RE: How SBD peg actually works OR How the @sbdpotato conversions won't affect SBD price
You are viewing a single comment's thread:
We are at a point where SBD is below 1 USD, and the external debt ratio is over 10%, therefore there is no new SBD being printed,
This is not accurate, SBD is still being printed via the SPS (Steem Proposal System) so the failsafe that stops the printing was effectively removed in the last hardfork.
If we want the SPS to keep paying in SBD instead of STEEM then it is my opinion that we need to introduce a blockchain rule that stops the SPS from printing SBD and instead buys it from the internal market if the debt ratio is above a certain threshold.
https://steemit.com/steem/@onthewayout/how-to-fix-the-sbd-peg
0
0
0.000
That is a good point.
I haven't considered the sps influence on this, and thinking about it, it's kind of worsening the debt ratio even more...
More circulating sbd = more debt.
SBD created to fund the SPS (treasury) doesn't increase debt in any real sense (though it does increase the apparent debt ratio used by the blockchain to calculate the conversion haircut), until stakeholders vote to pay out those SBD in order to fund proposals, since it doesn't circulate, it just sits in the treasury.
If that happens (funding payouts), then one can conclude the stakeholders believe that such an increase is 'worth it'. Indeed funding something like @sbdpotato out of SPS is another way for stakeholders to place controls over the debt ratio (since @sbdpotato will destroy more SBD than the SBD put into circulation to fund it).
For this reason, as well as the funding rate being rather low (less than 1% of market cap per year), it was seen as fine to continue to fund SPS with SBD regardless of the debt ratio.
So the SBD locked is still counted as circulating SBD, it does affect the debt calculation.
And even though the SBD is locked, it makes sense that the debt-ratio increase, because the SBD is printed, and the debt already exists. It can't be claimed, but it exists.
Can't say more than first impressions and thoughts, because i haven't researched how the SPS work yet.
I don't know what 'it exists' means exactly, nor what it means to say it is 'printed'. It is a number in the blockchain code. It can't be spent, it can't be converted, it isn't part of any user's account balance, etc. In fact, regardless of votes, it can't even be paid out to SPS proposals at a rate of more than 1% per day.
IMO it shouldn't even be included in 'supply' until placed into circulation, at which point it can be spend, can be converted, etc. but this is of little practical significance right now since the amount is very low (200K out of 7M), as is the rate of increase.
If it's being accounted for by the blockchain as circulating supply, then it is "printed", and it is added as a debt to be paid.
It might be locked and not moving, but it is accounted for, and it does have an influence on the debt ratio value.
And as you said, it definetly shouldn't be included on the supply until it is unlocked.
And 200k/7M is 2.8%, wich isn't insignificant if you consider that the external market debt ratio is around 0.5%-2% over 10%.
So yeah, the way this is accounted for does have a significant impact on the debt ratio.
The 2% (over cap) is a percentage of the total Steem market cap not of the amount of SBD, so these are different numbers. In fact about 20% of SBD needs to go away to get back to the cap and SPS is only 2.8% of SBD.
This would probably be slightly better but not necessarily worth the added complexity given the current funding of SPS. At the moment, SPS only receives 10% of the roughly 8% inflation or about 0.8% of market cap per year. In other words, if the debt ratio is 10%, then after a full year of SPS printing (assuming no conversions, which is of course unrealistic), the debt ratio would then be 10.8%. Not really a serious concern.
In fact there are times, even under haircut conditions, when conversions reduce the SBD supply faster (sometimes much faster) than SPS creates it so even the 0.8% annual rate is an overestimate.
Eventually I agree there are are merits to the idea of the blockchain sometimes buying and selling on the internal market, but at the moment it seems like a very low priority given the above numbers.
One thing that change that would be an increase in the share of inflation going to SPS.
Ultimately the deciding factor is the price of steem however it still bugs me that we are still printing SBD under the current market conditions. The updside to printing sbd instead of steem is that we have less liquid steem putting pressure on the price. If we could find a way of getting rid of the excess sbd by burning it instead of converting it everything would align.
We do have the promotion page which burns SBD, though the quantity is very limited, probably only a few dollars per day. When SMTs launch it will be possible to pay/burn SBD (amount to be determined) in order to create a new SMT.
Still probably won't add up to much but better than nothing.