RE: Steem Velocity Hardfork - Hardfork 20
I don't think the current 'void' between 5% and 10% serves any useful purpose and it is clearly destabilizing to remove all supply or price influences on SBD within some fairly arbitrary range.
Apart from that we could quibble about exactly how things should work, like maybe the ramp should start a bit lower than 9%. But overall I agree with @blocktrades that the real debt control and safely value comes from the 10% limit, not this one, and I also agree with @timcliff that printing STEEM instead of SBD* is not useful because it just serves (all else being equal) to drive the STEEM price down, when the STEEM price being weak is the main reason the limit has ever been hit (multiple times now).
After all, even with the current 2-5% there is nothing to prevent STEEM from dropping another 50% in value after the 5% is hit and then we are right at the 10% anyway. 50% is hardly even a big move in crypto terms (we've already seen STEEM lose 90%+ of its value two or three times). Hitting 10% and risking the haircut is always in the equation, regardless of the printing rules. SBD holders should be aware of it and consider it rather than assume it won't happen.
One last point. The haircut doesn't kick in instantly it gradually phases in. So at 10% there is no haircut. At 11% there is roughly a 10% haircut, etc. There will be plenty of opportunity to see this play out and I'm sure even before 10% is reached, as it is approached there I'm sure there will be posts warning about SBD potentially becoming less-than-fully backed, and people who don't want that will have the opportunity to sell or convert their SBD (which may itself help resolve the situation). There's nothing sudden about the transition.
* An alternate rule we might consider (but I'm sure very few people are interested because everyone wants their 'free money') would be to stop printing rewards altogether when the debt ratio gets too high (rather than switching from printing SBD to printing STEEM), as this could be taken as a sign that the market is not valuing STEEM enough for it to be a good idea to continue diluting it.
The gap between 5-10% is effective a buffer zone where there is no additional debt (SBD) taken on by the system, yet the convertability to $1 worth of STEEM is not yet threatened. To me it's a warning that not all is well with the supply of SBD.
Alternatively, lets say we run the debt level up to 9% and all the top witnesses claiming "All is fine - nothing to see here" as we keep printing SBD (adding debt) with reckless abandon. Then the STEEM price drops 10% overnite and we are suddenly in haircut territory. Then it drops another 20%.....not an abnormal short term price move....what are we converting SBDs at then? Very quickly we transition from mania to panic for those invested in the ecosystem.
THAT is a virtual cliff.
I'm not on board with the equating of "This is fine!" with not switching from printing overvalued SBD (which clearly benefits Steem stakeholders since we are taking 1 STEEM from the reward pool, converting it to SBD to pay out and then selling it to someone for >1 STEEM, an immediate guaranteed profit) to instead printing STEEM (with no associated immediate gain to stakeholders). They're just not related at all.
Saying to stop printing SBD means:
Again, either way it will still be pretty clear that the SBD backing is at risk when the debt ratio is 9% and haircuts start at 10%. I just can't imagine a situation where someone sees STEEM dropping rapidly but somehow people think that "everything is fine" just because of how the payout mechanism works. It makes no sense to me at all to make the connection between those two things.
You're assuming mania at 9%? Or even 5%? After STEEM has hypothetically dropped by almost 90% as it has recently?
SBD holders need to understand that SBD is backed by STEEM only to the extent that STEEM has a high enough value to do so. Haircuts (in the sense of reduced backing, but not necessarily price) are part of the deal and should come as a surprise to no one if it comes to that. If you don't like it, just sell your SBD. The premise here is overvalued SBD (otherwise it gets converted and the supply does not grow regardless of the printing rules), so anyone who wants out can not only get out, they get a premium. If you stay in you are accepting the risk of haircuts.
I know this is an old post but what do you think about the 9% full printing limit right now? If you think it's still better than 5% why do you think so? And how is it better than let's say linearly decreasing from 0% to 10%(100% SBD print rate at 0% debt, 80% at 2% debt, 30% at 7% debt, etc.) as it also eliminates the window between no-sbd-printing and haircut? Or do you think that the SBD mechanism needs to be reworked from scratch so that we actually have a reliable stablecoin on the platform? If you are for reworking the SBD backing mechanism, how would you personally design it?
#sbi-skip
I still don't think it is particularly useful to print STEEM instead of SBD. If there were some discussion about turning off or reducing printing altogether then I might be more supportive of it. Otherwise I'm fine leaving SBD printing on unconditionally. If there is too much of it, then conversions kick in and the result is STEEM put into circulation instead of SBD anyway.
SPS (which I had nothing to do with) follows this philosophy and prints SBD all the time, even under haircut conditions. What we've seen in practice is conversions keeping up and even slightly reducing the SBD supply anyway.
As far as reworking SBD, I'd like to see reverse conversions or some other way to put more SBD into circulation when it gets overvalued (which in turn ought to result in it being far less likely to ever get overvalued). Apart from STEEM itself being a basket case in terms of market reception and economics (you can't back anything with an asset that constantly drops 50%/month), that was always the main problem with SBD.
I think implementing reverse conversion shouldn't be too hard as it has been proven to be possible with the SPS account. I would like to see that too but I feel like it's pretty far low on Stinc's priority ever.
Or an entity can make a stablecoin with SMT when it comes out saving us all from the SBD shitshow altogether for reliable stablecoin.
#sbi-skip
Custodial stablecoins where you are relying on a third party to hold dollars (or whatever) can work but they have their own issues.
I mean if an entity like Tether comes to the chain why not? The real question is will any of them ever be here lol
Thank you for bothering with me replying to old post!
#sbi-skip
It's all permisionless. If Tether or anyone wants to create a custodial fiat-backed SMT, they can certainly do so. My comment was more that it wouldn't be a direct substitute for SBD, but could be an alternative. Just as we have no say over who creates an SMT we also have no say over who uses them, so if that's what people want, and there is a willing provider, they'll certainly have it.