STEEM and SBD supplies after 30-ish days of SPS burning [burnsteem100]

Proposal #116 from @blaze.apps ends today. So, let's take one final look at the supply information on the last day of the proposal.

For previous weeks, see:

• baseline
• week 1
• week 2
• week 3

Let's take a look at the final results, with just a few hours left on the clock.

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Introduction

Overall, there have still been been no surprises. The SBD supply started at 9.1 million and declined to 8.1 million. The SPS wallet started at 5.2 million and declined to 4.2 million. And, the haircut price started at $0.152-ish and now sits at $0.136391. (I had predicted $0.138 at the start, so it's just a touch lower than my initial guess.)

With the present median STEEM price of $0.0750 and haircut price of $0.136391, the blockchain's conversion rate for SBDs is about $0.55. The external price (via @coingecko) is $0.57, so a little off from the conversion rate, but close. At the original haircut price, we'd see a conversion rate of $0.493. So, there's an argument to be made that our little burn experiment might have raised the price of SBDs by about 12%. Stated another way, the expected price of SBDs would be 10% lower without this burn activity.

Meanwhile, also as expected, there has been no change in trend for the STEEM supply, the virtual STEEM supply, or the collateralized STEEM values. Therefore, there has been no change to inflation.

As I've stated in each of these posts, what we did was a debt restructuring, but not a debt reduction.

Anyway, now on to the pretty pictures.

Supply Sizes

• The 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.

Expected daily new STEEM

• As anticipated, no discernable impact on these trends.

Inflation observations vs. expectations

• Raw values (green/yellow) are scaled on the left, percentages are scaled on the right (red/blue)
• Observed and expected inflation are continuing to track together. I assume that the little bumps we see in observed inflation have to do with SBD conversion activity, but I haven't verified that.
• For now, I am updating this chart daily in Google sheets, and publishing it here
• As before, ignore the upward movement in observed and expected supply values before last week. That's an artifact of changing the update frequency. The important point is just that the green and yellow lines are moving together.

SPS sizes

All available data

• In general, after the Upbit delisting of SBDs, the internal and external prices are continuing to move together, including during the burn proposal.

After September 30 (Recent baseline + burn proposal)

• The decreasing size of the purple area is clearly a result of the burn activity.
• IMO, the decreasing size of the orange and blue areas comes from the broader market downturn. Specifically, it's because the price of STEEM has declined (relatively faster than the haircut price).
  • If we accept the argument from the introduction section, the orange and blue lines would have ended 10% lower without the burn proposal.
• Also IMO, the blockchain is healthiest when all three of these values are the same.

Wrap-up

I'm still organizing my thinking around this, but IMO, what we really need is to create an overall theory of STEEM inflation. There are (at least) two relevant thresholds that need to be tracked:

• the haircut threshold
• the peg threshold
  • As noted last week, the SBD peg can be seen as a sliding peg, where it is pegged to the (median/haircut) ratio with a $1 ceiling when the STEEM price is above the haircut ratio.

And the internal and external prices of SBDs need to be tracked against those thresholds. We have a lot of experience with STEEM below the haircut threshold, but not much experience on the top-side.

Meanwhile, the witnesses and the community have at least two parameters to play with:

• Paying SBD interest
• Burn proposals (STEEM & SBD)
  • these are constrained by the size of the SPS wallet, but wallet growth can - in principle - be accelerated by paying interest on SBDs.

What we need is a general theory that tells us what actions should be taken, and we need to recognize that sometimes things may be counterintuitive (as with the present case where burning SBDs doesn't remove debt and creating them doesn't add debt.)

In my opinion, the point of paying interest or burning tokens shouldn't be to manipulate the market prices. The goal should be to create a healthy ecosystem. If we do that, market prices will follow. So, we need to ask questions about a healthy ecosystem like:

1. What is a the ideal haircut price target?
2. What percentage of the SBD supply should the SPS hold?
3. What levers do we adjust when the external price rises drastically above/below the sliding peg?

That's enough for now, but hopefully it gets the idea across. Ideally the community shouldn't need to ask whether or not to take this burn action or make that interest payment. Instead, we should have a steemonomic roadmap to guide those decisions.