It may be nice to get $2.30 worth of steem for every 1 SBD that credits to your account… but, it can cause problems for people who transact on the steem blockchain.
SBDs are supposed to be worth $1 USD (or close to it) at all times. If the value is going to get messed up, most steemians would prefer that it go too high.
When SBDs are worth more than $1, it seems like no harm no foul. In fact this can be a great thing for people who are holding SBDs and get to cash them out at a higher price. For anybody who does this, there is no need to complain.
However it’s worth considering that even if high SBDs benefit you, they aren’t good for the ecosystem as a whole. Unstable SBDs break the expectation that an SBD will have a steady price, which can have bad results.
An Example of When Overpriced SBDs Are Bad
Let’s paint a hypothetical scenario: A guitar teacher is charging 50 SBD per hour for digital lessons. They give a two hour lesson to another steemian to help them prepare for an upcoming audition. The invoice is sent via email with a notice to pay within 48 hours.
The next day, the student goes to pay the 100 SBD that they owe. Their plan is to transfer some litecoin to SBDs via blocktrades and then send it to the teacher. At that time, they are startled to see SBDs trading at $2.30.
What happens when they see that steem dollars cost this much? Now, rather than spending $100 of currency to pay for the lesson, they have to spend $230.
This was completely outside of anybody’s control. Their goal was to transact with a stable currency. When they made the deal of “The student will pay 50 SBD per hour for lessons,” this was supposed to equate to approximately $50 USD per hour.
With the overinflated SBD price, it messes with the economy of steem. Now the student has to overpay, or to awkwardly ask to pay in a different cryptocurrency, or be late on the payment in the hopes that SBD prices drop.
Monthly Fees Have the Same Problem
What if a service wants to charge a monthly SBD fee? People are forced to overpay when the SBD price is too high and the bills are due.
I had this issue with my Sndbox membership, and despite waiting for a few days, SBDs are still overinflated. Pretty soon I might have to eat the loss and pay more than a 2x premium on my monthly fee as a result of the expensive SBDs. This is not ideal to say the least.
Not Sure What to Do
There’s not much that I can do about the SBDs. I guess it’s the result of pump and dumps from large whales - or some people speculate that it’s because money is leaving Tether after last week’s hack and going into other pegged cryptocurrencies like the SBD.
Whatever it is, it’s a symptom of the small crypto markets that can be influenced by the machinations of huge whales. If somebody wants to dump millions of dollars into SBD, it’s gonna push the price. That is just how it works for now.
Nonetheless I wanted to share my two cents and open up the discussion: How do you feel about the inflated SBD price?
I feel like I am going to convert all my SBD into Steem power straight away!!!
I think you might want to transfer it to steem, THEN steem power, to get the most value. Not sure
yep, I meant that :P
Tether is meant to do the same thing (to my higher-than-Everest level appreciation of the topic). How does that manage to keep to $1?
I find the two currencies baffling if I’m being honest. I just end up moving everything to Steem to power up and now I am just going 100%. Not sure of the best route.
Well there's some sketchy stuff going on with Tether. I actually just wrote about them for Bitcoin Canada.
Long story short, there was a $30 million dollar hack and now there's been some suspicious activity on the blockchain... I'm hearing a lot of weird FUD-y rumors around twitter about it too. All that I know for sure is they got hacked and it has peoples' confidence in the project somewhat shaky
Cheers for the linkage. I’ll go get schooled.
100% power up is the worst route now...do 50/50% and instantly sell your SBD for steem...you will have more Steem for every post like that
Wherk. Ok I’ll swap tactics!
Just to double check - what's the best way of moving the SBD to Steem? I've been pressing the convert button, but should I do the Buy/Sell thing via Blocktrades?
Internal market. No blocktrades, no convert:)
Just seen it, thanks!
It's good for those of us with some sbd we would convert to steem anyway, but it is against what it was intended to be. Unfortunately we can't do much about market speculation. The witnesses would have to somehow produce more sbd to flood the market and bring the price back down. The economics are beyond me. As you say, having a pegged currency is really useful
Yeah since its already 100% SBD payout for the liquid portion of rewards, it seems like there isn't much more that can be done in the short term.
but if we keep producing more sbd, it won't have any value at the end of the day!
That's why the supply has to be controlled
by whom? The whales?!? (giggling) - I only see kids playing flag wars . Trending posts have been ridiculous lately.
The witnesses have some control over payment. They could give us steem instead of dollars
Good, Your Post Conveys the other Angle to see
Of course, it was great when I received a lovely payout of 20SBD and got to trade them for like 42Steem (which will worth more in the future) but yeah, if you're using SBD for payments the fluctuations in price are no good. :)
The thing is that if it goes under $1, you get more SBD's for your money but if it goes over $1 you get less. Benefits and disadvantages. I can't see any solution to it.
If it went down to $0.50 people would be shitting bricks
I think I would too, haha. At least for a short period.
I handled well Steem at $0.80, but I am still new in this crypto space. Six months does not make me a pro. :D
From skimming over the Steem whitepaper, from what I understand, the SBDs produced should adjust to the Steem price over time. The system should be self-correcting, but I guessing due to the rampant bull market we are in, the self-correcting is slower than the price action.
The issue is the scarcity of SBDs which should correct over time as the supply grows. Sure, we'll see these swings, but over time the volatility should decrease unless I'm misunderstanding something.
over time the volatility should decrease in theory I hope
I agree with you Matt about the inflation factor putting the stability of the economy at risk, but to those who hold onto their SBD as well as those trading it away, isn't it really a win as well? What do you think is causing the inflation to begin with?
In my limited understanding, it may be the result of mega-whales storing lots of money in SBDs and/or intentional pump & dump schemes. There might be a tie-in to the recent drama surrounding Tether, another dollar-pegged cryptocurrency, as well... hard to say tho.
check your assumptions.
the word 'over ' conflated with inflated is a micro aggression.
I'm SO triggered.
but I digress.
it's called a free market.
the value of the coins is what the market says.
don't MESS with it.
that never works out well.
Ya but the SBD is specifically designed to be pegged at $1! When it drifts far away from $1, that is a broken thing.
not necessarily.
an analogy.
a windstrength guage is designed to (say) operate in speeds up to 100mph...when a hurricane hits and the wind speed is 200mph...it don't worka so well.
it it broke? Should it be fixed?...or should it just be left a lone until the external conditions return to normal.
That's what's happening with SBD right now...the external market conditions are exceeding the design parameters of the Peg.
An attempt to 'fix' it would be likely to fuck it up beyond all repair.
Fair point. I'd probably want to buy a new gauge if the windspeeds were consistently higher than 100 mph in that case... but if it was only once in a while, I suppose I would just avoid using it in those extreme conditions.
you're not from West Texas then....why...I could tell you stories about wind..
It was bound to happen, with such a short supply, it will go even higher.
Hmm... Why though?! Why would anybody be buying into SBD at these prices, knowing that it is inevitable the rate will eventually crash back towards $1?
How will it crash? The rate was supposed to be close to 1$, but cleary not working that way. Someone bought a ton of SBD and is still holding on to it for some reason.
I bought at §2,22 yesterday, it is at $2,68 right now, clearly people are buying. Why did I buy? To speculate.
It will go back to $1 is all I mean. It could take days, weeks, months, whatever, but eventually it is going to go back down. I'm pretty sure that is how it works anyway.
Volatility because too much current BTC coverage in MSM causing irresponsible levels of #FOMO. Traders diverting all BTC they had for 2X fork in alts. Some alts have found reasonable levels already and are staying at them.
SBD is not necessarily understood by every trader. Not in this bloody madness couple of weeks.
If it stays at 2-3, that may require a redesign of how much STEEM is generated, but that is a fickle thing to mess with of course.
You make a really great point. I think at this point it isn't a hugeproblem for too many people because there isn't that big of a goods and service trade at steemit but if sbd continues to drift away from USD it will certainly become a big problem, and it's really inconvenient for some of us already apparently. Sorry to hear that.