RE: HBD: The Ultimate Stable Coin
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There already exists a mechanism that can modify the conversion rate of HBD, it's called the Price Feed Bias:
One of the tools that witnesses have the option to use is a price feed bias. Essentially they can intentionally tell the blockchain that the price of STEEM is higher or lower than it actually is.
If they tell the blockchain that the price is lower than it actually is, then SBD->STEEM conversions will typically results in more than ~$1 USD worth of STEEM. The blockchain will also generate less new SBD tokens when paying rewards from the rewards pool.
If they tell the blockchain that the price is higher than it actually is, then SBD->STEEM conversions will typically results in less than ~$1 USD worth of STEEM. The blockchain will also generate more new SBD tokens when paying rewards from the rewards pool.
https://peakd.com/sbd/@timcliff/sbd-explained
On another note, I don't think that the creators of steem operated under the asumption that fiat is a stable form of money. In this case the "stability" that is referenced in the white paper is conceptualized as relative to the fiat currency in question...USD.
For a currency to be a stable store of value it neither has to be inflationary nor deflationary, in other words the amount in circulation has to increase or decrease with the cycles of the economy.
Since the economy is a caothic system the best that you can do is have a predictable issuance rate and influence the circulation via interest rates (or let the market sort it out).
For the above reason the best that you can hope for is to have relative stability. Unfortunately any attempt to peg HBD to the inflation rate of the USD will either deteriorate the debt ratio or will destabilize the inflation schedule for HIVE.
I am more inclined to have a conservative HBD monetary policy:
- Cap the issuance of HBD below the Hair Cut rule, maybe at a debt ratio of 8%.
- Start Increasing the liquid hive ratio at a lower point (6%) so that the liquid portion of the author rewards start paying hive instead of HBD in a linear fashion before the debt ratio gets to 8%.
- If HBD starts trading above 1.00 let the market sort it out.
Posted Using LeoFinance
I think it's pretty obvious (as stated in OP) that if USD experiences inflation then Hive gains in market cap and the debt ratio stays exactly the same even if we raise the value of HBD. In fact, our debt ratio is clearly being lowered by doing nothing.
It also won't destabilize the inflation schedule because again, if Hive goes from $0.25 to $0.50 from inflation of USD and we modify HBD from $1 peg to $2... what has changed?
Our market cap doubled and our debt doubled. Same ratio. Someone who converted 30 HBD at $0.25 gets 120 Hive. Someone who liquidates 30 HBD at $0.50 again gets 120 Hive only if we account for inflation by pegging HBD to $2. Otherwise their value is leeched away to 60 Hive. Just like a real central bank does it.
I don't see that the USD inflation and the HIVE marketcap are directly correlated. For this to happen some of the extra USD money supply has to flow to HIVE but it's more plausible that it will go to BTC instead over a long enough period. Once the hive inflation schedule stabilizes at 0.95% (in about 16 years) theoretically HIVE should start to appreciate against the dollar.
In reality the money supply by itself has little effect on the relative price of any coin. For the difference between two currencies' inflation rate to manifest on the exchange rate the demand side of the market has to change in tandem. But the demand of any item is also influenced by other market forces.
My reasoning is that since the price of hive is not directly correlated to the inflation of the US dollar changing the peg to match it will create an incentive to permanently convert HBD to HIVE at an increasing rate which is not in the best interest of HIVE holders as this creates extra selling pressure on it.
Creating sinks for HBD is an interesting proposal for destroying part of it's supply as opposed to converting it to Hive.
Very nice! This is the best argument so far against attempting to account for inflation. However, I would be pretty surprised if the price of everything in the world doubled from inflation but Hive didn't. Wouldn't you?
I believe this shows a fundamental lack of understanding when it comes to liquidity, supply, and demand. A coin can double in value without any money being put into it. All that needs to happen is for the sellers to decide they aren't selling anymore. Markets can shift with zero volume. Of course this idea probably exists in a vacuum and has never actually happened IRL.
In any case, thanks for getting back to me.
I have a lot to think about.
Market dinamics a very complex, both supply and demand are sensible to a host of factors which are difficult to account for in the short and mediam term. Especially since we cannot apply the same models to tokens/currencies that operate under different designs.
Note: when I say supply I mean what is placed for sale on the market and not just the amount that is "physically" in existence. Anyway, this has been a stimulating conversation.
We'll all laugh about this when we're fucking millionaires.
When Lambo? Kek.