I think it is more the systemic risk that it presents...
This greater risk only exists when STEEM prices are too low, relative to SBD supply. That's not a problem with SBDs. That's a problem with STEEM supply/demand fundamentals and the inability to attract interest in the currency. This will cause a STEEM failure regardless of the existence of SBDs.
The problem of risk is there due to the volatility though, not the direct price of STEEM. If STEEM went up to $20, then crashed down to $1 - we would have the same risk (although on a larger scale) that we have today with the price recently being at $0.20 with the possibility of it dropping to $0.01.
Sure, but then the volatility isn't due to the existence of SBDs. So, SBDs don't necessarily pose a systemic risk. There just needs to be a better means for creating and managing them.
If a crash occurred from $20 to $1, there are bigger things at play that need to be addressed. A 90% loss doesn't just happen for no reason. If STEEM and SBDs were more widely used as an actual currency, and if the Dollar peg remained intact, then the odds of a 90% crash in such a short period would be virtually zero at any given time.
There are ways to discourage holding SBDs and there are ways to manage the relative risk of having them. Scrapping them because it might be too hard at some point sounds like a pretty lazy solution to me.
I have my personal views, and while I am leaning in one direction, I haven't made up my mind yet..
One question that I have though - Other than the reasons SBD is good on it's own (stability, easy for adoption, easy to understand, etc.), in what ways does it actually benefit STEEM holders?
I have some of my own thoughts, but I am curious what you think.
More use of the blockchain benefits STEEM holders directly. In order to engage in a large volume of transactions (for example as a merchant or payment processor, but perhaps even someday as a regular user) you need to hold sufficient SP. That defines your bandwidth allowance, is the substitute for transaction fees in this system, and in turn contributes to buy-and-hold demand for STEEM. The need for more SP (i.e. the implied fee rate) will increase as usage increases and blocks start to fill up.
Despite the currently-low usage (most blocks are relatively empty), I experienced this directly in needing to power up more SP to my market maker bot to avoid having its transactions blocked by the bandwidth limiting (though it was still only a small amount).
However, that benefit (implied transaction fees) being said, I personally believe the greatest benefit to STEEM holders remains helping to build a larger user base for the entire platform and a larger user community, for the reasons described by @ats-david. Without a large user base this entire platform will inevitably become (nearly) worthless. We need to keep our eye on that ball. I guess it is a matter of opinion but I personally think that the presence of SBD helps a lot more with the critical issue of growing the user base than would the incremental simplification of removing it. The systemic risks and other issues are also a factor though.
I will give my main answer to my question:
SBD is beneficial for merchants. Merchants are really the ones that need a 'stable' currency in order to function.
For an actual business to try and sell their goods and services (which have fixed costs to produce) they need to be able to set fixed prices. Having a stable and widely used currency will attract more merchants to sell their goods and services using the digital currency.
Merchants are beneficial to STEEM holders because "non crypto" users will have more things that they can do with their earnings from the site.
I remember trying to explain the money thing to my non crypto friends, and lots of people lost interest when they heard you have to register in an exchange, provide your bank account information, trade your SBD (or STEEM) for BTC, and then sell the BTC to get cash. I did this on behalf of many of my friends, but not everybody is going to know somebody who can do this for them.
If someone could see that they can take what they earn and go buy an i-Phone (or whatever other good/service they are interested in) in the internal marketplace using their earnings from the site - that would be huge!
Why was it in the whitepaper to begin with? What has changed since then that has this discussion taking place at all? Who benefits from removing SBD? I don't see any reason to remove it, only benefits of keeping it. Enlighten me.
You are right. SBD beneficial for MERCHANT.
It only causes harm to Steem holders. I hate to say this but witnesses (include smooth)would make some good tip from it too.