Steem - Can the SBDpotato initiative really fix the SBD peg?steemCreated with Sketch.

in steem •  3 months ago 

Can SBDpotato and their initiative really help peg SBD back to $1?

If you haven't heard by now, there is a new initiative going around where a group of orcas/whales/witnesses have gotten together to try and peg SBD back to a dollar.

It's called SBD Potato: Peg Repair Community Initiative.

Sounds like a great idea!

(Source: https://steemit.com/steem/@sbdpotato/sbd-potato-peg-repair-community-initiative)

So, how do they plan on doing this?

Very simply really.

They put out a daily post, which can be seen here:

https://steemit.com/sbdpotato/@sbdpotato/sbd-potato-day-11-potatoes-can-be-sweet

Then, those that would like to support the initiative upvote the post. When the post pays out 7 days later, the steem rewards earned from the post are sold for SBDs on the internal market.

Then those SBDs are converted back to steem via the conversion feature over a period of 3.5 days.

During the conversion process, the SBDs are destroyed/burned and steem is credited back to the account.

The idea is then to do this whole process over again, and again, and again, growing the amounts burned/destroyed over time.

The thought is that eventually enough SBDs will be destroyed by this process that the market price will start rising, eventually getting back to $1.

This makes a lot of sense, in theory.

The only problem is the DAO/SPS

Currently it is receiving 1,596 SBDs per day.

https://steemproposals.com/proposals

That means that the SBD supply is growing by close to 1,600 SBDs every single day.

Which means, this burn initiative will likely have to burn 1,600 SBDs each day just to keep pace with the inflation.

Currently, it isn't looking like the initiative will be able to burn more than a couple hundred SBDs per day for the foreseeable future.

(Source: https://economictimes.indiatimes.com/markets/stocks/news/low-inflation-in-india-may-be-a-sign-of-something-far-worse/articleshow/70230948.cms)

It's not quite that cut and dry, as there are some caveats...

The SBD supply is technically increasing by that 1,596 each day, but much of that is not really going out into the market, it's staying in the DAO and 'filling up the pool'.

Which means the SBDpotato initiative might not technically have to burn 1,596 SBDs each day to start to get the price moving upwards.

However, it will have to burn that amount daily to actually reduce the total supply of SBDs.

Overall, I think this is a great initiative and a great idea that I am a fan of.

I just have some doubts as to the overall effectiveness of it unless we are burning significantly more SBD than we project to via SBDpotato for the foreseeable future.

Perhaps over a long enough time line it will burn enough SBDs to more than offset the DAO inflation, it will just take a while?

This is at least how I understand it, what does everyone out there think?

Stay informed my friends.

-Doc

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They should submit an SPS proposal to take SBD from the steem.dao and convert it and give the STEEM to the foundation (is that still a thing?) to distribute to worthy projects on Steem.

Not a bad idea. What about funding the DAO/SPS with steem instead of SBDs?

High finances and potato?
Investors are lining up.
Come on guys!

🤣 badaboum!

Posted using Partiko iOS

The way I look at it, the SBD peg mechanic has proven to be just fundamentally broken similar to how the entire idea of crypto reward upvote blogging and 'honest curation' to get the best content on top simply doesn't work. The more I think about it, the more I'm leaning toward the only solution to save this platform is to remove the reward pool as we know it and make it purely into a proof-of-stake algorithm where tips along with possibly advertisement revenue shares make up for the post values.

The main rule should be that code is law and that code needs to work. This is clearly not the case for SBD or for the upvote system. Steemmonsters is pretty much the only things on Steem that gets it all right.

There is a ton of truth to that... and it may be the way we end up going.

I would prefer to stop printing SBD completely and focusing solely on STEEM, which makes more sense in my opinion. SBD is an interesting concept, but has failed as a stable coin, and puts too much pressure on STEEM and there is also no conversion from STEEM to SBD only one from SBD to STEEM.

Yep, steem.dao should be receiving STEEM instead SBD :/

That would be my vote as well.

Yes, support that idea :) I think we should switch from SBD to STEEM only, alternatively we can fix SBD and mitigate the pressure on STEEM (add conversion in both directions, STEEM <-> SBD, and secondly reduce/halt the conversion when the market cap of SBD reaches 1-2% of the market cap of STEEM to reduce the selling pressure on STEEM).

can't agree with this more... we need to just eliminate SBD all together

I think SBDs serve a useful purpose. I just think we need to figure out to better peg em.

Only way to peg any currency to another is to actively trade it... In the early days I complained that there needs to be STEEM-SBD pair in all exchanges that have either one listed...

There is a STEEM-SBD pair using the internal market with no fees, no censorship, etc. I don't really see what STEEM-SBD pairs on centralized exchanges would add. Now SBD-USD pairs or that sort of thing could definitely be more useful.

Obviously that would eliminate unnecessary withdrawal fees when moving coins back and forth between steemit.com and the exchange... Trading fee is in some cases less than withdrawal fee.

Agreed that SBD is not all bad ... just we need a better mechanics.
Having a nice stable coin can attract investors for its self.

Interesting short term solution, although it does nothing to stop sbd from going above $1, which is just as big a problem.

The obvious long term solution is to allow users to create and destroy SBD just like the MakerDAO does with DAI and ETH

That is where burnpost comes in.... :)

https://steemit.com/@burnpost

Yeah it does a little. It is similar to @sbdpotato in that it is better than nothing even if it doesn't solve the problem on its own.

But yes, I agree we need a better long term solution for maintaining the peg.

So the solution for that initiative is to increase the steem inflation...not a fan.

Well technically SBD is steem debt... when you destroy the SBD, steem takes its place.

  ·  3 months ago (edited)

As I noted elsewhere the DAO is getting 1596 SBD per day (using your numbers) but the other sources of inflation (vesting, witness, and author and curator rewards) are producing 9x as much STEEM. So under the optimistic assumption of an unchanging STEEM price, this process pushes the 'debt ratio' toward 10% (so under current conditions, lower).

In terms of the amount of SBD:

  1. @sbdpotato isn't the only only one doing conversions. It is adding to the conversions being done by others.
  2. It will take a while for @sbdpotato to accumulate a large enough fund to convert at a high rate but with persistence it is possible. Every day's rewards add to the fund.

BTW, I'm downvoting this, as I feel the reward is a bit high for something that asks, essentially, if rewards of @sbdpotato are high enough, not even making any sort of case that @sbdpotato is a bad or harmful idea, just not big enough. Then gets more rewards than the typical @sbdpotato post...

Fair enough, though the sbdpotato posts have actually been earning significant rewards the past 7 days or so. Anyways, I don't think it is bad or harmful, in fact I think it's a good idea. Just pointing out that it may not have much impact for a long long time. I guess putting a bit of realism down in writing for myself and possibly a few others that may have been a little overly optimistic initially. Again, including myself, mostly hoping I was missing something. :)