I fully agree. We're currently in this mess because some people thought it was a good idea to print millions of SBD, to counter a good thing: a pump.
Supply went from 3 Million to 16 Million. If the supply would still be at 3 Million, the peg would have hold easily on the downside.
But now we're at the point where converting SBD to STEEM is risky and actually bad for STEEM (due to the inflation). Reducing the haircut rule wouldn't be good in my opinion as it could very well increase the STEEM supply by a lot.
Thanks! Yes, messing with the rules now needs to be done with care - a care that was not taken when cheering an SBD supply hike.
I have been thinking about any solution and the sad thing is that there is nothing anybody can do within the ecosystem to change its current blockage. It requires external changes, such as a drastic change in the steem/sbd price.
When that happens, I suggest reversing that 10% debt level or at least putting some distance between the debt ceiling and the haircut level (the tonsure!)
Indeed, if the haircut level were to be increased just 1% now, it may unlock the system. SBD print rate would still be 1% (or zero) so it wouldn't be able to run up that 1% in coins, although it could do in price. Just thinking aloud, perhaps just to show that tweaks are not currently going to be effective.
On the upside, earnings in STEEM are edging upwards :-)
When the steem price stabilised and get at 0.402 cents then the SBD PEG will be restored.
The current haircut median price will slowly come down, as it has from 0.417 when we started it is 0.402 as of today.
Bots are a total different game ... they can choose as they wish...
If you are waiting for market conditions, then it is not a peg.
There is no peg; it's just an idea without mechanisms to implement it.
Stop wishful thinking about what should be, use reasoning about what is.
The peg is not an idea, it's the outcome of a calculation. What we are witnessing now is exactly the peg mechanism at work.
115322866.353 / 286962591.735 = 0.402
It isn't a price peg mechanism; it is to avoid the SBD debt ratio rising, potentially to be greater than the STEEM market cap.
So, what would happen if prices were x10 - STEEM at $2, SBD at $6?
??? It is a supply mechanism. When prices were x10 the mechanism stays the same. We would have a median of 4.015. Maybe I don't understand what you are trying to say.
The SBD debt ratio is capped @ 10% of steem market cap.
After the crypto crash the blockchain triggered the 10% SBD debt ratio Hair Cut Rule, the steem price crashed and the blockchain is now in a recovery period.
As you can see the blockchain creates an incentive to convert sbd to steem.
There is a bug that's the reason we are still printing 1% sbd... that's not a big deal, with every conversion the SBD debt will go down and so will the median. However, it takes time...
This way the steem price and the median will find each other again, and that would be the end of this Hair Cut recovery period and the SBD / 1 USD peg will be restored.
Of course when the steem price recovers, it has the same effect, market cap would rise, and the debt ratio would go down. Steem price and median will find each other, and from that point, the SBD Peg will be restored.
PS: Market Cap Debt Ratio @ 1 SBD = 1 USD was 18.xx % as you can see we are now down to @ 16.xx %.
We will be fine, tshtf in cryptoland, and we are recovering and we did survive. Hurray
In the comment thread of this post, some users mention that with sbd conversion inflation rises. I don't understand how they come to that. Maybe they mean, with each sbd conversion sbd is burned and extra steem is being printed. That's in my opinion not inflation, but dilution.
Inflation is a percentage of the Virtual Supply including steem and sbd. This inflation is fluctuating as sbd is being printed or burned but is in my opinion negligible.
After all who is going to pay down excess sbd debt? This designed way is the least of all evils. We are all in this together.
Maybe @smooth could acknowledge this inflation thing.
This makes no sense. Although you posted it a while ago so maybe you were confused at the time, and already by now understand the situation better.
The supply went from 3 million to 16 million precisely due to the pump that you claim is a good thing. No one "thought it was a good idea to print millions of SBD to counter a ... pump", the system did that entirely by itself automatically as a direct consequence of the pump and of the long-existing (since 2016) rules and economics.
The change after HF20 to increase the print rate cap made very little difference to this; well under a million SBD was printed. Printing, as currently set up (both before and after HF20) is an exceedingly slow process. It takes about a year to move the debt ratio about 2% through printing. Indeed HF20 had not been implemented, and if nothing else had changed (a somewhat implausible scenario, but this assumption maximizes the possible impact), the supply of SBD would still be about where it is now, which is to say something above 12 million (maybe right around 12 million instead of the current actual 12.5 million), the debt ratio would still be >10% and the haircut rule described and its side effects described in the post would still be happening.
The only way to imagine supply at (or anywhere near) 3 million as you suggested would be if the original pump never happened.
What you've done here is make a compelling argument how that sort of extreme pump in SBD are not a "good thing" and are quite disruptive. That was not fully appreciated in 2016 which is why the system doesn't handle it well and also why renewed emphasis has been put onto improving the ability of the system to respond to these sorts of pumps.
Thanks for the comment. Very much appreciate it.
I fully agree that the root-cause was the pump. If that wouldn't have happened, SBD wouldn't have been massively printed in the first place.
However, my concern was and is with the decision by some witnesses to alter the pricefeed with a positive bias.
Let me quote a part of your highly valuable comment from 11 months ago:
https://steemit.com/witness-category/@reggaemuffin/witness-discussion-sbd-price-and-reverse-peg#@smooth/re-ats-david-re-reggaemuffin-witness-discussion-sbd-price-and-reverse-peg-20180124t044257100z
Maybe I'm wrong there, but isn't that also a reason, that we've printed more SBD due to the positive bias on pricefeeds?
I'm not sure how much influence this had, since not all witnesses decided to do this, but based on these posts (one from 9 months ago and the other from 6 months ago) at least 2 TOP 20 witnesses (at the time) had a positive bias.
6 months: https://steemit.com/witness-category/@dragosroua/adjusting-my-price-feed-bias-again-sbd-is-creeping-out-from-the-safe-zone
9 months: https://steemit.com/witness-category/@dragosroua/adjusting-my-price-feed-bias-down-to-50-from-250
And this is exactly what I was referring to. It's probably not as big of a deal in terms of influencing the SBD printing percentage as it has been due to the pump alone, but it's still a misdecision of witnesses in my book. (Let me quote @clayop's post here - https://steemit.com/witness/@clayop/three-reasons-why-we-should-not-support-feed-premium):
Ah yes I agree. However, not enough witnesses did that to make any appreciable difference.
Remember, the blockchain takes the MEDIAN of the witness values (middle values after sorting), so only two witnesses making the adjustment wouldn't do much if anything. The biased values all will end up at one end of the sorted list and not be used. (The purpose of using the median is to discard outlier or inaccurate values that are submitted for various reasons including, as in this case, non-consensus policy opinions, as well as malfunctions, delayed updates, etc.)
Yes - I thought it was more, but 2 of 21 is really not that much. Appreciate the conversation :)