There were months of very real concerns about the amount of debt in the system as SBD were far too numerous and the price of STEEM was tanking months ago.
How much of that was due to APR rising faster than expected? As far as I'm aware, it was never higher than 10%. 10% APR can only possibly increase the debt burden by a maximum of 10% in a year. That's 7 years to double and 24 years to increase by an order of magnitude. Compared to other factors, it's a non-issue in regards to the debt burden.
The $1 peg promise is an important one, but at what timescale? An hour? A day? A week? A month? I think that's the important question.
My answer to that would be an ever decreasing timeframe. As the network gets larger, with more liquidity, it will be easier to maintain a stable peg. You will be able to do it on shorter and shorter time frames. You're not aiming to be the federal reserve, where you're responsible for the whole economy. You're only responsible for block production, adopting network rules updates and maintaining a price peg. I think on the contrary, faster responses will improve our ability to maintain a peg.
I also think that relying on market forces is the wrong philosophy here. A peg is by definition a method of manipulating the market to keep a stable price. The market can only maintain a peg by responding to the incentives presented to them (an unmanipulated market would have the token float all over the place like Steem does).
Thanks for the discussion.
It sounds like an automated price bias would be what you're in favor of. If the price ever drops below $1, then a bias gets implemented right away to always keep it at $1. That might be interesting. Ultimately, I have doubts about the current structure of the SBD ever working because unlike bitUSD, there isn't a conversion mechanism both directions which enforces the price peg. The 3.5 day lag time may also be too long to quickly adjust the market (it used to be 7 days). Maybe more liquidity would make this a non-issue as more people would use the conversion option, even without a price feed bias.
It doesn't have to be perfect, but it can get progressively better. Automation will be necessary eventually, but for now a human making a quick review and judgment every 2-3 days and applying the configuration change seems reasonable to me.
I argued in posts over the last month when the peg was well broken to the upside, that an upwards broken peg isn't a huge concern. The network as a whole still gets large benefits from that, as long as people are aware that there's no promise to keep the price that high. It undermines the ability to use the token for ordinary commerce, but we gain other benefits instead. I am in favor of allowing SBD to diminish in importance (such as by allowing rewards to be paid optionally in Steem), as long as the SBD contract itself still remains available.