After I announced yesterday that I'm adjusting my price feed bias, a few other witnesses followed suit and we're seeing a trend in which the current SBD imbalance is mitigated via price feeds, by witnesses. My current bias right now is 300%.
For this of you who asked why are witnesses doing this, below is a fragment from the Steem white paper (page 10) which is relevant for this:
Sustainable Debt to Ownership Ratios
If a token is viewed as ownership in the whole supply of tokens, then a token-convertible-dollar can be viewed as debt. If the debt to ownership ratio gets too high the entire currency can become unstable. Debt conversions can dramatically increase the token supply, which in turn is sold on the market suppressing the price. Subsequent conversions require the issuance of even more tokens. Left unchecked the system can collapse leaving worthless ownership backing a mountain of debt. The higher the debt to ownership ratio becomes the less willing new investors are to bring capital to the table.
A rapid change in the value of STEEM can dramatically change the debt-to-ownership ratio. The blockchain prevents the debt-to-ownership ratio from getting too high, by reducing the amount of STEEM awarded through SBD conversions if the debt level were to exceed 10%. If the amount of SBD debt ever exceeds 10% of the total STEEM market cap, the blockchain will automatically reduce the amount of STEEM generated through conversions to a maximum of 10% of the market cap. This ensures that the blockchain will never have higher than a 10% debt-to-ownership ratio.
The percentage floors used to compute STEEM creation are based on the supply including the STEEM value of all outstanding SBD and SP (as determined by the current rate / feed).
At the moment of writing, SBD was trading almost 7 times higher than the dollar and STEEM was at around $1,8.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
If you're new to Steemit, you may find these articles relevant (that's also part of my witness activity to support new members of the platform):