RE: Steemit For Investors #2 - How Steem Dollars Hold Their Peg to US Dollars - By Leon Fu Dot Com by cryptobarry

Viewing a response to: @cryptomarket/how-do-steem-dollars-hold-their-peg-to-us-dollars

steem · @cryptobarry · Jul 23 '16

$19 of Steem is generated to back 1 SD?  Wouldn't that devalue the STEEM trading price because there are now at this time approx. 5 STEEM backing every SD?

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@cryptomarket · Jul 23 '16 (edited)

Yes, if there was a sudden collapse in the price of STEEM, and no recovery in price, the peg may break. Quote from the white paper:

>For every SMD Steem creates, $19.00 of STEEM is also created and converted to SP. This means that the highest possible debt-to-ownership in a stable market is 1:19 or about 5%. If Steem falls in value by 50% then the ratio could increase to 10%. An 88% fall in value of STEEM could cause the debt-to-ownership ratio to reach 40%. Assuming the value of STEEM eventually stabilizes, the debt-to-ownership ratio will naturally move back toward 5%.

Leon Fu

👍 cryptobarry, robok

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@cryptobarry · Jul 23 '16

Thanks Leon

👍 mpili

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@tjpezlo · Jul 23 '16

Good read! @leon-fu its a good thing ive been follwing you at twitter.  Very informative, perfect for  crypto traders that are non technical like me

👍 mpili

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@alanc · Jul 23 '16

Don't forget, crypto being crypto, we will see the moon and we will watch it crash hard, many, many, many times :)

👍 randyclemens

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@leon-fu · Jul 23 '16

True, which is why Steem Dollars were created to protect Steem users.

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