Inflation vs. Deflation

As the fantastic rise of Bitcoin has captured headlines around the world, the Steemit community has no doubt noticed a significant rise in the price of STEEM. In fact, the wallet and per-vote values on Steemit definitely serve to draw in more users. One thing that is a bit confusing to me, and no doubt to some newbies as well, is the price of SBD.

When we chose the 'Convert' option in our wallets, the STEEM / SBD price will pay out after a 3.5 day period. This is clearly designed (as described in the notes) to limit manipulation of price discrepancies.

The Era of Coin

The main goal of SBD as I understand it was to provide liquidity and certainty of value pegged to traditional currency (USD).

Since the inception of Steemit, we have seen a ballooning of alt-coins and acceptance that the crypto-currency space is much more than Bitcoin and Ethereum. In fact, many solutions to existing problems will likely be found in this new space. What made no business sense in the past, perhaps due to lack of technology, scalability, or sheer lack of interest, can now be addressed with proper design, community interest, and crypto-economic incentives.

Is it any wonder that SBD us 7 times its nominal value of 1 USD? The potential digital utility of a crypto-currency is definitely more than a paper dollar (or even a digital representation of one). The fact that we can clearly see deflationary trends in crypto, make it obvious that over time SBD should indeed be valued more than USD. Of course, the paradigm of acceptance must continue to be favorable. I guess the basic fact that USD fractional reserve system is based on intrinsic inflation would lead us to where we are today. It seems like the protocol mechanisms to produce more SBD are far less 'generous' than fiat currency.

What is interesting is that this divergence of USD and SBD price was not meant to happen, and it seems to be an organic product of the points mentioned above (inflation vs. deflation paradigms). That being said, this highlights another fact that seems more than obvious now. Central banking is a very complicated and messy task. Code protocols may not be 'human' enough to match fiat currency machinations. Ultimately the SBD / USD price will be a testament to the value proposition.

Where do we go from here?

Unless of course this is all a fad a la Crypto-Kitty, and people are just paying premiums for SBD (and BTC, and CryptoKitties) because it's just REALLY COOL!

source: coinmarketcap.com