Pegging Steem Dollars (SBD) to USD : A Pro and Con Argument
This is a complicated topic and thus should be discussed with care due to its impact in the financial viability of many people and or steem ecosystem. On the other hand, however, it remains an important topic to explore because of its importance.
Moreover steemit witnesses have been bombarded with questions and arguments especially from those against pegging SBD to USD because of some valid worries examples, going against free market economics, dealing with unhappy members who will get less in sbd conversion and thus might abandon steemit , rewarding and motivating content creators with high sbd etc
In light of all these worries, the question remains should SBD be pegged to USD ? if yes when will be the best time? What are the advantages and disadvantages of pegging SBD to USD?
In answer the afore-mentioned questions, I will start with SBD definition according to steem white paper
Steem Dollars (SBD)
Stability is an important feature of successful global economies. Without stability, individuals across the world could not have low cognitive costs while engaging in commerce and savings. Because stability is an important feature of successful economies, Steem Dollars were designed as an attempt to bring stability to the world of cryptocurrency and to the individuals who use the Steem network.
Steem Dollars are created by a mechanism similar to convertible notes, which are often used to fund startups. In the startup world, convertible notes are short-term debt instruments that can be converted to ownership at a rate determined in the future, typically during a future funding round. A blockchain based token can be viewed as ownership in the community whereas a convertible note can be viewed as a debt denominated in any other commodity or currency. The terms of the convertible note allow the holder to convert to the backing token with a minimum notice at the fair market price of the token. Creating token-convertible-dollars enables blockchains to grow their network effect while maximizing the return for token holders.
One example of an issue that may take some time to correct is short-term market manipulation. Market manipulation is difficult and expensive to maintain for long periods of time (Pls see the white paper for more informations)
In light of the whitepaper, we can argue that the initial plan of the founders of steem ecosystem was to create a stable currency that moves in tandem with USD, why?
Stable Currency: stability leads to investors’ confidence which is good for steem ecosystem-moreover,we should not deal with 2 unstable currencies in the same platforms (Steem and SBD). Therefore if sbd is created to bring stability to the ecosystem and to cryptocurrencies , we can rightfully argue that traders are manipulating sbd for their personal gains-which is not illegal because this is a decentralized economy and we all believe in free market isn’t it?
Moreover having a stable coin in our ecosystem will make us stronger-this argument is supported by Myles Snider in his article AN OVERVIEW OF STABLECOINS
Stablecoins are one of the highest convexity opportunities in crypto. They aim to become global, fiat-free, digital cash, so the total addressable market (TAM) is simply that of all the money in the world: ~$90T. The opportunity for stablecoins is, intrinsically, the largest possible TAM. This vision is larger than that of Bitcoin itself. A fiat-free currency that’s price stable will challenge the legitimacy of weak governments around the world.
In light of these points, I lean towards pegging SBD to USD maybe after summer this year (or any other time agreed by witnesses and members of the community). Reason is that, sensitive issue like this should not be done in a hurry in order to avoid resistance and issues with the community-rather a pragmatic time line should be discussed and agreed.
What do you guy think? Send in your comments and or suggestions, resteem in order for others to join the discussion and upvote in order to send in your support.
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SBD could be pegged on a downside - you always could exchange 1 SBD to 1 USD worth of STEEM.
SBD is not pegged on an upside. To do that you need to be able to print limitless amount of SBD and dump it to feed any demand. Is steemit.inc do so or a community as a whole incentivized to behave such way then it would be peg to 1 usd.
Good point, reality is indeed different . Thanks for your comment
I don't think t pegging to dollar is needed.
We are now at the very early stage of Ecosystem. It's better market decide it's value.
Through due process, SBD will be stable, in my think
Very good point indeed, I agree to allow free market to decide now . However even if the witnesses decides to peg SBD to USD (will be a difficult process) , then it should not be a hurried process and community should know before hand.
The whole debate is somewhat moot, because there are already built-in controls to bring SBD back to $1 in the mid-long term.
I think once all the speculators realise that the system is constantly creating new SBD to meet the demand that there'll be an "oh shit" moment and we'll see a mass sell-off... the price will hit $1, the built-in "convert to Steem" option will return to keep the currency stable, and volume of SBD will drop back down accordingly.
So enjoy it while it lasts, because the plunge to $1 is inevitable.
Very good point indeed, thanks for your comment. Lol we all have to enjoy the SBD now before its too late because am sure that it will drop back to USD before end of this year
Woff, woff!
Hello @charles1, Nice to meet you!
I'm a guide dog living in KR community. I can see that you want to contribute to KR community and communicate with other Korean Steemians. I really appreciate it and I'd be more than happy to help.
KR tag is used mainly by Koreans, but we give warm welcome to anyone who wish to use it. I'm here to give you some advice so that your post can be viewed by many more Koreans. I'm a guide dog after all and that's what I do!
Tips:
Unfortunately, Google Translate is terrible at translating English into Korean. You may think you wrote in perfect Korean, but what KR Steemians read is gibberish. Sorry, even Koreans can't understand your post written in Google-Translated Korean.
I sincerely hope that you enjoy Steemit without getting downvotes. Because Steemit is a wonderful place. See? Korean Steemians are kind enough to raise a guide dog(that's me) to help you!
Woff, woff! 🐶
Thanks doggy
This is a very sensitive but important topic. As a new member and a young lady in need of some SBD money , I will like to see high sbd price in order to gain however if it will go against the intended use and be an instrument for speculators then I am all for pegging as you rightfully indicated in this post. We should think long term and not short term and pegging is is better in the long run however it should be done wisely.
Speculation profits bring in new users, stability keeps them active
Hahahah good point which can be argued.
Sure, but isn't that why we have Steem and Steem Dollars?
i agree with your view @ronja, when we think short term, we would have problem on the long run, i love how you crafted the sentence "As a new member and a young lady in need of some SBD money"
Thanks for bringing this up @charles1, this is not the time to start loosing members on the platform, but then i am concerned if the SBD is raised, won't people start posting "nonsense" all in the name of earning some SBD?
I believe the two sides of the coin must be looked at.
Point, thanks for your comment
You say that like it's not already happening.
Good points indeed, there are 2 sides to the story
one of some points I wanted to think about. I guess there is not yet any way
which I know how I can find post which I want to read later, here I make reply to read it later.
To hear the speech version of this post click the play image.
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Damn, that is good. How did you do it? send me link pls ...so I can consider doing it for Dlive?
This is interesting, when I first came in to steem I always wondered why the platform said it was pegged but the value did not reflect it. I like the free market and the fact that is not pegged. I believe they should leave it as is and change the definition to not confuse new comers.
Good point however I am not sure that they will allow it like it is now for long. However, good for us to earn more
I feel you...I do hope I get a chance to see sbd at $13. I was not around for that wave.
I am against the peg for a simple reason.
SBD is a debt instrument. For each one issued, $1 of STEEM is required to pay it off.
Since November we saw the amount of SBDs outstanding jump from 3.5M to 9.8M...So the ecosystem must have more debt?
Not really.
Back in Nov STEEM was $.85 meaning it took 4.1M STEEM to pay off the debt. Today it takes 2.92M STEEM.
The debt actually costs less STEEM today than it did 4 months ago when there were 1/3 the SBD outstanding.
Very good point indeed, I agree with you. However it means that you support 2 speculative currencies in the ecosystem? there are two sides to the arguement too however as stakeholders we would prefer the best to win.
Yes that is an issue.
Although I am not sure what is speculative about SBD...it states it is worth $1 of STEEM...people want to pay more, that is up to them but the value still is the same for redemption.
It runs up to $30, it is still worth a dollar.
But you are right, it is a subject of great debate.
Also, the market might take over. As more SBD produced, the value should be driven down.
I agree with your view point however based on making more money via my post and thus gaining from free market economics however as you indicated, the other side has a point which Charles analysed well...speculation is not good for the ecosystem and having 2 speculative coins is bad.
Good point, I agree with you. I believe in free market however this is an issue that needs to be resolved before the end of this year in order for members to know their fate on time with regards to SBD.
Cheer Up! 무슨일인가요? 사람들 반응이 엄청나네요?
Cheer up too...thanks
I think that at one point it should be pegged to a 1$, but not before Autumn, as you said. A lot of writers who earn 1,2 SBD per post will stop posting so the platform will lose a lot of members. First, witnesses need to educate the community and spread the word on other social media so people can prepare for it
Good point indeed, thanks for your comment