SBD Potato: Peg Repair Community Initiative
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According to the Steem Whitepaper (page 9),
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.
The Steem Backed Dollar (SBD) was all part of the plan for Steem's world domination but somewhere down the line it got broken and it is no longer even closely equal to 1 USD as it was intended to. The prevailing rate is more like 69 cents.
This is an embarrassment for the Steem Network and does no favours for its reputation or adoption of SBD by merchants and freelancers.
Stabilising SBD is key to regaining overall confidence in STEEM; there is however a way to help support the peg from the lower price levels, that is by doing conversions. Conversions basically take SBD out of circulation by converting it into STEEM over a 3.5 day period, this is much like a convertible note as seen in traditional finance.
Conversions can be lucrative, netting the converting party anything up to 3% over 3.5 days. When the debt ratio of SBD is greater than 10% the blockchain imposes a 10% "haircut" so doing conversions is likely going to make you a loss.
If you look at this API provided by @cervantes, you will see that the ratio is currently around 14%, meaning total SBD supply / Total Steem Marcap in USD is 14%.
So from the above we can now see that we need to remove SBD from circulation through conversions, but it is risky for individuals to risk their funds doing this. So What is the solution?
Enter the SBD Potato!
We need to bring SBD back into the sub 10% debt ratio range so the community can jump in and help do conversions without risk of a haircut. My proposal is to use native STEEM inflation to purchase SBD on the internal market and convert it into STEEM.
The plan is this; should this first post get enough community interest, a daily post will be created that the community can vote to redirect rewards to this initiative. The account will be placed on permanent powerdown to unlock the Steem Power earned.
Once a week the liquid STEEM rewards in the @sbdpotato account will be used to purchase SBD on the internal market and converted into STEEM, the resultant converted STEEM, in addition to ongoing rewards being received from daily posts will be used in a circular fashion to continue purchasing SBD and converting it.
When SBD is safely within the 9% debt ratio range the service will be stopped and I will take guidance from the community on what to do with the accumulated STEEM, some ideas could be: send to @null to burn it, donate to @steem.dao, use it for purchasing marketing for Steem, donate to a charity on behalf of the Steem Network etc, but all of that can be decided on later.
What do you get out of it?
Well firstly by voting this post you will be helping fix SBD to get it pegged to 1 USD again as it was meant to, this could also help bring the STEEM price up with it. There is a theory that the two are circular, a strong SBD gives support to healthier STEEM prices, perhaps due to positive sentiment in the network.
In addition to doing your part to improve the economy of the Steem network, you will also earn SP curation rewards from voting the post that hopefully get decent traction.
I recommend setting the @sbdpotato account on autovote using a service like beta.steemvoter, by setting a stream to autovote the @sbdpotato account at around 4 or 5 minutes as per the screenshot below. There are also other autovoter services you can use if you prefer.
Conclusion and Disclaimer
I would like to thank @smooth for inspiring this concept, it came from a discussion about it being risky for an individual to use their capital to try help the peg, this gave rise to the idea of using community capital (inflation) instead.
This idea is also derivative of Smooth's @burnpost idea. In addition, @smooth has pledged vote support to this initiative.
As custodian of this project I, @thecryptodrive, will not derive any monetary value therefrom and undertake this under my duty as Steem consensus witness and ambassador.
I hope the Steem community will embrace this idea of supporting the SBD peg by voting the @sbdpotato posts regularly, alone we are powerless, together we can bring about change.
Dear @sbdpotato, @thecryptodrive
Finally I had a chance to get familiar with idea behind this project. I have few small questions.
You've menioned that "This is an embarrassment for the Steem Network" that SBD is worth 0,69$ usd. Instead of 1$. And it made me wonder - perhaps pegging SBD 1:1 with usd is not possible in a long run?
We've seen many economies accros the globe which tried to peg their currency to USD and sometimes it's turning out to be very costly to keep that pegged value. Perhaps SBD should be stablized at 0,7 - since it's more of a 'natural' rate?
Trying hard to bring it back up to 1usd can be very costly and difficult.
Based on my understanding (correct me if I'm wrong) - your goal is to use part of inflation to purchase SBD? Isn't going to increase STEEM selling pressure?
And what will happen to those purchased SBD? Will it be send to @null?
Yours, Piotr
The market seems to be responding well, the price of SBD and Steem are both going up, today SBD is 0.84 USD on Coingecko, I believe @sbdpotato can help take it the rest of the way without costing anything. Example a 25K SBD fund can keep cycling conversions to reduce SBD supply by 25K every 3.5 days which equates to about 214K sbd per month.
Commit to this and I'll happily support it.
I’m pretty happy with the null option, would like wider community input, sending to dao is also interesting.
At least there is conversation on the topic, but I'd rather see an improvement to the actual peg mechanism - such as implementing Reverse Conversions, or even using a collateral mechanism like DAI, which has now streaked ahead of SBD.
I agree more improvements are needed but hard forks are necessarily rare (other than in cases of emergency, which hopefully don't happen) and developer focus (which for the next fork at least is mostly on SMTs) is even more scarce. After that we are looking at several months to a year. We should continue brainstorming and discussions but I don't see a quick fix in the blockchain itself.
In the mean time it is possible for the community to do some good with the tools we have, although not everything, as you correctly point out.
It should have been in the last Hard Fork and an absence of any attempt to address the SBD peg issue says to me quite clearly that it won't be addressed. I'd be happy to wait for months or a year if there was actually a commitment to fix the SBD peg, but once this band-aid goes on the issue will just be swept under the carpet and forgotten about once more. Rinse and Repeat = Credibility does not get restored long term.
It's all well and good to come hat in hand to the community for funding of a band-aid solution, but I think that as a platform we could (and should) do better.
I don't think it is useful to dwell on what should have been done. We all have ideas of things which should have been done differently around here, at least I do.
To be clear, I don't think this is an amazing 'solution' but I consider it a fair alternative/complement to burnpost (also a band aid) as a way to keep (or at least reduce) rewards from being dumped on the market, as well as address some of the internal imbalances, while potentially channeling some of those imbalances back into platform value.
I also don't think it makes much if any difference to what might or might not get implemented in the blockchain in months or years, but I understand where you are coming from in not supporting band aid approaches. That is fair.
We do have to learn from our past mistakes (or inactions) if we hope to improve going forward. Nobody likes to hear "I told you so" but if that's what's needed to learn the lession then it has to be said and pointed out.
I'm also not saying I don't support the idea of the SBD Potato. I was happy to see this post on the topic - I upvoted and resteemed it too - but lets acknowledge what it really is. It's a band-aid solution that does not address the core issue that has brought us to this situation. Band-aid solutions don't solve anything in the long run.
Absolutely agree re. band aid.
I also agree it’s a band-aid @smooth, it’s what we have atm and is better than nothing. It can be a precursor to a longer-term solution.
Hi @buggedout
What do you think about sbdpotato now? 3 months later? I'm just learning about this project and I would like to hear your opinion.
Cheers, Piotr
I haven't been following it closely. Been meaning to do some analysis on it but haven't got around to it yet. I still support the idea of fixing the peg.
Hi again @buggedout
Can I ask you for little favour? I joined contest called "Community of the week" with project I manage and I would be grateful if you could RESTEEM it and help me get some exposure and drop some encouraging comment :)
Link to my post: on steemit or on steempeak
Thanks :)
Yours, Piotr
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Hello @smooth any chance at a small prize sponsorship for #SPUD ? Thanks and take care.
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Also reverse conversions are only useful when SBD is above $1. We need a solution when it is below $1, I have proposed perhaps changing the debt ratio haircut threshold to like 15% or 20% so that people can start converting en masse without fear of haircut to help the peg, can change it back later.
Hi @thecryptodrive
The thoughts are very good
we join, my team in norway and i stand with 100% vote
Regards @xpilar
Hi @xpilar
What do you think about sbdpotato now? 3 months later? I'm just learning about this project and I would like to hear your opinion.
Cheers, Piotr
Hi @crypto.piotr
So far, it has had a positive impact on the SBD price and the debt ratio is decreasing. The project is now funded and the last post from @sbdpotato was 5 days ago so for now our upvote is not used and the post that appeared on the trending will not be a problem.
I suggest you read this link, here are many answers that allow us to better understand this with the SBD award
https://steemit.com/sbdpotato/@thecryptodrive/no-brainer-sbd-potato-top-up-proposal
Thank you @xpillar, together we can fix SBD!
yes @thecryptodrive,
and those who are smart will now also invest in SBD again 👍🙂
Haha yes, good opportunity to earn 30% on your money in maybe a less than a year.
Yes, there is a chance of a good return
This is true, though I would argue that Reverse Conversions might prevent this problem from recurring during the next pump. To me this does look like a bit of a band-aid solution and does not address the core issue.
@smooth basically answered this perfectly, no need for me to reply further.
Agreed, but it isn't so easy to get everyone on the same page to agree on making changes such as reverse conversions, perhaps this will spark interest in the matter. Also, the upcoming SMT HF is already full of changes, it may be risky to put additional complications into it.
Great initiative, Might want to set beneficiary to @likwid not to have to wait 13 weeks to power down the SP.
I had that in my initial draft of the post but wasn't sure if the service was still active so decided to go the pd route until i found out more about likwid. Will try on next post.
awesome idea! I've set up the stream (y)
Thank you!
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Interesting solution 👍
I'm not called "The Hacker" for nothing! :)
This is a great initiative. I propose burning the author rewards once the debt ratio target is reached so as not to cause any further strain on the price of STEEM.
The author rewards will be used to purchase SBD and convert it and repeat until the peg is fixed, at the end of the initiative yes the rewards can be burned if that is the general sentiment.
What this initiative does is push down the price of STEEM down while the puchasing is going on. Burning whatever STEEM is left in the end will help undo that collateral damage. It might even be a good idea to adjust the ratio of STEEM burned or used to buy SBD dynamically.
Tentatively agree with this reasoning.
Sure it can be done carefully, at the start it won't be much I suspect to warrant any throttle selling. Also remember if the rewards weren't going to @sbdpotato they would likely be going to other authors who would likely sell it for BTC which is worse than selling for SBD, at least one of our currencies is being pumped instead of BTC.
That’s true. None of these rewards leave the platform.
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Hi @markkujantunen
What do you think about sbdpotato now? 3 months later? I'm just learning about this project and I would like to hear your opinion.
Cheers, Piotr
The potato posts are a bit disturbing in Trending and I don't think it is going to be needed for long as the price of STEEM will quickly surpass the level needed to take the SBD Debt Ratio below 10% again.
Hi again @markkujantunen
Can I ask you for little favour? I joined contest called "Community of the week" with project I manage and I would be grateful if you could RESTEEM it and help me get some exposure and drop some encouraging comment :)
Link to my post: on steemit or on steempeak
Thanks :)
Yours, Piotr
Burnpost 2.0