SBD will never be worth $1 USD
I tried the conversion with a small value. To try the process, I changed some STEEM to SBD using the internal market and converted it, waiting 3.5 days.
Here is some information about SBD and a report of the experience.
What is a conversion?
Conversion is a way to change SBD to STEEM.
What is Steem Dollar?
By design, Steem Backed Dollar (SBD) is a token that is meant to be worth $1 USD. Its value is more stable compared to STEEM. A Steem Dollar is a promise to pay one USD dollar worth of STEEM when it's redeemed.
Creation of SBD
The unique way to create more SBD is through the content creation.
Destruction of SBD
There are 2 ways to destroy SBD
- burn it
- convert it
Burning SBD
Burning is sending SBD to @null. You can put an @author/permlink in memo to promote a post.
Converting SBD
Conversion is a process during 3.5 days that destroys the SBD and creates new STEEM worth $1 USD.
The rate of conversion is calculated using the price in the market. If STEEM course is at 10 cents, one Steem Dollar could be redeemed for 10 STEEM. When STEEM is at 2 USD, a Steem Dollar would redeem for 0.5 STEEM. In this order its price tries to be stable and pegged to 1 USD.
A Steem Dollar is a promise to pay one dollars worth of Steem when it's redeemed.
If the price of SBD is less than 1 USD, the people can redeem it for Steem worth in 1 USD. In this order, its price will rise.
The price of SBD
The price is published by the witnesses. The price redeemed by conversion is normally different from SBD price on the market due to speculation.
In August 2017 it lowered to $0.8 USD, in December 2017 it raised to $12 USD. Now it is very low at $0.69 USD.
The experiment
I tried the conversion to make the price rise. Additionally, I should make a profit if the price of STEEM or SBD do not change significantly during these 3.5 days.
I sold 0.123 STEEM for 0.024 SBD on the internal market and converted it.
3.5 days later, I received only 0.117 STEEM, loosing 4.8%.
I was paid $0.68 USD worth of STEEM instead of $1 USD
The prices on Coinmarketcap the 17th October at 01:29:
1 SBD $0.687120
1 STEEM $0.141205
0.117 STEEM at $0.141205 is worth $0.016521. I received $0.016521 for 0.024 SBD.
False promise
A Steem Dollar is a promise to pay one USD dollar worth of STEEM when it's redeemed.
The promise to pay one USD worth of Steem when it's redeemed is false.
What is the point here? Why wasn't I be paid at the rate of $1 USD per SBD?
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You did not need to do this experiment. The peg to 1 USD is only supported if the debt ratio is below 10% of the virtual supply. If the debt ratio exceeds 10% then the haircut rule is enforced.
https://steempeak.com/sbd/@timcliff/sbd-explained
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Thank you for the link to this good explanation.
Current supply: 7,456,172 SBD (steemd.com)
Virtual supply: 328,833,197 STEEM (steemd.com)
STEEM price: $0.138619 USD (coinmarketcap.com)
The debt ratio:
7,456,172 / ( 328,833,197 x 0.138619 ) = 0.163575
The debt ratio is 16.36%. Is my calculation right?
Is there still a mechanism to keep SBD price near to $1 USD when the dept ratio is over 10%?
The existence of SBD is pointless if the regulation works only in a stable or bull market.
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You got voted by @curationkiwi thanks to droida! This bot is managed by KiwiJuce3 and run by Rishi556, you can check both of them out there. To receive upvotes on your own posts, you need to join the Kiwi Co. Discord and go to the room named #CurationKiwi. Submit your post there using the command "!upvote (post link)" to receive upvotes on your post. CurationKiwi is currently supported by donations from users like you, so feel free to leave an upvote on our posts or comments to support us!
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This post has received a 3.13 % upvote from @drotto thanks to: @curationkiwi.
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You got a 100.00% upvote from @botcoin courtesy of @droida!
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This post was resteemed by @steemvote and received a 99.3% Upvote. Send 0.5 SBD or STEEM to @steemvote
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This post has received a 100.0 % upvote from @boomerang.
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