My follow up question for Tim: since SBDs may be viewed as trophy tokens within the steem network, perhaps there is in fact no ceiling to cap their price potential?
There is really no ceiling to cap the price potential of STEEM or SBD :)
There are a lot of new SBD tokens being created each day though, as the blockchain generates new author rewards. As the supply increases, that can push down the price. It is all a matter of what there is more of - supply or demand.
For over a month now, it's been clear that market forces have managed to sustain the value of SBDs far above the originally intended peg noted in the white paper. Could this simply demonstrate that it is impossible to set a floor value to anything or create a "stablecoin," and that ultimately buyers and sellers in the free market will set the price? If so, then maybe the best intervention is no intervention. If market forces continue to sustain the price of SBDs in this manner, Steemit Inc may then need to reconsider how SBDs are explained to users and the broader crypto investment community moving forward.
There has been a lot of discussion about this in various channels. The consensus is that the mechanisms in place allow us to set a reasonable 'floor' (of pretty close to $1 USD), but there is not a lot that can be done to push it back in the other direction. The risk of the coin being above $1 USD, as well as the continuous supply of new tokens, was expected to be the main driving force to push it back to $1 USD if it went higher.
The education part is an interesting point you raise. Obviously having good education and understanding of what the currencies are is important, but one question I have - who is being harmed by not being educated about the deviation away from the stable coin? I am not saying it is with zero impact, but I think it is safe to say that most Steemians (even if they didn't know SBD was worth more than it was) are actually benefiting from the high prices - whether they are educated about the mechanisms of them or not.
That's great to definitively know that there is no cap on the price potential of SBD. Thanks for that clarification, Tim!
In regards to SBD, is there a cap on how much new SBD is created on a daily/yearly basis by the steem blockchain as new author awards are generated? I ask because the supply on Coinmarketcap is currently listed at just over 5M, which is considerably less than the amount of steem and may be contributing to the sustenance of SBD's recent price ascension: https://coinmarketcap.com/currencies/steem-dollars/
In regards to the consensus that the floor value of SBDs should be maintained at $1 USD, I think this further reinforces the stability of it as a trophy token uniquely distinct from steem; essentially, if my understanding is correct, witnesses and other key stakeholders in the blockchain's success have agreed to "buy the dip" if SBD were to ever pullback to below the $1 USD level again and that with steem there is no such agreement. However, it seems that given the recent rise in SBD's valuation, its "plunge protection team" may no longer be needed. At least one can hope!
Therefore, tying into the education reference, I was thinking that a clear distinction between SBDs and steem can be reinforced to all users by rephrasing the way SBDs are described in our wallets. Currently it reads: "Tokens worth about $1.00 of STEEM, currently collecting 0% APR."
In light of SBD's sustained price rise to well above the $1 USD value initially outlined in the Steem White Paper, it's evident that free market forces have demonstrated that this characterization of SBD is constrained and outdated. Perhaps it should read something like this: "Tokens issued by the STEEM blockchain as new author awards are generated. Price per token fluctuates on the free market, just like STEEM. Note that via consensus, $1 USD has been set as the floor price for SBDs." Thoughts?
The Steem blockchain has approximately 9% yearly inflation based on the USD marketcap of STEEM.
Of that, 75% goes to the rewards pool.
Approximately 75-85% of that goes to authors. (The rest goes to curators.)
Approximately 40-50% of those author rewards are paid in SBD. (The rest goes to SP.)
The description in the wallet is technically not wrong. SBD are technically still worth about a dollar worth of STEEM based on the blockchain rules.
You are right that they are also worth more. I don’t know an easy way to explain it all in one sentence that won’t actually confuse users. There are a lot of people that have so little idea about crypto currency, that going into all of that actually makes it worse.
Also, your definition of the floor is technically wrong. There is no guarantee it won’t go to zero.
Thanks for clarifying how SBDs are generated per the yearly inflation rate of the steem blockchain. That is helpful information to keep note of.
I admittedly am not a subject matter expert in crypto currency from a technical standpoint. I can say though that there is a prevailing sense of confusion when I introduce others to the steem blockchain. One of the first questions I am asked is what exactly are SBDs and how can they only be worth about a dollar of STEEM if they are in fact trading higher than STEEM and higher than a single US dollar.
As public interest in the steem blockchain grows, there is a marketing dilemma that remains unaddressed as it pertains to the distinction between steem and SBDs in simple layman's terms. The sustained price ascension of SBDs since the end of 2017 further accentuates that.
Allow me to use an analogy from the health care field: when a doctor prescribes a generic drug to a patient, he/she confidently does so knowing that it has been shown to be bio-equivalent to the brand name product. Nonetheless, the generic and brand name products are still required to be marketed under distinctly different names to ensure that it is clear which is a generic and which is the brand.
With this analogy, I would contend that Steem Blockchain Dollars may not be an appropriate name for the token generated by the steem blockchain. It should perhaps simply be called a Steem Blockchain Token since the dollar nomenclature suggests that it has parity to a single US dollar in value, when in fact this is not so.
As for the price floor, it is implied by the wording of the Steem White Paper when it states: "It is our belief that these rules will give market participants confidence that they are unlikely [to] lose money by holding SBD purchased at a price of $1.00."
Last year, Dan even suggested, "I think all witnesses need to pro-actively manage the price feed such that a Steem Dollar never falls below $1.00 for more than 1 day per week."
What the free market has demonstrated since the end of 2017 is that the peg as originally explained in the white paper is not a proper characterization of how SBDs can actually be expected to fluctuate in value in the real world. Accordingly, now more than ever before, it may be warranted to reevaluate the manner in which they are marketed to users and advocates of/investors in the steem blockchain.
Just my two cents - I appreciate you taking the time to hear me out!
You are absolutely correct, and I agree with what you say. I don't know what the solution is though :)
Also, regarding the 'floor' - the way you presented it in your latest comment here is accurate. What you said before:
$1 USD has been set as the floor price for SBDsis not, because it implies it will not go below $1.00 USD.