Hi everyone - it’s been about two weeks since my last witness update so I’m due for another one, but I felt it was especially important to provide an update today due to the price movement of SBDs.
Why the broken SBD peg is bad for Steem
As you all are surely aware the value of SBDs has shot up over the past few days and is currently sitting around $9 on coinmarketcap.com. It’s been having some pretty wild price swings and could likely be very different between the time of writing and when you read this.
While this is great for all of us who hold SBDs, I feel that it is very, very bad for the Steem platform in the long run if SBDs cannot maintain a fairly stable peg to $1 USD. But don’t take it from me, take it from Dan:
A strong peg of Steem Dollar vs Dollars means the market will have a strong degree of confidence in the Steem Dollar. The more confidence the market has, the more value / demand there will be to hold Steem Dollars. This in turn means there is a ready and active market for those who earn Steem Dollars to sell into when they want to.
Having confidence that there will be market liquidity at around $1.00 when you want it goes a long way toward people being willing to trust their wealth to a currency. It goes a long way toward merchants being willing and able to accept Steem Dollars at face value. All of these things help grow the value of the Steem network by making it easier to use and building trust.
He wrote the above in this post Boost Steem Value by Backing Steem Dollar last year. At the time the SBD was trading well under $1, but it is equally bad if SBDs are trading over $1 and especially as much above $1 as they are right now.
Also from the Steem Blue Paper it says:
Many users who are introduced to cryptocurrency struggle to comprehend how “magic internet tokens” awarded by the platform can actually have real world value. In order to help bridge the gap between more traditional fiat money systems which mainstream users are used to, and the cryptocurrency tokens which they are awarded through the platform, a new currency called Steem Blockchain Dollars (SBD) was created.
SBD tokens are designed to be pegged closely to one USD, so that users who receive them can know approximately how much they are worth in “real dollar” terms. SBD tokens also offer a relatively stable currency for users to hold if they are looking to preserve their account value relative to USD.
So again - while we may all be making some great short-term profits from selling our SBD, they were designed to be pegged to $1 for a good reason and we should do everything we can to keep them there for the long term good of the platform.
What can we do about it?
As a witness, there are some things we can do to help fix the situation. One thing is to set the interest rate on SBDs to 0% - however since this is already the case the next option is to adjust our price feed bias.
For those of you who don’t know, most witnesses publish a price feed, which means they publish what they believe to be the current market price of a STEEM token.
In the image above you can see a typical one of my price feed transactions. In it I am saying that 1 STEEM token is currently trading for approximately 1.745 SBD. Under normal circumstances 1.745 SBD is nearly equivalent to $1.745 USD.
Due to the current situation with SBD trading at around $9 I have set my feed price bias to 300%, which means that I have adjusted the “quote” value in my price feed to 0.250 STEEM instead of 1.000 STEEM.
I admittedly don’t have a full understanding of the exact mechanics behind all of this but to my knowledge increasing the price feed bias will shift more of the rewards to SBDs and thereby increase the supply of SBDs which should hopefully put some downward pressure on the price. If someone reading this has a more detailed understanding of exactly how the price feed bias affects the SBD supply I’d love to hear about it in the comments.
Calling the top 20 witnesses
While I have set my price feed bias along with a number of other witnesses, it’s only the price feeds of the top 20 witnesses that actually matter. Currently out of the top 20 only @phareism and @netuoso have set a price feed bias and @phareism has set theirs to 1,166% which I believe is just to try to compensate for the fact that no other top 20 witnesses have set a bias yet.
For the reasons mentioned above I am hoping that the rest of the top 20 witnesses will follow suit with a price feed bias of around 200 - 400% until the price of SBDs falls back closer to $1.
To help more witnesses adjust their price feed biases I have also submitted a pull request with updated documentation to the steemfeed-js github repository created by @someguy123 since the configuration options for adjusting the bias were undocumented.
If anyone needs help updating their price feed feel free to contact me on https://steemit.chat and I would be happy to help!
That’s enough for now about SBDs and price feeds...I also have a bunch of other updates about projects I’m working on and all that but this post is already pretty long so I guess I’ll save those for the next update.
Help Support My Projects!
If you would like to support my projects and/or my ideas and vision for the future of the Steem platform, I would greatly appreciate your witness vote. To cast your vote you can:
- Go here: https://steemit.com/~witnesses
- Scroll to the bottom
- Write yabapmatt and vote or set yabapmatt as a proxy
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Thank you for reading, and looking forward to hearing from you in the comments section!