remove large proportion of complexity.
Pegged asset sounds sweet. But in fact, it is basically a community money as well as STEEM. For instance, ETH person never uses SBD even though 1 SBD perfectly equals to $1, while Steemian is willing to use both SBD and STEEM as a payment method. Volatility is less important than belief in the platform.
Yeah, that is also a good point.
Yes, pegging currencies represent costs. A good example for this in the fx world- is the Swiss National Bank's move to remove the EUR/CHF floor of 1,2 in Jan. 2015, which they have supported before in order to support their economy & exports. They gave it up eventually as the costs were running to high and the pressure on the Euro was to powerful as the ECB was highly accommodative in their policy.
I agree 100 percent. A lot of people will be discouraged to see their post value go down with the coin and most of them wont understand it. I like your idea of using sp and steem only because it gives the publisher a straight forward answer as to what their post is worth. Furthermore, The whole SBD, Steem And Steem Power setup is very confusing to newbies and has no clear answer as to what is what.. People are left to figure this out on their own.
Myself, I worry that it's still to early to remove SBD. It got us this far... and we're not out of the woods yet.
SBD is meant to be approximately a $1.00 worth of steem, so it could be used like a currency for purchases like how Bitcoin is used on e-commerce sites.
(Yes I know, SBD has been bouncing around and isn't always $1.00 -- but it really should be an average of $1.00 over 7 days I think)
I like the idea of SBD. I just wish it would stay near $1.00 of steem so we can get more e-commerce sites accepting something (like SBD) in crypto that is always worth approximately $1.00 USD
If STEEM itself jumps around in price too much, it gets confusing. We really should have SBD as a normal "peg" that tracks the US Dollar... it brings stability to STEEM in certain ways.
I don't know, let's ask Dan, Ned, and whomever was here during the initial days of when SBD was coded into the system if it is time to remove it.
This is the reason why I've been supporting SBD so far. But my opinion has changed because I haven't seen any real effort to make SBD useful in any commercial markets.
Oh it's very early. By the time people start thinking we need this.... people are already coding it.... and that's probably happening right now.
I fully expect by the end of this year, you should be able to transfer SBD to buy yourself something on the internet quite easily without having to sell for Bitcoin and then buy it.
Bitcoin's network is delayed, saturated, requires you to convert into/out of a centralized exchange from STEEM
People would just rather send SBD to a STEEM USER and have their purchase approved.
STEEM users are not cryptocurrency geeks. They are everyday people. These everyday people don't want to learn how to convert to bitcoin to spend their earnings. Let them use SBD and you've got a huge crowd of buyers.. :)
Just wait for it... it's coming...
I've been in the cryptocurrency world long enough to be very skeptical of promises like "just wait, it's coming".
I want to see real work and real results.
The "we have to wait" has been so useless until now because the market for crypto-currencies was very slow. If you think long term, then you should know that at the slightest problem, one should not fall. If you can no longer wait, then you are no longer an investor, but a speculator.
Just for info: Elon Musk has been more than 15 years old to have a car like the Tesla Model 3. Steemit is only 1 or 2 years old...
The way I understand the whitepaper it was mainly meant for commerce and savings.
It might not be necessary for Steemit as a platform, but would be great for an e-shop, lending and saving.
But therefore a stable pegged and not volatile currency would be desired
I got an better idea, Why not take fee when there is SBD inter account transfer? That way Steem holders can get benefit from SBD and Steem community can issue more SBD!
I don't see how that will affect the amount of SBD existing. It doesn't offer a mechanism to balance supply and demand, although it might have a little effect if the demand for SBD goes down because people are discouraged to use it.
Sweet. This is a great idea!
A person that claims to be an Anarchist and is around for only the money is a fucking idiot and never was an Anarchist to begin with.
Why you are saying SBD is broken?
First we had a triple in price of steem in satoshi and at the same time a double of price in Bitcoin.
Second we had less payout.
So SBD had a problem keeping up in the biggest bubble (so far lol) of this year.
Yes, that is not good. But is SBD broken?
At the moment it is at 1.36$ - 1/3 down from the 2$ it was.
Wait a week or maybe 2 more and it will be at 1$ if the exchange prices are stable now.
That is your very subjective interpretation that I very subjectively call Bullshit.
SBD is price stable currency. If the price doesn't stay stable, the pegging mechanism is broken. It should work in most situations, including big changes in general cryptomarkets.
How harmful it would be for the community if SBD will get removed?
there are people which keep SBD, because SBD was a promise for them. How you would like to remove SBD? convert everything for STEEM? This can be harmful for them!
Also... removing SBD would be like giving up an idea of having stable cryptocurrency, which is perfect for merchants.
SBD is a derivative token that promises to be worth of one US dollar in steems. So if we give those steems to users who own SBD, it is totally fair.
So far the adoption by merchants has been pretty much non-existent.
Are you sure? I made planty deals with other people on steemit, by paying them SBD. What is maybe no ready is platform for merchants.
Actually it should be pretty easy to analyze how often SBD change hands. Sometimes memo will be an explanation what was bought.
Oh yeah, that's another point I forgot to mention in the OP. There is no privacy for SBD transfers which is a huge problem. Very few people are willing to use a token in everyday commerce if every transaction is totally open for the world.
so in that case, we can use only Monero?
It has other weaknesses to be really useful. But the privacy tech it's using could be implemented in the Steem blockchain. And not only could but really should. When Steem was launched, privacy was on of the features to be implemented soon, but somehow it's been totally forgotten today.
I don't see much downsides. SBD doesn't have any real world usage.
That is true even for Bitcoin, if you ignore the mafia uasge.
That is true!
This should be implemented: https://steemit.com/sbd/@timcliff/saving-sbd-proposal-to-restore-the-usd1-usd-usd1-sbd-peg
and everything will be ok again.
If we are going to make big change to fix the system, why not rewrite it completely? I think the BTS system is much better because it removes all systemic risk from the blockchain. So if we are going to keep a price stable currency on this platform, why not copy it from Bitshares?
BTS system is too complicated! And.. there was never a successful peg. BitUSD was always more expansive than USD.
It has been holding the peg much better than SBD because it's so easy to crete more supply if there is more demand.
so lets add a possibility of creating more SBD on demand, as timcliff suggested.
It still keeps the systemic risk. If the price of steem is in a bubble and demand for SBD happens to be great, people will create too much SBD. There will be problems when the steem price gets corrected down again.
BTS mechanism is better because users who create SBD will bear the risk, not the whole platform. It's unfair to force every user to take part in cryptocurrency speculation markets.
I get it what you mean, but still BTS mechanism in my opinion is far from perfect. It is too difficult to explain even for professional traders.
the funny fact is... that if we remove SBD, then actually 100% payout will be exposed to speculation about Steem price. Right now people can avoid that keeping SBD.
The volume trade on Poloniex for Sbd is too low, sbd is not so high for the traders considering what money they trade on other cryptos. If you remove Sbd from poloniex 100% the price will be under 1$.
The pegging mechanism should work in all situations and not depend on where the token is traded or not.
You don't need SBD when you display de rewards in Steem in combination with the estimated post value. Like the estimated account value of the wallet.
How so? New here and really, for me, rewards are secondary. I wish to increase my steems... so I powered up as suggested by others.
Then switched back to 50/50.
If user has posted when the price of steem has been low, he has been rewarded with a little amount of SBD. If he's been lucky, he might have sold that with two dollar price recently. But at the same time, the price of steem has gone up much more than doubled. If the user had been paid only with steems, he would have gotten a much more if he sold those steems now.
I think a good solution good be to ditch SBD but not to solely display the paid out Steem.
Instead display additional information in the form of an constantly updated real dollar price.
Displayed author reward: 100 Steem (currently worth 101 USD)
By displaying the current value even the articles which were written when Steem was valued 6 cent, would now show high(er) rewards. It would also promote the idea of striving for a higher market cap as it will highlight how user funds are affected by a price increase.
I think it might be best to give users an option to choose which currency they want to see their (and everybody else's) earnings.
I like that. A European might find Euro displayed more appealing and therefore the platform.
I disagree. I like SBD. I do wish it was more closely pegged tot he US dollar so it could be used as it was intended. A stable currency.
It's not easy to keep anything stable in a free market such as the crypto world but it's worth doing.
Once SBD becomes more mainstream and Vessel wallet comes out I think more shops will take advantage of a Stable SBD and that will increase Steem value.
Where is the evidence of this happening? I've hoped for this, too, but now I see it's only wishful thinking.
well, everything on Steemit is wishful thinking. But who says wishes can't come true?
I thought that they would inflate the SBD to lower the price but it has become a debatable topic rather than sticking to their pledge o it holding.
Im not sure how it all works, not a math wizard. but i do hope it finds stability. I even said in a comment on Tim's post referenced here "why not peg it at $2us?" it just needs stability, any value is ok. It will help people use steem to market what ever they are selling.
By wishful thinking I'm talking about daydreaming. It's different from actual goals that are worked on.
The Steem community should decide if well-functioning SBD is just a dream or a real goal. If it's a real goal, people should be working to achieve that. Currently nobody is.
If it's just a dream, it doesn't matter if it's on the blockchain or not. It's still just a dream.
It doesn't matter what the pegging value is. If markets are willing to pay 100 % more, the price will still go up even if the pegging value is raised.
Stability can be only achieved by mechanism which guarantees that there is enough supply to satisfy the demand. And if there is too much supply, the mechanism has to be able to lower it until the peg holds again. It works like a thermostat that maintains certain temperature – when it's too cold, it warms, when it's too warm, it cools.
Of course it's a mechanism that keeps it on par. I do agree with free markets and let the people decide somethings value. They said back in the day, it would be controlled through inflation. If it gets too to high in price they will flood our rewards with more in hopes it brings down the price. If its too low, they will throttle back.
But i'm not sure why they are not doing this or why it is not working if they are.
SBD is here to stay, dont attack it
It's fine, it shouldn't be removed. If it's trading above $1.00 who cares? It just means that there is greater demand than supply rather than it being broken.
great...rs and upvote for u....
I've had a similar opinion since day one. If the issue is psychology, just create an algorithm that converts the Steem into the 7 day moving average estimate. No need for SBD then. It's not as if most people have never had to convert their home country's currency into a foreign one. They should be able to handle the concept of Steem by itself.
Looks like the King Bitcoin is causing a lot of swaying
Interesting discussion. I had previously considered it would be valuable to at least show both $ amount and Steem on the posts to combat this very issue, but that is probably less than a half-measure. I think you need that $ amount there because it makes it seem "real" to your prospective audience, but lacking the token amounts renders the amounts volatile. The problem is either way it's easier for people not to "do the math" and get a sense of the total reward, unless you totally remove the $ amount listed. Problem is, if you do that, suddenly when you try to show someone else how it works, they don't have an immediate frame of reference to the effort and reward ratio for creating content. They may not even believe it's real without that $ there. It's a conundrum.
Why would you ever want to measure success in much more volatile Steem tokens than SBD ? The fact that SBD does not maintain accurate USD peg does not mean that it's not better than Steem. If Steem becomes 10 times cheaper people will be able to buy 10 times more and reward with 10x more tokens. How is that better than rewarding with more stable SBD ?