The whole Crypto world and STEEM in particular are getting smashed at the moment. So I thought I would express that the best way I know how, and that is with my photography. I took this shot on New Years eve in 2013 over the small coastal hamlet of Lennox head in NSW, Australia. Flames in excess of 20m were recorded and over 770 hectares of bushland was destroyed. Fortunately no homes or lives were lost as over 80 firefighters per shift, with support from helicopters and water planes fought the fires. Now back to STEEM and in particular what is happening with STEEM Backed Dollars (SBD) at the moment.
STEEM just touched down at 49 cents US which puts the market cap at about $143 million. As of this morning there were 14,088,101 SBD according to coinmarketcap.com which is very close to the 10% debt ratio which would break the SBD peg. This has implications on the stability of STEEM when SBD experiences a conversion run as people rush to convert their SBD before the peg fails. @buggedout did a good analysis of this here; and it seems in the past week close to 300k SBD are being burned per day into almost 600k steem and accelerating. This amount of STEEM hitting the market is putting a massive amount of downward pressure on the price which is already in a negative spiral, so the debt ratio continues to climb despite the reduction in total SBD.
Downward pressure on SBD effectively translates into leveraged downward pressure on STEEM (ie while the peg holds SBD selling pressure is converted to increased STEEM supply, so STEEM falls in value rather than SBD). Time will tell how this pans out; and if SBD holds or not. As holders of STEEM we are all essentially underwriters of SBD and the additional systemic risk of the stablecoin game we are playing whether we realise it or not. Yes SBD liability will always be capped at 10% of the steem market cap due to the way it defaults at the 10% debt ratio limit, however as the peg breaks and official blockchain conversion rates get lowered, it will damage the reputation of SBD putting further pressure on its price, and in turn put further pressure on STEEM. HF20 changed the sliding SBD printing cutoff from 2-5% to 9-10% of the STEEM market cap. At the time there was not a huge discussion around the downside economic stability impacts of such a change as the focus was on preventing another pump. So we are currently issuing more SBD right up to the default point at 10% allowing less breathing room for the SBD conversions to take supply side pressure out of the SBD market. Creating a whole new economic paradigm from scratch and tweaking the variables for stability is not easy !
In the mean time I am holding on to my STEEM; and hoping that this purge burns out a fair bit of dead wood while helping to even out the holding distributions a little. Lets hope the whole village does not burn down at the same time. There is lots of fundamentally amazing work happening in the background with STEEM at the moment with the transitions to a DApp based economy. Unfortunately in the existing speculation based economy we see in the crypto sphere price has little do to with fundamentals.
For those interested the shot was taken on a Canon EOS 50D, with at ISO 400 with a focal length of 280.0 mm (443.7 mm in 35mm), and aperture of f/4 with an exposure time of 1/160.
If you would like to learn a little bit more about my background in photography you can read the interview @photofeed did with me here
Robert Downie
Love Life, Love Photography
All images in this post were taken by and remain the Copyright of Robert Downie - http://www.robertdowniephotography.com
I think we can be positive and try to play this up, but the reality doesn't look too great for cryptocurrency in the short term. This is especially true for investors who put money and lost. It'll be hard to bring them back and motivate others to adopt the technology.
Yes the whole crypto market has been brutal.
7 straight monthly red candles for ETH!
I wrote an article that Steemit Inc is playing with fire by changing the cut-off point of SBD printing well before the HF20 took place. No-one paid attention.
Did Steemit Inc consult an economic expert? Nooooooooo
They relied on witnesses to be the all-knowing experts on financial matters. In fact the idea was born from a witness. They didn't go find any experts to review the concept. They didn't even go to their local college and consult a economics college professor. Unbelievable...
Here is the link warning of the issue with allowing SBD to be printed with a large debt ratio. https://steemit.com/steemit/@socky/sbd-change-with-hardfork-20-playing-with-fire
Yes agree; there was limited consultation that I can see outside of the witnesses themselves The 5% window between 5-10% debt ratio was there to allow the supply side of the economics to cut out and the market to stabilize before the forced haircut which has the potential to collapse confidence in the peg. The issue they were trying to address was that with no supply the demand side could kick in simply create a SBD pump. So the idea in HF20 was to increase circulating supply of SBD to reduce the chance of a pump; however it has unintended consequences on the downward side which I don't believe were properly evaluated.
The community was focused on RC's in HF20 but I believe this debt ratio change was perhaps the biggest change to the STEEM blockchain economics we have had (with the exception of the massive initial lowering of the inflation rate).
Good catch, I didn't even notice the debt ratio change.
What they don't get is that the SBD pump or a sustained price over $1.00 is a good thing. That creates a flood of revenue into STEEM. They are so focused on stabilizing the upper bounds of a coin that inherently only has a floor. And for what? so they don't have to do math on the US dollar equivalent price of SBD?
It is amazing to read people complaining that the price of SBD gets too high. It is like complaining to an employer that their paychecks are worth too much. People have no economics sense. That is why we need economic professionals to consult before making such decisions.
The good thing of the sudden SBD dumping is that it reduces the SBD supply and lessens the debt burden. Hopefully it will find equilibrium before the haircut.
From a blogging perspective the pump helped. The issues is if SBD is not stable then why have it (it is just a liability to have a debt instrument for no reason). I can see why they want a stablecoin however for DApps wanting to sell items. It is just not easy to create a stablecoin when the primary asset (STEEM) underwriting the coin is so volatile.
I think it was hubris to try to create a stable coin this early. Stabelcoins should be a project in itself and not added to an experimental proof of stake coin.
I have said since the beginning that I am behind removing SBDs completely as they are not really fit for purpose and there are other tokens specifically designed to operate as stable coins. I see that it makes more sense to get Steem listed on services that are intended to solve these problems, such as those that provide debit cards for crypto as it will be relatively simple for them to add in features to autoconvert crypto to a stable coin if that's what people want/need. All this said, I have read a lot about how Tether USD is not actually backed by any USDs.. lol. There are other stable 'coins' around though.
I agree that the SBD print rate adjustment was not properly discussed or its implications understood - witnesses have already stated that we are generally not happy with the way that multiple new features are lumped together into hard forks, which doesn't give us a good way to assess and test their effects individually. Currently though, only top 20 witnesses have any ability to affect the outcome here and I am not yet in the top 20.
I just voted for you for witness ura, I think we should get rid of SBD too
The meaning of Steemit is experimentation, but such things should be done at least a bit systematically and I agree that the hardforks seem a bit like arbitrary ideas thrown together on a whim. Only chaneg one ingredients in your cookie recipe. Else you will not know what happened. I voted for you too.
I think the problem is that everyone assumes that SBD is a stablecoin. It has a floor not an upper bound. It is different from stablecoins out there. The real stability comes from adoption and growth which has not come yet. Trying to make this into a stablecoin with manipulation will have negative consequences.
I think the first step is to stop calling SBD a stablecoin. Even long ago Dan Larimer explained that SBD has a floor and not an upper limit, but everyone still today believes that SBD should have an upper limit.
There is reason to have SBD. Just like the US dollar has a US Savings Bond. It is a mechanism that generates revenue and growth in an economy. Removing conservative safety mechanisms to control price is a bad thing.
What are the implications of breaking the 10% debt ratio?
Interesting suggestion that the SBD to STEEM conversions are putting downward pressure on the Steem Price. However if you look at other coins around the same marketcap as Steem such as Siacoin and Bitshares you can see that they've fallen by the same amount or more over the past week.
So its really just a general crypto thing with the smaller coins being affected proportionately more.
Same as on the way up but in reverse!
If you look at the daily volume on Coinmarketcap for STEEM it is $1,689,202 USD ; so 300K USD of SBD converting to steem and hitting the market has a massive effect on price. You can always pick and choose coins that are falling just as fast as STEEM but the reality is that we would be holding significantly stronger if we did not have a flood of STEEM coming on the market from SBD conversion; this is exactly how the SBD mechanism is designed to work (push STEEM supply up though burning SBD while reducing SBD supply in order to maintain a stable SBD price). We just have a lot more SBD floating around now then the white paper ever envisioned.
Stock markets are getting rekt, crypto's getting rekt. GG.
yea.. the picture describe alot for crypto price action these day..
sadly yes
lol
I'm gutted I didn't invest in pitchforks and torches when I had the chance.
I got into Steemit to make money blogging. A while back my account was worth thousands, now its only half a thousand and dropping. The folks who work to benefit the steemit community are being held hostage by speculators. Is it just a case of hanging on and hoping the market corrects itself?
Posted using Partiko Android
The best path as a blogger on Steem is to keep blogging and treat the STEEM as a long term investment. There will be a lot of volatility going forward as the whole ecosystem is a large financial experiment .
Thanks. That's basically my plan. I've been here a while already
At $0.40 I had to buy more steem. It would take a LOT of selling to keep Steem this low for more than a couple weeks. I feel a lot of the steem is still powered up and being used.
great picture, wow i hope they can escape safely.
Interesting suggestion
Well said, the itself is telling the hole scenario of crypto nowdays. By the way this is really a nice shot.
Posted using Partiko Android
Thanks. Just have to watch it play out now.
What can we do to get SBD back up again?
If we don't do something, it's gonna bottom out and follow the way of DogeCoin at this point.
At this point in the cycle not much. But once we stabilize we can consider what debt ratio we would like in the future once this settles down. The higher the % we set the debt ratio (SBD/Steem) before default the harder it is for steem to support it without going into its own downward spiral. The current market will likely going to force default on SBD regardless of the debt ratio; but its a question of at what value of steem do you start to default the SBT (set at 10% in the white paper) and how much breathing room to do you keep before cutting down new supply of SBD's.
Nice post. I follow you
Hi @intrepidphotos!
Your post was upvoted by @steem-ua, new Steem dApp, using UserAuthority for algorithmic post curation!
Your UA account score is currently 4.813 which ranks you at #1382 across all Steem accounts.
Your rank has improved 146 places in the last three days (old rank 1528).
In our last Algorithmic Curation Round, consisting of 286 contributions, your post is ranked at #34.
Evaluation of your UA score:
Feel free to join our @steem-ua Discord server
Interesting photo and post. Sometimes the world needs a little perspective. For most of us Steem at $5 or $0.05 doesn't change our lives.
True. Although I am not sure how many witnesses would keep running the blockchain for $0.05 so there is a price where its not worth keeping the lights on.
The damage was done during the SBD pump which started over a year ago and massively inflated the SBD supply. It could all have been prevented with a simple fix of the SBD peg by enabling reverse conversions - we would have deterred all the speculators and idiot HODLers who were chanting "SBD to the moon!".
Every boom has a bust, but people were all too busy making out like pigs at the trough to care during the boom. This was the inevitable end game I've been writing about for almost a year.
Would a reverse conversion not simply create more supply of SBD which makes the peg even harder to hold when the crash eventually comes ? I thought the SBD print rate is set by the steem price rather than the SBD price so it was the STEEM pump which caused the over supply ?
Technically yes, the STEEM price caused an increase in SBD Supply. However it was the SBD pump which led to the conversion feature being disabled in the Steemit UI, it removed any chance of incentivising SBD conversions (which were happenning steadily pre-pump) and attracted the speculators and HODLers who saw an opportunity for profit. If we had reverse conversion we could have killed off the SBD pump before it got off the ground and the speculators and HODLers would have looked elsewhere (probably somewhere like Bitconnect LOL). We would never have had the demand to support a massive oversupply of SBDs that now poses an existential threat to the platform.
It is the same speculators and HODLers who are now dumping the oversupplied SBDs at sub $1 USD and bringing the excesses of the pumps crashing down.
If you look carefully at the justifications for the increased debt thresholds you'll see they are argueing for more supply of SBDs to meet demand as a way of dampening the price pumps. Reverse conversions could achieve that result in 3.5 days rather than allow for a 9-12 month pump and dump cycle to play out.
Yes. My concern with reverse conversions is that you would need to cap them also at the 10% debt ratio and then they would become less effective. But probably better than the alternative.
Maybe. But with a 10% cap it may still have capped out and allowed for a pump. Whether you get to the cap slowly or quickly could end up being the same outcome. When you consider that the reverse conversion approach is probably faster to enforce the peg vs. sustained printing, and likely results in greater stability between the two it is probably preferable, but it isn't entirely clear cut.
There is always variables and nothing is ever certain, but there is a case for applying some common sense and diligence to try and give the system some stability to prevent this sort of outcome.
It has been an entirely predictable bust and it's hard to argue that the HF20 printing threshold changes were not grossly irresponsible. If you go back and have a look at some of those old conversations with @dan years ago you'll see there was concern about how best to prevent this sort Black Swan event even back then. It's all recorded on the blockchain...
How do you explain blaming HF20 when the supply was already essentially just as high (and not being converted) long before HF20?
This makes no sense!
Let's look at this another way. Total STEEM inflation is about 8.5% per year. 75% of that is the reward pool, of which 75% goes to authors and 50% of that is SBD. If we printed flat out all the time, at a constant STEEM price, SBD would only increase its ratio by 2.39% per year. This is a very slow and entirely manageable rate. This rate played out continuously during Steem's entire 2.5 year history would only produce an ending SBD ratio of 5.98%! (These numbers, explain, by the way, why HF20 is irrelevant. After about three months, HF20 has contributed an additional 0.60% to the ratio. Again, not at all significant, especially when we consider that it may have been responsible for helping to bring the price down which then encourages conversions.)
In fact, the real issue here is not printing, it is price changes and lack of conversions due to SBD being overvalued that lead to the SBD ratio ever becoming high. Even before this week, the price has decreased from a high of about $6 to a recent range of 70-80c. That's a decrease of about 87.5%. That would, in the absence of conversions and NO new supply, take a 1% debt ratio all the way up to 8%, or alternately take a 2% ratio (the low end of the previous print slow-down range) up to 16% (of course impossible due to the 10% cap).
I agree with you that the old discussions bear relevance but they are almost entirely about the need for the 10% limit and the peg switch (from USD to STEEM), not print stopping. You can not use print stopping to significantly protect against a high ratio, it just doesn't numerically work (unless, perhaps, the stopping is at an extremely low ratio like 0.1%; in fact I once opened a github issue suggesting that the hard and soft limits were too close together, but after subsequent consideration I realized this is not a useful approach either).
With neither printing (i.e. once printing has slowed or stopped due to a limit), nor reverse conversions, the result is inevitably some sort of pump which stops conversions and forces a build-up of supply, at which point the system is inherently vulnerable to price declines. Much more vulnerable than it would ever be to 2.39% PER YEAR of printing.
IMO the way the system works now is about the best that can be expected. Substituting reverse conversions for printing would be okay, but also can't really leave a significant void (nor would a small void protect much against price changes, as above).
In short, common sense is not a substitute for analyzing something in detail. Once we do that we can easily see that print limits are just not helpful in solving this problem.
I don't blame HF20 exclusively. My comment was just that the HF20 changes were grossly irresponsible and lacking common sense. I maintain that it made the debt situation worse, even if only fractionally so. My point is that the people making these kinds of decisions need to be smarter and stop looking for band-aid solutions that don't actually fix anything.
We can talk about the technical aspects of this problem, but really this is about economics and market psychology. Why does Tether USDT seem to remain stable around $1? Nobody really knows if the money is actually there but for some reason or other the market has confidence in it's stability....thus it is stable. People don't buy Tether speculating that it will moon.
If we killed the SBD Pump with reverse conversions before it gets off the ground then we kill the demand for speculators and HODLers to even buy SBDs in the first place - Thus we don't get a debt build up and it stays as it was intended : As a stable currency used for commerce and off-ramping.
If I can use a crude analogy for implementing reverse conversions - You buy a gun so that you don't ever have to use it. It's a deterrent. I'm not saying we'll never have this sort of debt problem when we have a price decline but maybe the hangover would be milder and not so painful with less market demand for SBD debt. Offering the market a one-way peg creates an asymmetrical trade and it's just not smart.
Because it is possible to arbitrage by depositing and withdrawing USD (most of the time) and has no practical limits up or down in its capitalization. There is probably some actual backing in USD which enables the arbitrary, even if possibly all the USD isn't there. SBD doesn't work that way. The huge differences in the models carry certain tradeoffs.
I was in favor of this although there some details to work out and remaining questions. Including, which I have asked you elsewhere: What happens when you reverse convert up to the limit and the price is still pumped?
I don't agree with you that the print limit change was done carelessly, nor that it is grossly irresponsible. It was considered, analyzed and debated by many people literally for months. It has tradeoffs and isn't nearly as one sided as you claim. And as you have acknowledged, even if it had not been done, under the most favorable of assumptions (no credit for increased conversions attributed to the higher printing; almost certainly wrong) SBD would still be below par right now.
This is a fair point. It is one reason I don't view the 10% rule/limit as a 'failure'. By defining SBD as allowed to go under $1 in certain (reasonable IMO given the nature of backing by volatile STEEM) conditions, this removes the one-way nature of the trade and makes it possible for someone wanting to bet on a SBD pump by buying it at par to lose money sometimes without a catastrophic collapse. While at the same time maintaining reasonably low volatility (strictly lower than STEEM under all circumstances, usually much, much lower).
Reverse conversions with a cap would still create an asymmetric trade.
I understand that Tether utilises a different model. My point was that the market confidently values it at $1 and speculators are not buying it with an expectation of speculative gain. With a slight improvement in the SBD mechanism I think it could also deter a lot of the speculator demand which will give us more stability.
Regarding the cap, I'd question whether you'd want a cap. Yes it is possible that a big conversion could push the debt over 10% and affect all holders, but the converting party would be cutting their own throat in doing so. You could also apply a conversion penalty much like occurs in the other direction - For instance, at 11% Debt 1 SBD can only be converted to 90 cents worth of STEEM and it takes 1.10 cents worth of STEEM to convert to 1 SBD. This will not entirely kill a pump but it would seriously dampen it.
There are no absolutes here. No system is fool-proof and failures will still occur, but it is possible to make any system more robust, more stable against volatility and that should be the goal here. Any step in the right direction - no matter how small - is a help. Any step away - no matter how small (eg HF20) - is a hindrance.
As long as the markets go up, everyone's a successful genius.
Over-optimism runs rampant in all markets these days. Shocking to me how many people don't even consider what might happen if the markets go down. Not just crypto.
Yes its not just crypto; its humanity.
Well Said, I think based on some development around the cryto space that soon we will see an uptrend and market condition should move positively that will affect positively Steem.
One can only hope but the current market is out of our control.
I'll hold my steem into perpetuity
Now that is a long time ;-)
Hi,
All this is new to me. I hold some SBD at the moment (147). Should i be doing anything with it (converting)? Or is it too late?
Thanks in advance.
You got a 100% upvote from @dzentral courtesy of @sanchezpuukko! Earn a solid 0% earning payout by delegating SP to @dzentral.
Visit http://www.pornhub.com for details or take a nap like there´s no tomorrow.
You can make your post more visible with using our resteem service.
Send 100 SBD/STEEM Get Instant Resteem by @dzentral to 8+ Followers and Get Instant 2+ Upvotes.
Automatically NO Refund for Invalid Transactions.
Don't join us on discord, better send 100 STEEM/SBD to @null while making the dzentral war cry: For mother anarchy!
Hi @intrepidphotos
I never really thought about SBD Debt ratio this way. Interesting point of view.
ps.
I aAccidently just bumped into your profile just to realize that we seem to share a number of interests :)
In particular that we both share a similar passion towards cryptocurrencies and blockchain technology :)
big fat upvote on the way! :)
I will follow you closely :)
Take care, Piotr
I could never wrap my head around the economics of Steem so I never put money in it. It’s dropped ten fold since I started.
Congratulations @intrepidphotos!
Your post was mentioned in the Steemit Hit Parade in the following categories:
Hello , where can I know steem and sbd burning process? I'd like to know why and what kind of steem and sbd burned ? Sorry for my dump.
Estamos jodidos esperando que la subida del SBD sea pronto
Howdy sir intrepidphotos! I agree, I'm holding on. Wow, this post stimulated alot of great conversation!