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     6 years ago 

    Ok thanks. I'm surprised, I thought this mechanism was there to reduce the sbd supply if it was slipping it's peg, but you're telling me that it is just pegged to the market prices of steem. No wonder sbd is losing right now.

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       6 years ago 

      It is. But by design, if STEEM market cap is too low, SBD will jump off the 1$ peg. See https://steem.com/wp-content/uploads/2018/10/steem-whitepaper.pdf . quoting in section about sustainable debt ratios:

      A rapid change in the value of STEEM can dramatically change the debt-to-ownership ratio. The blockchain
      prevents the debt-to-ownership ratio from getting too high by reducing the amount of STEEM awarded
      through SBD conversions if the debt level were to exceed 10%. If the amount of SBD debt ever exceeds
      10% of the total STEEM market cap, the blockchain will automatically reduce the amount of STEEM
      generated through conversions to a maximum of 10% of the market cap. This ensures that the blockchain
      will never have higher than a 10% debt-to-ownership ratio.

      Note that conversions still reduce the SBD supply, which in turn affect the debt ratio.

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