RE: To SBD or not to SBD – Why is That a Question?

[luzcypher]

I personally don't think that 'confusion over SBD' is the main argument for getting rid of it. I think it is more the systemic risk that it presents, as well as the cost it presents to the network of STEEM holders to maintain the peg. As Dan has pointed out though - the cost can go the opposite way too - but it only benefits the network in a rising price environment - which we have not seen too much of recently.

Can you explain how having SBD's costs the network of STEEM holder to maintain the peg?

Comments

[timcliff]

Here is a post that explains a large part of it:
SBD Debt Issue - Riding the STEEM Price Roller Coaster

There is also the interest paid to SBD holders - which is not a large cost, but it is still a cost none-the-less.

[luzcypher]

Thanks. That helped a lot.

[timcliff]

In reply to your other comment (at nesting level 6)

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.

The primary purpose of SBD is to provide a stable currency. Merchants who want to use the currency to sell goods want to have something that has a relatively fixed value. If the value were constantly going up and down, then selling things would be really difficult.

Example:
What do you charge for a shirt that cost $15 to make, when one day 100 of the currency is worth $20, and a few days later it is worth $15?

It is also easy for non-crypto users to understand. Getting paid $10 SBD basically means they have $10 worth of currency that they can cash out / use. If that $10 was worth $5 a few days later - it would be bad for the user experience.

As far as what has changed:

• STEEM no longer has the 'crazy' inflation, so protecting against volatility is not as necessary. There is still a lot of volatility though, so IDK if this is really a good argument.
• The system no longer will pay out "approximately $1 USD worth of STEEM" if the debt level exceeds 10%. This means that there is actually a significant risk for merchants who use/hold SBD, in that they may not be able to get all their money if/when they decide to cash out.
• The system starts paying out "part STEEM part SBD" once the debt level reaches 2%, which becomes very confusing for users. It essentially defeats the purpose of having a simple coin that users can understand when you have to explain well, you get some SBD and some STEEM. If you want to, you can convert the STEEM into SBD by using the internal exchange... (This is not a user friendly experience!)

[biophil]

Just a quick note: you write

STEEM no longer has the 'crazy' inflation.

That's not quite true yet. Because they reduced the power-down period, all of the past inflation is being released onto the market rapidly, resulting in a rather dramatic increase in the effective inflation of liquid Steem. It will be at least 3 months before the effective inflation actually starts to fall. However, 3 months from now is when @ned and @dan are released from their no-power-down commitment, so if they decide to divest, the effective Steem inflation will continue.

[timcliff]

Good point.

[luzcypher]

Your response is extremely helpful to getting my head around these discussions. Thanks.

The more I think about the pricing issues, ie.

What do you charge for a shirt that cost $15 to make, when one day 100 of the currency is worth $20, and a few days later it is worth $15?

This really is a mute point. With POS apps like BlockPay for example, it makes no difference. The merchant charges the same price they charge non-crypto customers. In this example, $15 dollars. The app would take $15 of Steem at the price it is at the time of purchase and the merchant wouldn't even have to think about it or adjust anything in their accounting or books.

[publicworker]

I hope you changed your mind.
SBD should be gone. ASAP.

[luzcypher]

When I look at the big picture I think you may be right. One thing I don't hear anyone talking about on any of today's posts on the subject is how posts would be paid if we made the change.

Next to a post today, the earnings are expressed in SBD and we know this is pegged to the dollar. If the change was made, would the posts earning now be expressed in Steem? And if so, pegged to what? Dollars or today's Steem price?

[publicworker]

SBD causes harm to average steem holders since it generates downward pressure on steem price but it gives good tip to witnesses. It's a rigged system man.

[luzcypher]

Whatever, I don't mind witnesses getting good tips, they deserve it for the work they do. There would be no Steemit without them. Show me a system that is not rigged. Doesn't exist.
Makes no difference if I earn in SBD or Steem to me.
One thing I don't see discussed is how would payouts for posts be determined if not by SBD? In Steem? If so, pegged to what? Today's price? $1 USD?

When we see our potential earnings next to our post in SBD, what would it read if we made that change?

[publicworker]

That's not a serious problem. Just keep current $ denomination is one way, though $ price will be changing.
Change denomination to steem is another way and I personally think this is better way to go.

[luzcypher]

Or replacing SBD on a post with USD. Easy for noobs to understand.

[biophil]

You do realize that the current price slump in Steem is due to the recent hard fork and the reduce power-down time, right? Steem Power was hyperinflated for months, and then 2 weeks ago they made the change to suddenly release this inflated Steem Power onto the market, causing a dramatic increase in the effective inflation rate of liquid Steem. It will be at least 3 months before this effective inflation stops.

Downward price pressure is caused by people wanting to get out of Steem; whether I get out of Steem via SBD or simply by selling my Steem is immaterial.