RE: SBD is broken, why not just remove it? by pfunk

Viewing a response to: @samupaha/sbd-is-broken-why-not-just-remove-it

sbd · @pfunk · May 28 '17 (edited)

$5.48

It's fine. For now we can give it some time to correct itself naturally, now that there has been a constant supply for a bit. If it still trades high, a mechanism like the one @timcliff made a post about could be an option.

For the reasons why it should be kept, I left a handful of comments in this post: https://steemit.com/ned/@krnel/ned-on-sbd-does-the-community-want-to-continue-to-be-paid-out-in-steem-dollars

👍 pfunk, ausbitbank, ats-david, timcliff, bacchist, demotruk, solarguy, heymattsokol, wingz, mynameisbrian, thisisbenbrick, the-ego-is-you, bestoftherest, krystle, thylbom, ebargains, greymass, burnin, littlescribe, bosman, reisman, mraldo, irawandedy, writingamigo, ninkhisibir, bledarus, shellyduncan, evildeathcore, justinashby, lautenglye, pangur-ban, lukinsawyer, dirty.hera, tonylondon, tamersameeh, thejohalfiles

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@bluesmokes · May 28 '17

I've noticed that it's movements are kinda correlated with bitcoin's movements. If it keeps this correlation, a very large and fast drop in bitcoin's value could mean a fast drop in sdb value, which could damage the peg, and harmfully affect the ecosystem.

Of course, this analysis could be inaccurate, as steem's price and the entire crypto currency market's market cap are also correlated in the same way, so it might be connected to other price movements. But it still raises the same fear, could a sharp drop in another currency cause a sharp drop in SBD value, damaging the peg, and thus the site as a whole?

What could be done to mitigate such connections in the future?

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@pfunk · May 28 '17 (edited)

>I've noticed that it's movements are kinda correlated with bitcoin's movements.

Are you talking in terms of USD value or BTC value? Its price in BTC is meant to inversely correlate with BTC's USD value.

>If it keeps this correlation, a very large and fast drop in bitcoin's value could mean a fast drop in sdb value

The SBD is a token that can be converted (with a 3.5 day delay) to roughly $1 worth of STEEM. It is this guarantee floor that keeps SBD pegged from below. The theory of pegging from above comes from emission of SBD. If over time it's observed that the pegging pressure from above is inadequate, then we can address that with a limited STEEM->SBD conversion option. 

But for now, because of the botched reward pool migration in HF17/18 happening concurrently with irregular market conditions, the recent experience with SBD price isn't enough to say "let's kill SBD."  We're on track to it normalizing.

👍 bluesmokes

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@bluesmokes · May 28 '17

> Are you talking in terms of USD value or BTC value? Its price in BTC is meant to inversely correlate with BTC's USD value.

I meant it's movements, with respect to the dollar, correlate proportionally with bitcoin's movements with respect to the dollar. As bitcoin rose, SBD lost it's peg and rose above the dollar. Then, as bitcoin traced back, SBD started falling back towards it's expected value.

I guess the peg from below is a lot stronger than the peg from above, that does make me feel better about it.

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@samupaha · May 28 '17

I doesn't correct itself naturally because the pegging mechanism doesn't work. It lacks a proper feedback loop to print more SBD according to the demand. SBD demand doesn't have any direct feedback mechanism to encourage more supply.

Total SBD amount is directly linked to the price of steem. To fix the mechanism, it should be directly linked to the supply and demand of SBD. That's the way to achieve price stability.

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@pfunk · May 28 '17

$0.60

A major factor of why SBDs ended up losing their peg upwards is because the supply was severely restricted for over a month thanks to the poorly implemented transition of the reward pool. That context should not be ignored in the recent price history of the SBD. Now that supply has returned, we are seeing the value of SBD come down closer and closer to where it's meant to be. Have patience :)

👍 thejohalfiles, ausbitbank, krystle

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@samupaha · May 28 '17

Even if we take that into account, the feedback mechanism for adjusting SBD supply is still far from perfect.

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9 replies

@heymattsokol · May 28 '17

Right on, @timcliff's idea is perfect IMO. It's an elegant solution that doesn't require any huge changes.

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