RE: How to fix Steem Inflation? - RESCUE PLAN

[timcliff]

For the 50% that is actually backed by BTC, it seems like the user is essentially owning BTC but just calling it something different.
For the 50% that is not actually backed by BTC, it has the same problem as the current SBD model. If the user wants to "cash out" their BBS the blockchain is going to need to produce enough STEEM to buy those BTC. If the price of STEEM compared to BTC has gone way down (similar to what has happened today), it will still need to hyper-inflate in order to generate the amount of STEEM it needs to buy up the remaining 1/2 of BTC.

The main two differences seem to be that:
Half of the "cash out" is basically done ahead of time
The other half is pegged to BTC instead of USD

Comments

[profitgenerator]

• Well no it's not like BTC because our "BBS" asset would not be tradeable, but with Steem, so it would be a smart contract on this blockchain, that would swap BTC-BBS-STEEM in trio.

• The ratio can be debated, but this would be much better than what it is today. Sure a 50% backing is still inflationary, but much better than 0% backing. It's not enough if you peg it, you need to back it in order to maintain the peg. And you cant use dollar, because that would essentially make Steemit a money transmitter and fall into the regulation dungeon, with KYC you name it. So we can only use cryptocurrencies that are not regulated. Bitcoin is the perfect reserve currency IMO.

• Well yes the same restrictions could apply, if the reserves are shrinking, some limited capital control can be done to created, or perhaps positive rewards like increasing STEEM POWER long term interest rate

• We could also reform STEEM POWER, in such way that longer interest rates could be bigger than short term interest rates. So for example those that hold SP for X period without power down, get bonus interest.

A lot of the monetary policies can be reformed to incentivize holding and dis-incentivize selling, even positively without imposing capital controls. Again I am not in favor of capital controls those should be reserved for worst case scenarios.

But playing around with the interest rates could incentivize people, I guess I have to write a new article about it, you gave me a few more new ideas.

[timcliff]

So holding a reserve is definitely an interesting idea. (Like Fort Knox holds a reserve of US gold.) You are right that it would most likely need to be in BTC instead of USD because of the regulations. With today's market conditions, the 50% that is held as 'reserve' would help to combat the inflation. The flip side though is that if the BTC goes way down or STEEM goes way up, then the money that had been put into the reserve would essentially be lost/wasted (or at least significantly reduced). I would argue that it is essentially a hedge, and would more or less have the inverse effect of the 'non-reserve backed debt' portion of the coin.

[profitgenerator]

• Yep, and it would be transparent, whereas the Fort Knox Gold is very dubious
• Well that is why we select BTC because it's the biggest on and most widely used, so the risk of going down is small. In fact I would argue that BTC is better than USD, since the USD has a higher inflation than BTC, so while the BTC risk is uncertain, the USD risk is guaranteed.
• It's not hedge, we know that BTC's price is more or less upward trending, if not for anything else, but for the fact that it has the lowest inflation rate amongst all currencies, so it would be wise to save in BTC rather than ETH or OneCoin (haha).
• No it would lift everything up, Steem would still be the basic currency, and this asset would bring a net positive transaction balance into Steem, adding net positive demand to it regardless of what happens to the asset itself (but BTC should be stable). Since people have to buy Steem first before getting access to this asset, Steem's value would be dependent on this asset's trade volume.