We have tools available for pegging
There is no real tool for downward pegging, other than waiting it out, which is what was done the last time SBD went higher, and did eventually work. That will likely work this too, but it makes SBD useless (essentially "disabled"; right now nearly all of it is on exchanges being traded by speculators) as a stable currency much of the time.
The only conceivable method that exists (outside of reward-based initiative such as my @burnpost) would be a positive bias on the price feed, and that is not a good one because it amounts to increasing inflation above the defined paramaters, with not even any future remedy to absord the newly created coins. It is neither widely supported by stakeholders nor recommended by the white paper (which admits that in the original, flawed design, little if anything can be done if SBD is valued about $1).
The proposed improvement of adding a method of converting STEEM to SBD does not increase inflation, and can be reversed later if it becomes necessary due to changing market conditions by converting SBD to STEEM.
I don't necessarily agree with this. The tool for downward pressure when SBDs move off the peg is to reduce or eliminate the incentives to buy/hold (interest rates) and to increase the supply to meet the higher demand (bias). The increase in supply obviously takes time to reach the markets, but it would still provide downward pressure (assuming the parameters are actually changed by enough witnesses to reflect market conditions, which currently doesn't happen).
I think that consensus changes for increased supply is actually a good mechanism and the preferable one if we're talking about token inflation. Even if the new supply ends up creating more than the market demands (which would be the obvious goal for short- to mid-term price spikes anyway, in order to bring prices back down to the desired peg), parameters can then be adjusted to incentivize holding or converting SBDs to STEEM if SBD prices happen to over-correct.
But this is why witnesses should be well-versed in the blockchain protocols and price/token parameters and at least have a basic understanding of currencies/markets/economics. This can't happen if people don't care or don't understand and if they're not paying attention to the markets (or if they're completely absent witnesses altogether). We can have any tool imaginable at our disposal but it won't mean much if people don't know how to or just don't care enough to use them. If the problem is simply that witnesses don't care about pegging or don't know how it works, then none of this even matters and this should be a consideration for our witness votes.
Why doesn't it increase? Whether we use bias or use a conversion function, more SBDs will be created. The former at least allows consensus protocols to manage the increase of supply, but both serve the same purpose, which is to meet market demand for SBDs.
I'm not necessarily opposed to a new conversion function. I'd just like to see the current tools actually tried before we condemn them for being useless. In any case, we probably still have quite a bit of time to figure this out and there's no reason why we can't test both or either method - and whatever we try won't be a quick fix. Unless we're assuming that SBD speculators are always up-to-date on the internal mechanics/sentiments/changes of or with Steem, which I believe is rarely ever the case, there's no reason to expect that any immediate changes to protocols or parameters will yield immediate results. I'm OK with a slow return to the peg via slow increase in supply to meet demand, if it can be done.
This is something I'd like to see more of when making protocol changes that yield bad results. But I think I'm dreaming a bit there.
The interest rate has been 0% for a long time.
Because it is a conversion. STEEM is converted into SBD which means STEEM is destroyed and SBD is created, so the net inflation is zero. A conversion from STEEM to SBD and back to STEEM would result in the same amount of STEEM that we started with (assuming no price change, or alternately, averaged across the range of positive and negative price changes). That is not the case for a bias, which permanently prints and distributes more rewards (because the blockchain in that case believes, incorrectly, that its market cap is higher and can therefore 'afford' to distribute more according to the predetermined schedule, currently about 9%/year).
Overall it is not a well-targeted method for dealing with the SBD value due to this distorting of the assumed market cap and the resulting permanent net increase in rewards/inflation. It also screws over people who perform conversions from SBD to STEEM by shorting them on the STEEM received (since it is assumed to have a higher price). Of course, no one should rationally be doing these conversions now, since it converts a $6 SBD into 1 USD worth of STEEM, but some users have anyway. This has become less of an issue now that SBD conversion was removed from the GUI.
The undesirable side-effects are the reason most witnesses and stakeholders don't support it.
What about allowing 100 pct Sbd payouts? This would allow the natural stabilizers to work twice as fast and is a minor change.
I see an amazing opportunity to dominate store of value coins if we increase the cap of Sbd. A stable coin at 6x the cap would be a great addition the the landscape. “ the stable value coin” of crypto should be backed by something decentralized like ether or steem.
But we can only win this battle if we straighten out Sbd quickly!
Imagine the ability to print the dominant stable value coin (through steem power). This would surpass blogging influence as the reason to own steem power.