A few thoughts in no particular order:
One concern that is often brought up regarding APR however is that since a majority of SBD is stored on exchanges, it is primarily a benefit to the exchanges holding the SBD, which weakens much of the intended impact.
It does, however, offer an incentive for people to pull their SBD out of exchanges so they can receive the interest. This can have numerous benefits.
Another advantage of offering interest (when demand for SBD is weak) is that the interest can be removed when demand grows stronger. This partially addresses (as an alternative to STEEM->SBD conversions which have some doubters, and in any case don't currently exist) the issue of how to deal with overvalued SBD. If the interest is routinely set at zero then it cant be reduced, and any SBD weakness is only addressed by converting (i.e. permanently destroying) SBD. This makes the supply of SBD more unstable, along with its price.
Last year prior to the first SBD pump, in the absence of interest, the system supported weak SBD at about $1, by destroying about half of its supply (via conversions faster than printing). In the six months between the first pump and the second pump, the system again supported a weak SBD by keeping SBD supply stable (via conversions about equal to the print rate). In both cases had we used some APR to encourage holding SBD, the subsequent pumps would have likely been smaller, or possibly not happened at all (due to both the larger circulating supply and the ability to reduce demand by reducing APR), and the price of STEEM would likely have been higher (via the SBD=STEEM HODLing effect you describe).
Although not essential, a small change I would like to see (hint, hint) is to only pay SBD interest on the savings account. Since exchanges don't generally use savings, they wouldn't receive interest (and if they did switch to using savings, that would be a good thing too).
Even if a user receives a SBD token and turns around and sells it right away, that is not putting any downward pressure on STEEM.
This is true if there is sufficient demand from someone else to hold the SBD and keep the value at or above $1. That hasn't been a concern for most of the past year, and it is likely that a well-functioning SBD would usually have a lot of demand because there is simply huge demand in the world (both crypto world and wider world) for stability. Even in the worst case though, when no one really wants the SBD, it gets quickly converted to STEEM, and the result is essentially identical to what would have happened if the SBD didn't exist in the first place.
This is a really good idea. While I am against having a large debt obligation for the platform (that increases haircut risk in a downturn) and therefore don't particularly want to encourage HODLing SBDs, this could be an important feature for the long term maturity of the ecosystem.
I'd personally prefer to see SBD function as a stable currency - In other words, it is intended to be spent, not HODL'd. If we want to see real commerce on the platform then we should be looking at the "Velocity of SBD" just like real economies look at the Velocity of Money as an indicator of economic health. In this way we'd require a smaller Circulating Supply and a smaller Debt Level - thus lower Ecosystem Risk.
I would say the two visions (spending and savings) are compatible. The interest shouldn't be extreme, so it shouldn't discourage people from spending, much like how traditional cash doesn't earn interest but putting the money in the bank it can.
You guys rock, this is probably the most coherent explanation of the relationship w/STEEM & SBD. When is the APR going to be rolled in? I haven't recieved any interest on my SBD Holdings yet!
Thank you for the kind words.
You should be aware that there is never any guarantee of getting any interest on SBD. The APR is 'voted' by witnesses, and currently the vast majority of witnesses (including me) are voting for zero. I personally believe we should enable some interest at some point in the future if and when the SBD supply has receded somewhat from the 10% limit AND the price of SBD is not significantly above $1, but other witnesses may (and probably will) disagree for a variety of reasons including those mentioned by @timcliff in the post. So I would only say to wait and see.
followed, I can see why at +10% debt ratio interest would be a bad idea anyway. Thx for the clarification!!!