STEEM and SBD supplies after week 2 of SPS burning [burnsteem100]
For previous weeks, see:
For week 2, there are still no surprises. We're seeing the SBD supply and the haircut price declining, while STEEM current and virtual supplies are staying on trend.
No matter how many SBDs get burned, we would only expect the virtual supply to start declining if the price of STEEM climbs above the haircut price. Until then, we're restructuring the blockchain's debt, but we're not reducing it.
When proposal #116 from @blaze.apps launched, the haircut price was around $0.153. Last week it was $0.149627, and today it is $0.14534. My baseline expectation was that it would be around $0.138 at the end of the 30 days, and that still seems to be a reasonable guess.
Meanwhile, the @steem.dao wallet has dropped from about 5.2 million SBDs to 4,951,607.959 and then to 4,705,238.593.
So now, let's get on to the visuals:
Supply sizes
- The STEEM virtual supply, current size, and collateralized STEEM are all scaled against the left axis.
- Collateralized STEEM is not a real term. It's just something that I use as an aid for understanding. It's defined as
the virtual STEEM supply-the current STEEM supply. It's also the number of STEEM that the blockchain would have to create, if all SBD debt were magically cashed in at the current prices. - The SBD size is scaled against the right axis.
new: Expected daily new STEEM
Since the SteemDB information that I use for my inflation graphs has not been available, I'm starting to work on independent tracking for this metric. As long as I created the graph and have the report open, I may as well post it, so here it is...
- As previously mentioned, when SBDs are priced below the haircut threshold, burning them does not affect supply sizes, so we see what we would expect. No changes in trend for the daily reward distributions.
- Burning SBDs increases the number of STEEM per SBD, so if/when the price of STEEM eventually rises above the haircut threshold, the SBD supply reduction means that smaller increases in STEEM's price will cause the supply size and reward distributions to decrease faster.
SPS sizes
All available history
- I never understood what was happening when SBD prices were so high, but ever since the Upbit delisting, the haircut value and the external value have tracked pretty closely. Which is (IMO) what we would normally expect.
After September 30 (Recent baseline + burn project)
- Under current conditions, the most impactful way to raise both the external value and the haircut value would be to raise the price of STEEM. That's the dominant factor controlling the size of the purple-only area in the chart.
SBD is dropping, and Steem is sliding along with it. As I’m writing this, SBD is trading at $0.4959 and Steem at $0.07212.
So the question is: does it make sense to use the DAO Funds to start buying Steem on the internal market at these levels, or should we wait until SBD moves back toward $1?
I’d also like to warmly welcome @xpilar, @jondoe, @rme, @steemfy, @blockbyte, @steemchiller , @justyy , @moh.arif, @moecki, @steem-agora, @upvu, and @h4lab to this discussion. It’s always better to have these conversations on-chain rather than on Discord.
What do you all think?
I also think it's good that we discuss this on-chain, so I hope to see more comments.
If, in addition to ‘burning’, the aim is to stabilise prices or even increase them, I don't think it's necessary to wait for an SBD price above $1. Am I correct in assuming that the bought STEEM should be burned?
At the end , we just need to be clear about what could happen with which players. If we offer SBD on the internal market, this could have an impact on the external market if arbitrage trading works.
So let's assume that the DAO buy order causes the STEEM price to rise on the internal market. Arbitrage traders could buy STEEM cheaply externally in order to sell it internally at higher prices. This would indirectly lead to higher prices externally as well.
The decisive factor (and one that is impossible to predict) is what the traders then do with the SBD. If they are then sold externally, the external SBD price would come under pressure. Or we could see more conversions again.
The best thing to do would probably be to offer interest at the same time so that the SBD sold from the DAO is not resold.
Under the condition (also mentioned by @remlaps) that the accounts involved are controlled by the community, I would support it.
Yes of course its for burning . I also like the Idea on paying Interest on SBD very much , People would hold it for a Nice return i think
My opinion... if the liquidity exists to support it, buying pressure on the STEEM price plus burning STEEM would be far superior to just burning SBDs. It's applying two different forms of favorable pressure. And, as long as STEEM is priced below the haircut threshold, the SBD price should rise organically if the STEEM price rises, so the selling pressure on that side shouldn't matter at all.
To me, the only conceivable drawback is that burning STEEM would raise the haircut price. (Maybe it's worth burning a mix of both to hold the haircut price constant?)
BUT, I would only support it with a strong community control on the account that's buying the STEEM. Over the years, I've seen too many rug pulls from anonymous accounts who promised to do good things with funds that they collected. I will never again support initiatives like that without some oversight capability.
If we can't have some sort of technological or legal guarantee that the funds will be used as expected, I'd rather just keep burning SBDs to get the haircut price down to a reachable level. That requires 0 trust.
(FTR,compared to BTC and HIVE, STEEM has been holding steady, or even gaining, and the SBD price is still tracking the haircut ratio. So, I'm fairly confident that the burn initiative is not causing any price declines. IMO, those prices are just dropping with the broader market.)
I propose that we maintain or even increase the current SBD burn rate until it reaches the $1 peg.
In addition, we can allocate SBD DAO funds specifically for STEEM new exchange listings.
This means actively reaching out to major exchanges where STEEM is not yet listed (such as OKX, Bybit, and KuCoin) and offering marketing budgets or listing, support funds as needed.
If possible, we should also attempt listings on Coinbase or Kraken.
A successful listing on major exchanges could drive a short-term price increase for STEEM, and combined with continuous SBD burning, this would strengthen the overall ecosystem.
i am not too conversant with crypto but i want to ask a question.
Burning SBD at these price level, is it the only available strategic alternative we have?
Because judging from what i read here, it is not reducing the debt.
I guess I'm aware of 4 possible options for using the SPS as a strategic economic lever:
Options 2-4 are not mutually exclusive, so they could be done in combination.
You're right that burning SBDs (option 2) does not reduce debt at current prices, but it makes it so that debt can eventually be reduced (as a percentage of market cap) at lower STEEM prices. It also makes it so that the debt will be reduced faster if STEEM's price climbs above the haircut threshold. Its big benefit is that it's technically trivial, and it requires zero trust.
Options 3-4 would also not reduce debt, but they might boost prices, which might also make debt reduction possible. The drawbacks are that we would have to trust someone to do the right thing with the SPS payouts, and there are technical hurdles that would need to be crossed. Another drawback to option 3 is that it would raise the haircut price which seems to make the eventual path to debt paydown harder and slower.
A final option, call it option 5, doesn't tie to the SPS, but the witnesses could actually pay interest to SBD holders in order to encourage people to hold them, instead of selling or converting. This would actually increase the number of SBDs in and out of the SPS. Just as burning doesn't reduce debt at current levels, paying interest wouldn't increase debt. However, it would raise the haircut price - which means that the price of STEEM would have to rise to an inflated level before debt could be reduced (as a percentage of market cap).
Option 5 could also be done in tandem with 2-4, though it would seem a little weird to burn SBDs and pay interest on them at the same time.
TL;DR: Burning SBDs is not the only strategic alternative for the SPS, but aside from doing nothing, it's the only one I'm aware of that we can implement without working through development and trust hurdles.