- 'A spread' means that it would take slightly more than $1 worth of STEEM to convert into 1 SBD and it would take slightly more than 1 SBD to convert into $1 worth of STEEM. The purpose is to guard against certainly (hypothetical) forms of abuse (or just useless but wasteful spam) converting back and forth without any build-in cost. There are still some inherent costs so it isn't clear this is needed.
- The way the mechanism works is you gather up some amount of STEEM (in general, by buying it), and then request that the blockchain convert that into 1 SBD for each dollar worth of STEEM, using a median price over the next 3.5 days (this 3.5 day averaging period guards against obvious forms of manipulation where someone briefly props up the price to get more SBD).
- On the matter of massive correction, one idea that has been proposed in this thread is to phase it in over a period of time. If that were done, the peg cap would start high (say $10) and gradually drop until it reached $1. That might avoid a crash, but on the other hand, the market might still crash quickly if it sees the improved peg coming. It is hard to say. My personal preference would be to wait until SBD has naturally returned closer to $1 and then implement these improvements to avoid future de-pegging, rather than directly forcing the market down now. However, that does have costs in potentially missed opportunities. We know that stable coins are a rapidly growing product area in the cryptocurrency marketplace. We already have most of what it needed to offer a very competitive product and potentially grow Steem (and the value of STEEM/SP) a lot, but that absolutely won't happen without these improvements.
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I believe that, in such a rapidly changing market, taking plenty of time to consider and learn how the markets behave is the best bet. I'm grateful to know that most of the witnesses are cautious and slow in making major decisions like this.
Thank you for the more detailed explanation.