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RE: Attention SBD Converters: Please Read - Important Information about SBD -> STEEM Conversions
Why are witnesses setting the price? It's supposed to be dictated by the free market, otherwise we are not better than the fed...
'In effect, feed producers are entrusted with the responsibility of setting monetary policy for the purpose of maintaining a stable peg to the USD' (Steem White Paper, p.14). SBD is not supposed to be priced by the free market. The purpose of the token is to have its price manipulated by both the autonomous mechanisms of the blockchain and witness inputs so as to maintain a stable value relationship with (the also manipulated) USD. That offers more utility to users who live in a fiat-dominated world. If and when such a world ceases to exist, then such manipulation will have no value, but for now it has great value. @timcliff's point about there being no value in treating arbitrary and aburpt supply changes due to obscure blockchain factors such as the change to a 30-day reward pool as being meaningful to 'free market' pricing is also a good one. Our job is to support the utility of SBD by maintaining the 1-1 peg (within reason). It is not to abandon the peg and defer to free market pricing.
But it is.
@timcliff 's last response
So the purpose of the price feed is to produce more or less SBD in order to lower/increase SBD price if too high/low. Witnesses can influence the price but ultimately the free market decides what the price is.
Good questions / answers. Upvoted with @adm for visibility.
The purpose of SBD is to be a pegged asset. The free market should dictate the price of STEEM.
SBD is also dictated by the free market.Did witnesses chose to pump SBD recently? Nope, it's the free market that did it.I don't see the point of the price feed
The HF 18 conditions of reduced rewards are not a natural market condition.
What do you mean?
Because of HF 18, the payouts are all artificially low right now because the 30 day rewards pool is being 'filled'.
I don't see how this is relevant to witnesses setting price feed...
When witnesses artificially inflate the price of STEEM via their price feed, it causes the amount of SBD rewards that are available for post rewards to go up.
Do you mean that the price of steem on the internal market is based on witnesses price feed? If yes, then the price of STEEM is not dictated by the free market.
No, the price on the internal market is based on whatever market participants are willing to buy/sell at.
The blockchain has it's own internal price, which is different than the internal market price. The blockchain price is used to determine the amount of STEEM that SBD conversions produce, as well as how much SBD to pay out for author rewards. This price is set by the witness price feeds.
The conversions between STEEM and SBD happen on the internal market and are based on the price of STEEM which would mean that the price of STEEM on internal market is set by witnesses. Are there other internal conversions that I'm not aware of?
I think you are confused. There are two completely separate prices:
Price 1: The internal market price, set by the buying and selling of STEEM/SBD.
Price 2: The internal blockchain price, set by the witnesses price feeds.
There is also a difference between "converting" SBD to STEEM (done through the wallet, and takes 3.5 days), and "trading/exchanging" SBD for STEEM (done through the internal market, or through an external exchange).
Thanks for clearing this up for me. Just to make sure I understood properly, the STEEM price set by witnesses has no influence on STEEM market price, it is just an internal price to do conversions correct?
Yes, that is correct.
Thanks