A fun and simple thought exercise I had today led me to the title of this post.

The base of it is the following facts deduced from my earlier post on SBD:

• The printing of SBD is based entirely on the STEEM price feed.
• Post value is really in terms of STEEM, and the amount of STEEM in the rewards pool is fixed by the blockchain.

When your post payout says $24 and the price of STEEM is 3 USD, what it really is telling you is that your post is valued at 8 STEEM. This is the real value that does not fluctuate based on the market. You will get 6 of that STEEM, and at 50/50 payout you will end up getting 3 STEEM POWER and 9 SBD.

Now just think about that. You get the following conclusion:

• The higher the value of STEEM, the more SBD will be minted.

STEEM and SBD have an inverse relationship! Not only that, but it is multiplicative. A ten-fold increase in the value of STEEM yields a ten-fold increase in the rate of SBD minted (whereas the rate of STEEM printing is entirely fixed/capped). The price of SBD will drop in this scenario. The growth in demand would have to match to keep the price up, and intuitively, it does not have a chance. Imagine the amount of demand it would take to drive STEEM up, and imagine needing a much greater amount to match the supply of SBD as it keeps printing at a much higher rate that STEEM. Crazy...

At this point, I hope to have convinced you of the title of this post. Now the question is...

What can happen?

Two (okay fine, three) scenarios to think of.

STEEM Mooning, SBD Stabilizing

You might be worried about the SBD price crashing to 0 in the scenario where STEEM blows up like crazy. But actually, it's not a problem. It's exactly what interest rates are for to encourage holding SBD.

This is the expected state, as outlined in the white paper.

SBD Mooning, and STEEM Staying Flat

I am just starting to explore this possibility. Is this possible? Let's consider an SBD value of 20000 USD, and a STEEM value of 1 USD. Everyone uses SBD as a store of value. Conversion function of SBD to STEEM via blockchain is completely useless (unless the intent is to keep burning SBD and deflating STEEM).

At this point it's safe to assume everyone is using 50/50 rewards to get the benefits. Greed should cause some to swap SBD for STEEM in order to get more of the payout for their own posts, and that should increase the demand and the price of STEEM and decrease the price of SBD. It's not a stable situation.

However, if you were following this post, in theory there is a scenario where SBD stops being printed at all. Then we can imagine a freakish scenario where SBD supply is completely fixed and valuable, and STEEM is stagnant. As in, everyone stops using STEEM because payouts are worthless, but SBD is just the best store of value out there because we've all agreed to use SBD as a currency. Is this the scenario some of you SBD HODLers are envisioning? I doubt it. Also because that means witnesses have no incentive to continue securing the network, because they are paid in STEEM. Hmm... I think that's enough to rule out this freak scenario.

SBD and STEEM crashing to 0

I forgot the bonus scenario that some of us are scared of. Value evaporated! I don't think this is even worth entertaining, as it means the entire experiment failed and everyone jumped ship. Sure, it could happen for a number of reasons, but there's nothing interesting to discuss here.

Conclusion

If you want a very fast summary, here it is:

1. Higher STEEM price leads to higher rate of SBD printing.
2. STEEM and SBD cannot both be arbitrarily high, as the supply of SBD will explode and bring its price back down.
3. Of all scenarios of either STEEM or SBD mooning, we ruled out all possibilities other than the one the whitepaper outlined: STEEM moons, SBD stabilizes.

Anyone an SBD HODLer after reading this post? Then we need to talk.