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RE: How the Steem Dollar Peg Works

in #steem8 years ago

SBD is not included in the market cap. I'm not sure where you're getting market cap from; I never talked about market cap in my video... The relationship between the SBD supply and the market cap is that if the SBD supply ever exceeds the market cap, the chain is running on a fractional reserve as the entire blockchain is not valuable enough to pay its debt. In practice, insolvency would come much sooner, as the mass execution of SBD contracts and sale of the resultant steem would drop the market cap considerably.

The chain has a lot of rules and formulas in place to regulate how much debt it's creating to try to maintain solvency, but at the end of the day, an SBD holder must decide whether he wants to hold that debt or would rather hold asset.