Who Wants 1 SBD = $1 USD?
I was initially quite surprised to see discussions here on Steemit about re-pegging the price of one Steem Backed Dollar (SBD) to $1 U.S. Dollar (USD) like it was originally intended. I thought to myself, "Why would anybody want to do this?" I couldn't imagine why anybody would want to cut down our payouts so much by pegging SBD back to $1 USD. If you are unsure what I am talking about, let me explain briefly. Then I will get on with the discussion.
PAYOUTS
Currently payouts work like this (on a high level):
*Half of the payout for each post and comment, after curation, will be paid out in SBD.
*The other half is paid out in Steem equal to the second half of the dollar amount displayed (after curation). See example below:
The total payout after curation for this post is:
That's $24.41 divided by 2 (50/50 payout), which equals 12.202 SBD and $12.202 USD worth of Steem. The math is not 100% exact, I believe because of fluctuations in the reward pool.
- 12.202 SBD x $6.97 (current external market price of SBD at this writing) = $85.04 USD
- $12.202 USD / $6.025 (internal price of Steem at time of payout) = 2.025 Steem Power
- Total USD value of post = $97.24 after curation rewards were removed.
- As you can see, this type of payout structure greatly benefits people who are engaged in this game we call Steemit and is actually a nice surprise for people that didn't understand it and realize their payout is worth a lot more than they thought!
- This payout method can greatly speed up the process of becoming a large minnow or dolphin for people who are serious, engage with others and stick with it!
- The payout displayed for each post or comment on Steemit was originally designed to reflect the total USD value of the payout before any curation rewards are subtracted with each SBD being worth $1 USD.
- The high price of SBD = payouts much greater than what is displayed on Steemit.
SO WHY THE TALK ABOUT PEGGING SBD AGAIN?
Why would anybody want re-peg SBD to $1 USD?
Well, the main reason that I have found so far in the little bit of research that I have done is that:
Pegging it would help stabilize the price of SBD and enable merchants to use SBD to receive payments without having to deal with changing the prices of their goods and services to ensure their profits come out as expected.
MERCHANTS
I really do want to encourage merchants to accept SBD and Steem and thus increase mass adoption, as this cryptocurrency and tech is one of the most proven out there, with 3-second transactions, no fees, ease of use, and relatively long term positive track record.
In addition to those virtues, there are millions of social interactions already occurring across the world on the Steem blockchain. Steem really seems to be the best candidate at this point in time to be adopted on a mass scale by users and merchants alike. However, we are still in the early stages of this experiment. I have been looking a lot of stats recently with my friend @glenalbrethsen and it is obvious that there is still a major imbalance in the distribution of SBD and Steem to Steem users.
Let me be clear, I don't begrudge those who hold a lot of tokens on the blockchain. But, while I can see that the volatility of SBD price would be a barrier against merchants accepting SBDs, an even greater barrier to adoption is the still very small number of people (relatively speaking) around the world that actually have expendable amounts of SBD or Steem.
It also doesn't help that it is such a laborious process currently to buy Steem and SBD, and you can't buy Steem/SBD directly with fiat. This is one reason that presently a majority of people in the world are not spending large percentages of their fiat paychecks to purchase SBD and Steem to buy goods and services. There are a lot of us doing it, but there are a WHOLE lot more that would do it if it were easier. Hopefully @jerrybanfield's project to build a peer to peer Steem/USD gateway will help alleviate this burden for many people around the world.
There is a relatively small number of whales, orcas and dolphins out there that are actually willing to spend there SBDs and Steem on products and services when compared to all the plankton, redfish, minnows out there. The majority of users still have very few tokens they are willing to spend. They are HODLING their crypto in hopes that it increases in price to a point where it becomes life-changing money. I do hope we get to the point where a greater percentage of users on Steem based applications have expendable tokens to spend. I don't think we are there yet.
The focus should be on creating more large minnows and dolphins (dare I say orcas) that stay engaged on the platform, learn what there is to learn here (lots of good stuff!) and then when they have some life-changing money, they can begin changing the world by making fiat more and more obsolete.
Let me ask you all this? Are there hundreds or thousands of merchants around the world clamoring and begging for SBD to be pegged to the dollar so they can do business? If so, I haven't seen it. Again, I would love to know that is the case but they aren't exactly filling up the trending page or my feed with posts about that. Maybe I have just missed them. Please point them out if they are there.
However, there ARE many thousands of people who are currently coming to the platform wanting to have their good content recognized and upvoted and earn some money in the process. Let's focus on them for now!
CURATION REWARDS
Another reason I have seen explained for pegging 1 SBD to $1 USD is that it is somehow unfair to the curators. I do agree that we need to incentivize curation. If dolphins, orcas and whales were to manually spread their upvotes out to a wider circle of users, it would also encourage people to stick with the platform and grow their Steem Power and ultimately reach the maturity level we are talking about where merchants will adopt Steem/SBD as a payment method.
Many ideas for further incentivizing curation on a wider scale have been discussed. I hope the witnesses do come up with better solutions. Maybe a solution would include making curation rewards pay out in a 50/50 split of SBD/Steem-Power. Or we could work on other structures where curation is incentivized for upvotes on high quality blogs with low reputation scores and/or accounts with low Steem Power. This would do a great service to the ecosystem, by retaining new users, would it not?
SUMMARY
I think it is too early to make huge changes to accommodate merchants, especially in the form of a hard peg of SBDs back to $1 USD which will negatively impact other important stakeholders.
One of our main focuses should be on retention of active users and rewarding quality content at all levels. I think this could be done by further incentivising curation. We need whales, orcas and dolphins doing more curation on a wider basis. I don't know how it can be done but I know some brilliant people are putting their minds to the task.
Once we have brought in a greater number of users who are actually able to see their earnings (hopefully largely in the form of Steem Power) grow and therefore remain active on the platform and people actually have liquid SBD or Steem to spend, then let's talk about merchants. If we reach that level of maturity we should be thinking less in terms of the fiat value of our tokens and the concern of that fiat/token price volatility becomes less of an issue, doesn't it? I am no economist but those are my thoughts.
CONCLUSION
The SBD cat has been let out of the bag! A hard peg to the dollar, especially a sudden one is going to make people leave and less people join. The result will be that the curators and merchants will have fewer people to do business with.
If you enjoyed reading this post, please Resteem it to let people know that we want the SBD to remain un-pegged from the USD as it is today unless we can be convinced otherwise!
Maybe you should emphasize the short-term versus long-term difference in point of view. SBD should not be reverse-pegged to USD now for the reasons you explain; but there is indeed a need to act that peg at a later time when the network is mature and liquid enough to attract merchants
I strongly agree with your ideas to "work on other structures where curation is incentivized for upvotes on high quality blogs with low reputation scores and/or accounts with low Steem Power". Do you know of an existing witness talk about this?
Man, you're writing like the pros. This is quality stuff right here. I wouldn't be surprised if some of the whales start linking to you if you keep putting together analysis of this caliber.
I agree with your conclusion. Although maybe originally intended as a coin for doing business, I don't know who uses it for that. And good golly, Miss Molly (that's a saying, right?) would it hurt to have SBD go all the way back to $1. The only way that wouldn't hurt as badly is if Steem dropped too, because then it would be easier to get SP
Thank you for the kind words. Yes, a lower price for the short term would alleviate the pain in some ways, like picking up more Steem for a lower price but high SBDs can do that better in my opinion.
As with the example above, if SBD were pegged to one dollar I would only be able to buy $24.41 in Steem but with SBD at nearly $7 I can buy a total of $97.24 worth of Steem from the payout.
This is from the revised white paper—
So it's a debt instrument, right? Which means people are buying debt, with the hope that Steem will go up to convert later? Or what?
That stuff flies like a rocket, right over my head! You can trade your SBD on the internal market for Steem. You want the Steem to be cheaper so you can get more Steem at the time of the trade but in the long run you want both to go up together. I guess you pay off the debt that is produced automatically via the 50/50 payout by trading it for Steem. Very confusing to non-economics majors!
I'm glad I'm not the only one it parts the proverbial hair on. I think.
So, the whole peg to $1 USD thing. Please correct me if I'm wrong, but isn't the intent of the $1 USD peg to keep the SBD from ever being worth less than $1 USD, rather than keeping it from ever climbing? And isn't it in addition to that the SBD will always be worth at least $1 in Steem?
Yes, that is true at this point in time. But I believe in the past it also meant that it wasn't supposed to be higher than 1 USD.
That's a good point. It does help to have the SBD price higher. Although high price of SBD means you need a higher rate of return to be profitable with voting bots.
I think we should set the price of Steem to $0.01 and the price of SBD to $10. I'll level in no time! :D
Yikes! Not sure if I would like that or if that would work. Please explain further!
Ha ha ha. Your reaction: Priceless!
I was joking, but in reality, you would level super quickly. The 1/2 reward that goes to XP would be 1 Steem Power per penny. The 1/2 of the reward that went to SBD would be able to purchase 1,000 Steem (power) per SBD.
:D
Great post! Very informative. I must have missed something because I didn't even know that there was talk of this occurring. I will definitely search for more information on this topic. I love SteemIt and want to see it grow, so I would support any strategy with that in mind. Even if it hurts me in the short term, but ultimately benefits the masses that contribute to the community.
Thank you!
I feel the exact same way. I may be wrong about this and the peg could be better for Steem in the long run. I am willing to take the hit if that is the case but as I stated in my post I believe there would be a huge effect on user adoption in the short to mid term.
You really took your time to analyse things here @bbrewer.
I know the persistent fluctuation in the price of Steem/SBD might not give some merchant assurance of accepting it as a means of transaction so that they wont run into loss at the end of the day. But also most of the investors might be discouraged because it might take them like decade to realise their investment back. Even the good and original content creators will be discouraged.
Before pegging SBD @ 1SBD = I USD, they should consider the two parties and make sure one party is not into greater loss at the verge of pleasing other.
The payout structure was originally 50/50 between author and curators; but it was changed a long time ago.
I wrote a piece suggesting we go back. We're still in beta, that's when changes are made, and unmade.
50/50 between author/curator is pretty steep but could work if curation was spread wide enough. I would prefer 65 Author/35 Curator or just giving curators the 50/50 SBD/Steem split like other payouts.
The high SBD price has certainly incentivised self voting over curation, as has the change from 104 week powerdowns; and the change from quadratic to linear rewards.
We adapt, I suppose. I make most of my rewards from renting out my voting power.
The high SBD price means every man and his dog is knocking on my door.
Very interesting! I have to agree, there is currently a lot of incentive to upvote yourself. Where can I read about your voting power rental program? I like the sound of that.
I charge 2% per calendar month; so my main customer, @silvergoldbotty gets to use 50K of my steem power and pays me 1000 steem each month for the privilege.
I also have two smaller customers, who each pay 200 steem per month for 10K SP.
I like it because it increases my exposure to the steem price.
They get to upvote their communities and causes without a massive initial outlay and I make out like VISA with zero risk of default.
Hmmm! You get 2% leasing fees AND earn lots of curation too, right?!
No, the customer gets the curation rewards.
Oh, gotcha.
There are a few other players leasing out, @blocktrades, @msp, @dang007, @berniesanders, but pretty much all the SP available has been leased out.
Excellent post friend and i think such changes also put very bad impact on investor's who are buying SBD's at exchanges now and they might end up losing their money, so it's far better to leave SBD at it's own pace and it will come back down with time because it's after all just an internal coin and steem is the main coin with large open space ahead. thanks for sharing nice information with us, Stay blessed
Agreed, our investors are very important stakeholders!
love how much time you took to explain everything, and @jerrybanfield is awesome.
Hmm this is a good one and you haven't left a stone unturned.
While decreasing SBD would help in the short term most people would be feeling a huge headache
binding SBD to the dollar is superfluous, you may need to completely abandon SBD and leave only the STEEM
I had to look up "superfluous" just to make sure I understood your comment. Haha. I personally like having both. ;)
Oh. Ok. Are you ever sad?
Sure I am. Don't we all get sad sometimes?
Thanks for understanding! What's the weather outside?