Bounty 20 Steem: Should we fix SBD?
I've been thinking about SBD lately and how we should deal with it. Clearly the intention in the white paper of a stable currency that reflects the USD price is not working.
As a recap directly from the white paper:
"....Steem Dollars were designed as an attempt to bring stability to the world of cryptocurrency and to the individuals who use the Steem network....."
Assumption
So I am going forward with the assumption that SBD is to be a
- Stable currency, pegged to some other currency (in this case the USD)
- The purpose of such is to protect users from price fluctuations (i.e. money earned should not have to be sold to protect its value)
- there is a bigger vision for steem than just blogging and SBD are to be useful as cryptocurrency to entire industry and not just steem content creators
A design flaw that makes everyone money
There has been quite some debate about SBD on Steem in the past and it will likely be hard to change anything at this moment.
The reason is that any price of SBD above the $1 brings value into the ecosystem, without any direct cost (other than the loss of SBD utility). Everyone that gets any sort of rewards in SBD has been overpaid dramatically. Specifically content creators have had their rewards multiply.
This money basically is coming from the market. As people on the market overpay for SBD people who earn and sell SBD benefit. So in a way this is free money flowing into the Steem ecosystem paid for by traders/investors. That makes steem grow at no cost. No wonder everyone loves this idea.
High SBD is good short term and bad long term
Because the value that is flowing into steem from the high price of SBD is really good for content creators this is really good for growth of new users and keeping existing users active. it also helps with wealth distribution. So this is simply fantastic.
In the longterm however the objective of SBDs is stability and without it they have no utility. Even worse the advantages that they are supposed to bring are not available to users. So while the there seems to be no cost for not having working SBDs there clearly is one. It is just not as noticeable in the short term, while the advantages of high sbd price is clearly felt by everyone. Immediately.
But imagine how great it would be if you could trust that SBD's are stable and one could use it to park value. Essentially the entire value of TUSD could be captured by SBD and flow into steem. If that were the case the steem blockchain would be more than twice as valuable.
Fix it in the long term and in a way that increases the price of steem
So I would suggest to let SBD go on as it has right now until its value comes down to its peg or at least close. Then however I would suggest to fix the design flaw that it has and make sure a volatile SBD price cannot happen again.
Allow people to create SBD
One of the great things of Steem and SBD is that the debt ratio can never be more than 10%. As such there is no problem creating unlimited amount of SBD. Therefore we can come up with a solution like @timcliff suggested
- Allow users to buy SBD by converting STEEM into SBD
- The conversion from STEEM to SBD should have a fee that is set by the witnesses (it would be their job to make this so high that the system cannot be exploited)
- This fee can either be burned or used for marketing or development purposes
- Steem used to buy SBD should also be burned
How this would increase the value of steem
If the utility of SBD would create lots of demand for it, the price of steem would increase. At first price of SBD would go up, this would then trigger arbitrage opportunities, which would increase demand for steem, which then would increase the price of steem.
Imagine the entire crypto market using steem as stable currency instead of USD, this would catapult the price of steem. I think the value of a stable currency is still vastly understated by most people in the space. In the end no cryptocurrency is money or currency as the most important attribute of such (that most often is omitted) is stable value. As such steem could be the only real currency in the space, if only we would get it right.
I think it is better to fix a faulty design than to forget a good vision. SBD are essential for making steem more than just a simple blogging site but a whole financial system that can change the world. In order for that we need working SBD.
Bounty
I am sure many of you will have interesting ideas about this so I look forward to your thoughts. In order to encourage you to share them I have put a 20 Steem bounty on this post, which will be shared among the top level comments, depending on how much upvotes you will get from me (80%) and from the community (20%).
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I can see how a stable SBD would attract resources that just want to be parked for a period of time without the extreme volatility. The crypto market is in desperate need of more stable options for sure. But, is stability the unique mechanism the STEEM ecosystem is trying to offer? For me, I don’t think so. Cash flow is STEEMs unique mechanism. Selling dreams of cash flow is much more attractive in my opinion then stability. I didn’t get into crypto for stable prices. I got into it for big gains and cash flow. The way the SBD is currently “broken” creates the most amazing opportunity for income growth I’ve ever seen. To change this and opt for stability would be a huge mistake from where I’m sitting today. Over time my mind may change, but for now I want the highest levels of cash flow possible without much weight being put on stability. Thanks for the post and getting this important conversation started! Resteem
Correct. We're still at our infancy stage for me and we need more and more sustainable income. If steem attracts more people joining the platform (including big whales/players), then that's the time a fork or change needs to happen.
So I'm admittedly new. But why would new people on the platform mean needing some sort of change? Maybe a better question of why specifically a fork or other change in case of growth?
Well put Brett! I was going to put in my 2 cents about this but you have taken the words right out of my mouth so all I will say is... Ditto!
This comment right here. The two trails of thought I'm seeing sum up cryptocurrencies perfectly atm. On the one hand we have those seeking a useful tool (a stable currency), and on the other we get those looking for the next big thing in investment. This is why the chaos we have coming from so many different currencies is actually a really good thing - just like with many other things, there is not one method to suit everybody, so I'm just glad that we do have so many (in time the ones with true value will stick around). In the context of Steem, however, it would make sense for SBD to have a stable price - this would boost the price of Steem greatly over time (and, I imagine, quite reliably because, as it's been said, stability is a genuinely useful commodity that we need in the crypto market), and in this way benefit both investors (those looking into Steem could simply invest and know safely that their investment will grow as more people join this genuinely great website) as well as those looking for that stability to make sure that the money they spent a week ago doesn't suddenly become worth all of what they own now or anything like that. Just my thoughts as a crypto newbie :3
I'm new to steemit, and steem in general, like some of the commenters below. I read this post and replies with interest, and I appreciate the reasoned discussion from both points of view. I don't yet have a good enough understanding the system to have an opinion, but hope to be able to offer useful input soon.
Thanks for your work in developing this community!
Thx for help :)
I totally agree with your opinion👏👍
please help me i just join in steemit
Hello friend. I'm new. I would like to introduce Korean culture, K-Pop, and food etc. Please follow me then I will follow you :)
okay friends later I follaw
nice
Follow back
Nicely said Brett I'm agreeing with you
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Forcing the peg back is anti-free-market and pro-regulation. It's everything crypto is against.
Witnesses arguing for a repeg should be unvoted. They are literally attacking your wallet while printing 100+ Steem a day.
All follow my, I will reciprocate.
Please help me I’m new
It takes time . You have to keep reading and studying.
Same here, follow me, then, will follow you :)
Hi, bosslui. I'm new too. I would like to introduce Korean culture, K-Pop, and food etc. Please follow me then I will follow you :)
How about dinamically controlling SBD inflation based on an SBD price algorithm?
LMAO
That is EXACTLY what they are doing!!! I've been watching...
You don't seem to understand how SBD works.
That is normal inflation. SBD in circulation is increasing with every post paid out.
Built in adjustment. Even Better! Which was totally LEFT OUT and overlooked by the OP.
;)
I didn't see this comment before I posted my response below but this run along the same lines as my solution proposed below. Basically all thats needed is to create an algorithm that can influence the price of SBD according to the monetary price of SBD at any future time point (x). There any many ways in which this algorithm can be written. @lightproject just proposed one and I proposed another in my comment below.
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Correct me if I'm wrong but SBD merely guarantees you a dollar's worth of STEEM if you choose to redeem it with the blockchain correct?
So it's merely a price floor. By holding SBD you are guaranteed the purchasing power of a USD. Nothing more!
If traders are driving the price of the SBD up, that's merely a bonus. The instrument doesn't promise you that at all.
Would I be correct in saying SBD has a price floor at 1USD but no ceiling?
Yes. What I am saying is that this is a design flaw relative to its purpose which is to represent USD
Right. If I had to pic a flaw.. that's the one I would pic! haha.
For Muse, this design flaw is good. Since we need to guarantee that artists and rights holders get the purchasing power to pay their bills to allow them to continue focusing on their music career.
I'm new to the environment and I think this question right here is one that is helpful for newcomers to understand. I admitily need to look into it more but this entire post sounds intriguing.
I agree with you, we cannot predict the Market globe that control by trading market. It depend on how many trader use sbd as payment tool. When the moment sbd many use it will up, otherwise when this sbd rarrely use, it will fown. It is system.
Yes, at least to an extent. That doesn't mean it can't trade below $1 for long periods of time. We've seen that happen multiple times.
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I don't disagree with your proposal for addressing it, but I would add that even in the short term, it seems to me that the only stakeholders who really benefit from high SBD prices are authors. I think other stakeholders are harmed in both the short and long term. I wrote about it from a stakeholder perspective a few months ago: About those high SBD prices.
Two questions that no one seems to be asking:
i. Does restoring the SBD peg reduce the whale self-voting/voting-clique problem?
ii. For a healthy platform, what are the desired ratios of voters/authors, investors/authors, and even readers/authors?
Authors are the ones with the megaphones, so these discussions usually assume that every Steem user is an author, but is that really the way the platform works best? It seems to me that the platform would be healthier with many more voters, and investors than authors (who have the smallest incentive to hold steem). The high SBD price does nothing to encourage that dynamic.
Correct me if I'm wrong but is this platform's Intention to be used as simply another form of open and free social media? If so then it is in the hands and interests of all users to Inherently become authors by Posting content they find meaningful and being rewarded for doing so. Given the underlying intention of creating a community of meaningful content via rewards.
Refocusing on the intensions of the coin produced and witnessed on this block chain network, If it has been define as a stability seeking method should be not strive to maintain that original purpose?
This is in the whitepaper (page 27):
So yes, anyone can earn rewards by posting content, but voters are needed too, and you need many votes per post (on average) to achieve effective curation. High SBD prices tip the balance in the opposite direction, reducing the relative value of voting, since curation rewards are paid in SP.
And yes, if I understand you, I agree with your second point. SBDs were designed with one purpose in mind, to have a stable value. If they're not doing that, then they are failing.
The whitepaper also has 52+ week power downs and exponential whale voting.
The repeated appeals to it are fallacious appeals to authority.
Actually, it doesn't. The copy I pulled that from was rewritten last year to match the current state of the block chain. The link is here - https://steem.io/SteemWhitePaper.pdf
And it says:
And
And even if it had been obsolete, that wouldn't change the thrust of my comment which is that high SBD prices incentivize authors at the expense of voters and other stakeholders in a way that discourages quality content discovery.
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Personally, I believe whatever is best for Steem then that should be the option moving forward, I dont think we will see it drop to $1 in the short term.
Although looking at BTC it could happen sooner than expected if the price continues to fall.
Can I ask - Do you think new people to the platform actually understand that the payout that is shown in a $ value is wrong?
I had no idea when I first joined, and many people I speak to don't either.
It was only after watching many videos and looking at articles that I started to understand this.
Conclusion - Long live Steem and Steemit :-)
I had a suspicion the displayed $ value couldn't be accurate. Do you have any references or could you go into as to how that is calculated versus what the returns really are?
@prlndra I use this online tool - http://steem.supply/rewards
Just make sure you change the Steem price and also SBD to the actual price and it will show you your earining per post.
Very good
What is the best place to track the steem/SBD prices? Within the steem platform itself or an external exchange?
I use Coin Market Cap - https://coinmarketcap.com/
On the righthand side is a search box - Type Steem or SBD in there and it will give you the price.
Basically, 1/2 is paid in SBD. The other half is paid in enough Steem to equal the USD value. So, if you see that your post pays $2.00 in rewards, you get ONE SBD. and one dollar's worth of Steem.
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That is AWESOME :-)
Thank you for letting me know @steem-bounty.
Can you let me know where to find out more information about the bounty and how this works as I would like to learn more please.
Thanks
We are still testing and will announce more soon.
If SBD can not be pegged to 1 $, there will be no reason for it to stay. Why don't we just remove it from the whole system? It confuses newbie.
Lol... Removing it means no stable value for the volatile Steem. That's a good way to think about it but it's impossible. Fixing what is broken is better than throwing away.
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I favor a SBD 100% pegged to the dollar, it is a no brainer. We already have a volatile crypto that is the Steem and all the others around. We miss a stable coin in the cryptosphere. Monstrous volatility is useful only for speculation purposes, but not for regular people.
You got a 25.03% upvote from @mitsuko courtesy of @discernente!
Except, it's actually not a no-brainer, because the natural mechanism to fix this situation is already working.
You armchair Keynesians need to sit the fuck back down.
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There is no reason to intervene now as we don't have any bussineses or projects running that would benefit from a stable 1$ SBD. Leave it as is and it will just serve as a jet engine propelling us forward.
It will go back to 1 on it's own when steem goes to 100 after SMT and HF 20 are successfully implemented. It will balance itself back to 1 as a ton of new SBD will be created every day.
Yeah but when?you think it will go down to 1$ just like that. People don’t understand that SBD is only mined in this platform. And only by authors. steemit is actuve 2 years now and we have only mined 10mill sbd. The number is really small. AAnd I don’t think that anyone can interfere in the protocol just like that. If it was so easy we could also change the circulation supply of Steem which-i don’t know how many of you have noticed- but out of the 269mil we are standing at around 253 as we speak. And judging by how quickly it escalates i assume within 4-5 months there wont be any more steem for mining.
At that point things will take their way. Steem will roll while sbd will return to the price it was originally designed
Steem does not have a hardcap, from page 26 of the White Paper:
"It will go back to 1 on it's own"
It's already doing that, even while other top-upvoted comments in this thread "lie" and say that it's price isn't normalizing.
Literally, many of the top comments in this thread are boldly lying about SBD not reverting to normal from normal market activity.
Derp? Which way does the line go? I think it goes from $12 to $2 (83% loss) in under 3 months.
Bueller?
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My opinion is SBD should definitely be pegged 1USD because there’s no such thing as a dollar constantly fluctuating and being volatile 24/7 it’s unpredictable how much your SBDs would be worth, won’t make it as a Steem currency unless it’s stable like USD fiat.
That or just change the whitepaper so people don’t get confused and spread lies to the community that SBD is pegged and promised to be a stable crypto when its not!
Great post!
The whitepaper is obsolete. Stop obsessing over it.
What is a "steem currency"?
The white paper shouldn’t be obsolete due to it explaining in detail what the company is about. Which for people that are serious in investing/using the platform or crypto like to know.
And “Steem cryptocurrency” same thing.
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