The Debate
A debate has risen. One that could mean life or death for Steemit. Am i being too dramatic? Or am i being realistic? There is a fine line between the two usually, but in this case it is as clear as day.
Should SBD be pegged to $1 to make it more stable or should we be content with a high SBD?
What Is SBD?
SBD stands for Steem Backed Dollar. The original purpose of the currency was to be pegged to the dollar, sort of like Tether. However, unlike Tether, there is a very small supply of SBD. There are only 6,988,548 SBD in total supply while Tether is currently sitting at a supply of 1,650,000,000 USDT, and they continue “printing” more. (Remember this point, because i will come back to it later)
SBD has risen to $14 in December and has been sitting at around $6-$8 for a while. Now this is good for post payouts, since you get paid in SBD based on the value of SBD, but in the amount of money your post is worth.
For the sake of simplicity, lets say you get paid 50% SBD and 50% Steem for your posts (i know the conversion ales into account curation and then ends up being less than 50%, the simple numbers are easy to follow). Now, imagine your post payout is $100, you will get about 8.97 Steem (worth $50 at the time of writing) and 50 SBD. Since you recieve 50 SBD, you are actually getting much more than $100 for your post since 1 SBD = $7.11.
If SBD was pegged to the dollar, your sbd payout would only be $50. It is a huge difference.
So Why Would Anyone Want A $1 SBD?
Well, there is a logical answer for this and it is that people want to have a stable currency here on Steemit to better hold the value of there money..... BUT WHY WOULD YOU MAKE SBD THAT CURRENCY?? I agree, a stable currency is something the platform should have, but there are issues that come with this, that i will address later.
This allows for more confidence in the value of your money on Steem which will help users feel more secure its their funds here. It would also allow for a Steemit Marketplace where you could trade SBD for goods or services of whatever kind. Since SBD would now be worth a stable $1, you would not have to worry about the conversion differing from the time you bought the item, and 20 minutes later.
But lastly, making this change would get rid of greed on the platform. Users would stop receiving huge payouts for posts that dont deserve it. There would be incentive to create content that is actually valuable and sort of level the playing field for minnows.
But Are These Positive Changes?
No. These are simply not changes that would improve the platform. I honestly and truly believe these changes would hurt the platform AND the Steem coin. They are both codependent on the other’s success, but the proposed change to $1 SBD, both would be hurt independently, and then even worse when the effects of the other is realized. This may not be clear to you now, but it certainly will be soon enough.
How Do Steem and Steemit Depend On Each Other?
Steem is a crypto currency. It has its own blockchain and can be traded and bought on exchanges. However, most of its use comes from the platform Steemit, which utilizes the blockchain to create a social media platform that rewards users for content with Steem.
Now, lets say Steem price falls to $0.10. Users may stop using the platform because the coin is not worth anything. Now consider that it remains at that price for a year. The platform will likely empty out of users and become a ghost town.
Now coming from the opposite direction, lets say users stop using the platform while the price of Steem is high. Since Steemit is the primary driver for the currency and the post rewards are mainly how people get Steem, then the price of Steem will fall because nobody wants it and users are cashing out before they leave the platform. Sure, Steem can still be traded on exchanges, but this would account for very little rise in the price since most people dont buy Steem, they earn on Steemit.
As you see, one of the two falling directly can relate to other falling.
But you may be asking “where does SBD come into the equation”.
Well, this is actually pretty straight forward. Most Steem is bought using the SBD rewards from posts since SBD value is so high. Using the example above of getting a 50 SBD payoutlets say this was worth $1. You could get around 10 Steem for this. But while the price is so high right now you could get about 60 Steem with 50 SBD.
So now if the SBD price drops to $1, people will buy less Steem which causes the growth of the Steem currency to slow, while people would continue selling the same amount of Steem they are currently. This would cause an inverse of what we have seen recently. There will be more sold than bought, and we will see Steem price drop just as fast as it has risen recently.
Why is that good? Steem should be rising, not falling. But also consider what that would mean for the platform. A low SBD would mean users would stop using Steemit because there is less value for their posts and they may not see it as being worthwhile especially if the price of Steem falls as well.
How Could SBD Possibly Be Pegged To The Dollar?
For this to happen, the supply of SBD would need to be increased. This is simple supply and demand. For the currency to be stable at $1 the supply needs to rise and balance out the demand. But this would mean new SBD would have to be created over time when more and more SBD is held by people. SBD would also need to be destroyed if a huge amount was sold of, as this would drive the price down below $1.
Supply would have to be adjusted constantly to meet the $1 mark. This is unrealistic and just like Tether will cause issues in the long run and with users since more and more will need to be created. This is pure manipulation of the price. Right now, buyers have raised the price to what is currently, why should developers be able to go and reduce these gains made by investors?
My Conclusion
Steemit and Steem have both been growing. The high SBD price brings in new users because they see possibility of big gains. Steem has also seen good rises recently which can be attributed to more people buying Steem. To me this is a formula that is working well currently for users and the platform. Why change a winning recipe?
Sure, i will concede that SBD needs to be worked on. The supply needs to increase or else the platform cannot sustain more newcomers. But i suggest that this change comes later down the road when Steemit is bigger and used more than it is currently. There is no immediate need or threat that this would fix and it could only ruin the growth we have seen recently.
I hope no action is taken on this issue without the agreement of users. After all, we have blockchain technology that would allow us all to vote on the issue and to have a say. As always, let me know what you guys think about the change. There are some things i didnt add since this post was so long already, but feel free to talk about them, I’d be glad to answer and discuss them.
The high SBD price today is a direct result of the free market speaking very, very loudly. The very notion of a "stable" currency is the antithesis to the free market. Prices ought to be determined by buyers and sellers, not centralized committees and planners.
The developers need not intervene, otherwise we have a new central bank.
That's a perfect comment and why are we worried about ....let the market decide the fate of SBD..is not it ...
Thank you.
This. I found it very confusing, but I believe the internal Steem/sbd market is a price stabilization feature.
Yes, but they would be stabilizing the market by manipulating it with increasing the supply. This dilute the value of our investments. Not to mention it would destroy the market capitalization of SBD
True, but still, is a currency really a currency without 'storing value'? And is value really 'stored' if it goes from zero to a hundred as fast as it goes from a hundred to zero?
It seems to me that the only way to make it match 1 USD is by inflation and so all it's doing is devaluing it. Or do I misunderstand? If people want to spend money on Steem Dollars and make it hugely valuable then why not? If you force them away then you take away value from the platform. I feel like my vote and rewards are MORE valuable this way.
Cryptos are all about letting the free market decide. Messing with the price of anything is just manipulating the markets. Which I personally believe is not right.
Good write up. Thanks.
Exactly. Manipulating the market to make SBD equal $1 isn’t what developers or programmers or whatever should be doing. We, as investors, have made it so that the price of SBD does rise. To manipulate it now is to say that it isn’t a free market and that what invest doesn’t matter because they can just change it whenever they want.
Thanks for taking the time to look at this. I appreciate it
There is no way I can be more in agreement with you. Resteem
Thank you
"Why change a winning recipe?"
It all comes down to this... in the long it will be better, even though sooner or later we will have to increase the amount of SBD
I agree. In the long term it may be better to peg it to the dollar. But to do that while the platform is growing rapidly is insane. It will stop the growth and reverse it. We should peg SBD to the dollar when the platform is fully grown and widely adopted. Right now we are small, but growing rapidly. It doesn’t make sense to make the change now
True!
This was a great article that really broken down for me the difference (and difference in value) of SBD and STEEM. I'm agreeing with many commenters here, you don't halt growth. I see the importance of keeping a currency at the $1US range for stability but you don't do that while there is massive growth happening. Are you sure that the system will not self-correct itself as more people come on, things slow down and the whole entire system find it's balance?
So what would be the ideal price of SBD? Still new to Steemit and figuring everything out...
Anything. Just as long as the investors get to decide. There shouldn’t be a limit. It should be a free market that determines the price
I agree! Free market rules
good article i will follow add me as well. high SBD is needed to keep people on the platform low sbd will cause the platforms death
Wonderful post. Thanks for sharing.
Thanks for reading
Credible write up,that was really appealing
but i think that steem dollar should not be equivalent to the dollar
because it like a currency and currency are not alway that stable
@ginquitti
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I've always found this a confusing issue. This has cleared up a lot of things! Thanks
I can’t agree more. Resteem.
I support high SBD. But before all, we will have to solve the reward pool abuse issues. This system as is now is funneling the wealth to the hands of the selected few - perfectly resembling neoliberal capitalism. On the other hand, most of us spend hours to make posts that collect tens of votes, but maake less than 1 SBD as the steem power is too inequally distributed.
The higher the author's award, the more my contribution. Among the hardforks I will select the one where my income is higher. That's why I'm here, not on Golos
How do you change the language on golos? Ive been trying to use them as well
Настройки - Выберите язык интерфейса
I earned at Golos 0.01$ and I have in wallet 1.36$
Thanks! And how long have you been on Golos? Is it worth trying out or no? I don’t speak the language that most do there. What language is it anyways?
It is a Russian language. It is not worth trying out for minnows. A minnow upvote costs less than 0,0003$ (0,00005 SBD)
Thank you. It's helped me to know some core things about SBD and STEEM.
I agree! Doing this the way it's been proposed is totally counter-productive. This is my reaction to it:
For now it seems that the majority is against the change, but if part of the witnesses continue to push for it, I think we should start removing witness votes from them and making sure we give them to witnesses who agree with us on what the future of the platform should be.
@originalworks