A week after launch SMD has a discount to USD from 10% to 20%. Now it is about 14%
Whitepaper states:
If SMD trades for less than $1.00 USD and the debt-to-ownership ratio is over 10% then the feeds should be adjusted upward give more STEEM per SMD. This will increase demand for SMD while also reducing the debt-to-ownership ratio and returning SMD to parity with USD.
If SMD trades for less than $1.00 USD and the debt-to-ownership ratio is over 10% then the feeds should be adjusted upward give more STEEM per SMD. This will increase demand for SMD while also reducing the debt-to-ownership ratio and returning SMD to parity with USD.
Assuming the value of STEEM is growing faster than Steem is creating new SMD, the debt-to-ownership ratio should remain under the target ratio and the interest offered benefits everyone. If the value of the network is flat or falling, then any interest offered will only make the debt-to-ownership ratio worse.
In effect, feed producers are entrusted with the responsibility of setting monetary policy for the purpose of maintaining a stable peg to the USD. Abuse of this power can harm the value of STEEM so SP holders are wise to vote for witnesses that can be counted on to adjust the price feed and interest rates according to the rules outlined above.
So we have excellent tool to fix that. Now nobody use this right to adjust to market demand. Everybody use default 10% interest rate.
As of block 3,044,004 Debt to Ownership ratio is 1.66% (1556178.966 STEEM / 93610169.201 STEEM). It is far beyond 5% target. The have explosive growth in terms of signups, engagement and retention. So we have huge leverage here to do with SMD rewards the same cool thing we did with authors rewards.
So my proposal to start move target interest rate to 15% target, perhaps, even 20% as SMD interest in our case should compete with Steem Power. Let's start a discussion.
Updated a Title
My point is that we can turn our weakness (high SMD spread) into our advantage (enormous USD interest rate). With current leverage we can do this.
@cyrano.witness Could you explain your point claiming this post as abuse?
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It's far too early to read something of the current data in my opinion
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Why? Current interest of Steem Power is far beyond SMD interest. Given the fact that every SMD user is early adopter and will choose between the only way to incentivize proper behavior is significantly raise SMD interest. Also, high SMD interest will attract users outside of Steem. Current leverage is far beyond what we can have. 10% a year for asset so young with so much risks is not viable. I believe that move is reasonable and doable.
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You have to remember the interest rate is much higher than 10%. As you can buy them at a discount of 14% - you are actually getting an interest rate nearer 28%. This assumes that in one years time steem dollars will be selling at par.
Do the maths yourself with this calculator. http://www.money-zine.com/calculators/investment-calculators/bond-yield-calculator/
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I understand this for sure. I assume that if a market behave this way even 28% overall interest is not enough to give enough incentives to nullify this spread. Let us give 40%-50% overall. We have enough leverage to make such revolutionary things. My point is if a market behave this way we should turn our weak point into our advantage. And we have everything to do it for sure.
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wow
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