RE: How SBD peg actually works OR How the @sbdpotato conversions won't affect SBD price
Every time the debt ratio gets above 10%, the original idea was that blockchain is supposed to stop printing more SBD. That was the beauty or debt resolution on steem.
The majority of community users haven't seen a new SBD reward for their comments and posts in such a long time (August 2019 briefly?). Many people have never experienced the blockchain when it was below 10% debt ratio. I continue to watch account value shrink, and wonder how new steem is ever going to help protect my wallet.
If we can get out of this zone of creating more debt at this level, rather than remain there, then things will get exciting again. Unfortunately, the number of exceptions allowing additional SBD to be printed and paid is making this goal very hard to achieve.
@phgnomo, thank you for sharing about @sbdpotato. This is a confusing aspect (to me) of the blockchain I was not aware of. Would @sbdpotato potentially lose a ton of money if they used the external market as proposed in this article?
What is the specific intended goal of @sbdpotato? How is its success or failure measured?
@smooth already answered most of your questions, but allow me to add a few more insights
The @sbdpotato isn't looking for profit, because it doesn't care about the conversion price. Sometimes it will make profits others it will have losses.
The whole point is to reduce sbd supply and theoretically increase it's price (Wich I don't think it works)
But it's kind of hard to measure it effectiveness, because a lot of other factors are pressuring the sbd price in one direction or another.
For example, the price increase we are seeing now have more to do with BTC price going up (since it pulls all alt coins prices with it) than with actual effect of SBD supply being reduced.
You can certainly measure effectiveness by amount of SBD removed from the supply (which in turn reduces the debt ratio, and therefore the haircut). That is right in the @sbdpotato posts. Currently that's a relatively small number, about 15000 SBD, but it is accelerating over time and should increase much faster now that the SPS funding is adding to the available funds.
When it comes to price, yeah I would agree it is hard to measure since prices (both STEEM and to a lesser extent SBD) move all the time for a variety of reasons. Even if we were to wake up tomorrow and find that SBD had pumped right up to $1, it would be a stretch to say that @sbdpotato was definitely responsible. It could be, but also could not be.
No, as I explained in my top-level comment, it really doesn't matter which market you use. This is among the many misunderstandings and errors in the post.
It is possible that @sbdpotato will lose money, as it is possible for anyone using the conversion function to lose money. Since @sbdpotato is not even trying to make money (it is trying to reduce the debt ratio and haircut, and increase the market price of SBD toward $1), it probably is more likely to lose money than private actors using the conversion function. However this is independent of which market is used.
I am not the operator of @sbdpotato, however as a contributor of some of the ideas I can give you my answer. By reducing the supply of SBD toward zero, the debt ratio is guaranteed to be reduced (assuming STEEM ratain any non-zero value). As this proceeds, the haircut will be reduced and it will become possible to convert SBD into a larger value of STEEM, eventualy into $1 of STEEM. This will eventually result in the market price of SBD returning to approximately $1, because it is impossible for SBD to be worth much less than $1 if you can convert 1 SBD into $1 of STEEM.
Secondarily, both the buying of SBD by @spdpotato and the visibility of @sbdpotato engaging in these efforts may increase confidence in SBD returning to $1 soon and encourage speculators to buy up SBD with that expectation. (If you buy SBD at $0.70 and it returns to $1, your return-on-investment is almost 50%.) If this happens then SBD may return to $1 (or at least closer to $1) sooner.
The second portion is speculative and may or may not happen. The first part is guaranteed to work as long as @sbdpotato removes SBD from the supply faster than it is being created, which is currently a low rate of about 1500 SBD per day (for SPS funding). That depends only on @sbdpotato having adequate funding (from post rewards as well as the SPS proposal) to continue to buy and convert SBD.
In fact, despite @spdpotato by itself not really having enough funding to meet this threshold yet, @sbdpotato plus other people converting has been enough to reduce the supply of SBD over the past few days. So progress is being made. With the SPS funding proposal approved, it should accelerate over the coming days/weeks.
Thank you for clarifying @smooth. If it works as intended then there is some good news for everyone.