RE: Law of Supply and Demand Definition and Explanation OR Why the @sbdpotato experiment just won't work
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I'm not so sure I agree with this post, SBD was supposed to be pegged 1:1 to the USD, if it isn't it looks broken and looks bad for Steem, it's in the whitepaper. If we aren't going to fix it we might as well get rid of it. Historically the Steem price follows SBD and the idea is that the Steem price will follow any uptick in the SBD price and improve the ratio even further.
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The peg breaks when the market cap of SBD exceeds 10% of the total market cap of STEEM. It's the fault of the low price of STEEM.
Yes, it's kind of like this.
The basic concept here is that the amount of SBD in circulation must be able to pay 10% of the value of circulating STEEM. If the system detects that this is not possible, the system stops printing sbd until the market self-correct due to changes in supply/demand ratio.
Hey, nice to see you joined the discussion!
So, here is something I think it is already part of Steemit culture for a long time:
The sbd peg doesn't work as the majority of us think it does.
I will write something more detailed about it soon, but I still have to do some research to be sure what I am talking about, but basically is this:
What most of us think:
Sbd is supposed to be have a pegged value of 1 USD.
How it actually works:
Sbd is supposed to have that same value of 1 USD in STEEM
Yes, it might sound like the same thing, and it took me a while to properly understand this.
Atm, on the internal market, 1 sbd is worth 5.115 STEEM Wich is actually .63 USD.
.63 USD can buy 1.015 SBD.
This kind of show that the peg is working as intended, because the amount of of STEEM you can buy with the equivalent value in SBD is pretty close.
Like I said, I still need to do some deeper research about this matter, and will write a more detailed article about this.
In the end, it's all some kind of Mandela effect, because most of us never actually understood how the sbd peg is supposed to work.
The thing is 1 USD should be able to buy you 1 SBD, currently SBD is selling for less than it should. and can't function as a stablecoin for hedging and merchant purposes, essentially useless and might as well just have STEEM as the only currency then unless we intend to fix the SBD.
I will write a more detailed article about this, but this is a misconception about sbd that is taken as true.
Sbd can't be fixed at 1 USD, because this not how the system work.
It is impossible to fix it, because there is no financial backing for it.
Sbd doesnt work as usdt, dai, sai, paxo, or any other stable coin.
The problem here is what is understood as stable.
In sbd, the stability is about the lower volatility, not about the price in itself. The 1 sbd=1 USD is the target, and if the right tools are used, sbd price will float around 1 USD.
There is a missing component here that is a paremeter that is supposed to be set by the witness: Interest rates.
Directly from the white paper:
"Interest
SBD pays holders interest. The interest rate is set by the same people who publish the price feed(aka witness) so that it
can adapt to changing market conditions"
And
"If the debt-to-ownership ratio is low and SBD is trading for less than $1.00, then the interest rate should
be increased. This will encourage more people to hold their SBD and support the price.'
'If SBD trades for less than $1.00 USD and the debt-to-ownership ratio is high, then the feeds should be
adjusted upward give more STEEM per SBD. This will increase demand for SBD while also reducing the
debt-to-ownership ratio and returning SBD to parity with USD.'
See, there is already a mechanism on the blockchain to fix the peg.
But where is the direct conversion button? Hidden. Where is the information about how many steem can I get from conversion? Only witness know.
In three years that I am using steem, I don't remember any discussion being brought up about adjusting internal interest rates. It have always been zero.
So, this initiative is nothing more than direct market manipulation, and use of the reward pool for something that wasn't intended to.
So, your premise is essentially because something isn't working according to the whitepaper that it reflects poorly on our chain.
I don't think that necessarily follows but there are more pressing matters than the broken peg. People engaging in meaningful curation less is one such thing.
After all, the white paper suggests voting should be an evaluation of a network contribution. What stands at odds w meaningful curation?
What activities are you currently engaged in that detract from meaningful curation? Selling votes for one which MB still does engage in... although I am glad y'all have made strides to prevent the votes from being abused.
Even so, the case can be made that vote selling undermines the very effort you are engaged in to increase Steem's demand. I've bought more Steem than I ever had once I was filled w hope from the #newsteem spirit and many repenting from selling votes. Not sure if it lasted considering such services still exist. Web based promotion would be such an easy transition with the right ppl so I don't know why we haven't ceased from reward pool based promotion. I digress but my point stands about being consistent.
I think it's inconsistent to make a general white paper appeal while one is engaging in activity contrary to it (irrespective of what Ned's former assent to the practice). If you want to make an appeal, it ought to be more specific as to why failure in this particular aspect of the WP is detrimental.
Otherwise, it seems rather arbitrary. So, why precisely does the peg being broken reduce demand for our native token. That's the question I hope to understand.
Historically SBD pumps are followed by a rise in the Steem price, that's the goal here. Also Minnowbooster earns maybe 5 SBD per day on vote selling currently and is hardly worth noting, we will be phasing down the minnowbooster vote selling services but we can't shut them down that easily without first migrating the lease market fully over to dlease which we are in the process of doing. Minnowbooster is a monolithic codebase and not easy to just remove one part, dlease is microservices based and much more flexible, we are going that route for all our projects.
Thanks for explaining and glad to hear about phasing out the bid bot service. That's the sort of thing that gives me confidence in our chain. 💪