RE: I submitted my first hardfork pull request to the Steem blockchain! (Updates to the SBD print rate.) by biophil

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steem · @biophil · May 28 '18

$2.34

A concern: isn't 10% the threshold at which the USD peg is abandoned?

It's been a very long time since I looked at the mechanics of this stuff, but I recall that when the debt ratio hits 10%, the peg switches from targeting 1 SBD = 1 USD to targeting MarketCap(SBD)=0.1*MarketCap(STEEM) or something similar.

If I have the details right, this means that your proposed change will continue printing SBD right up until the peg is designed to break. Your changes increase the aggressiveness of the pegging mechanism, and seem like they could add significant amounts of risk to the STEEM ecosystem in the event of a prolonged market downturn.

👍 tobixen, timcliff, edb

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@smooth · May 29 '18

Personally I would continue printing SBD forever. I don't think there is a need to limit supply when the market is overvaluing it. Let's say someone will buy $1 bills from you for $2. So you sell them as many as you can get your hands on, or do you sell some limited number and then stop?

The purpose of the 10% limit is to cap the backing of _all of the outstanding SBD_ at 10% of STEEM's market cap (considered a 'safe' amount) _regardless of the amount of SBD in circulation_. So if the market wants lots and lots of SBD with less and less backing, why not give it to them?

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@biophil · May 29 '18

> if the market wants lots and lots of SBD with less and less backing, why not give it to them?

Simply put, because I don't trust the market's risk management skills. In the medium-to-long term, undercollateralization almost certainly leads to peg discounts when the price of STEEM falls.

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@smooth · May 29 '18 (edited)

Peg discounts are otherwise handled by the system and indeed if you look at the price history there have not been significant sustained discounts ever (apart from a short time 2016 when few people understood how it worked). Premiums are not otherwise handled by the system. The only way to resolve a premium (which do put a very high degree of risk onto SBD holders; someone buying/receiving SBD at $5 is at risk of easily losing 80% of their money, and indeed this has happened) is by issuing/selling more of it.

Furthermore there is no real 'risk' here, in the sense of risk to the overall system. SBD regardless of the amount issued is capped at 10% of STEEM's value period, which is so small it is actually less than many one-day price moves. Any additional issuance of SBD just means that SBD buyers are voluntarily accepting some of STEEM's price risk. I see no harm in that. It actually addresses one of the frequent criticisms of pegged assets, which is that they are making an unkeepable promise to always maintain a price. SBD doesn't do that. It promises to maintain a price _as long as STEEM's price/marketcap is high enough_.

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1 reply

@freebornangel · Jul 28 '18

Is this idea feasible?
https://steemit.com/steem/@freebornangel/we-can-t-go-to-the-moon-without-creating-demand

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@smooth · Jul 28 '18

I'm not entirely sure I understood it correctly but to me it looked very much like the STEEM-to-SBD (also known as 'reverse') conversion idea which has been proposed by others (perhaps you were not aware of this and reinvented it. I believe it is feasible, but: a) The coding for it is somewhat involved as it requires both designing the details of how it would work in every situation as well as coding it, which requires a new operation and other code changes (along with associated testing); and b) I'm not sure it has enough support to get adopted at this time (though it might).

👍 freebornangel

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3 replies

@knircky · May 30 '18

$0.69

Yep!

👍 solenn

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@leprechaun · May 29 '18 (edited)

LOL.  Good questions!

However, imagine how whales of Nubits feel now that the per unit value is 0.44 Usd.  Some of the owners of the Steem Dollar are not responsible for this problem.  If I can just convince high schoolers here to start blogging, I bet I can buy Steem Dollars for one peso each.

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@smooth · May 29 '18

$0.02

NuBits promises a value of $1 and it hasn't delivered. SBD doesn't really promise that any more (since I think it was HF14), it promises a peg price that is conditional on the value of STEEM. If STEEM's market cap isn't enough to support the amount of SBD that exists, SBD holders are explicitly taking price risk. If they don't like that they should exit SBD. I find SBD's promises to be a lot more honest and reasonable than most of the other pegged coins which don't make explicit when they will no longer sustain a fixed price.

👍 leprechaun

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3 replies

@timcliff · May 28 '18

$0.08

You are correct as far as the 10% limit. It is not necessarily catastrophic to pass that point though. It just means that SBD holders would get less than $1 USD for conversions if it passed that point. It is a linear reduction down, so at 11% debt limit, SBD converters would only get _slightly less_ than $1 USD of STEEM for their conversions.

I did add some additional thoughts on the same subject in reply to @bacchist's comment above.

👍 the-ego-is-you

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@ipoelkip · May 30 '18

ping...

👎 asbear

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@timcliff · May 30 '18

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1 reply