Steem Dollars - Currently Collecting 0% APR - How is this determined?

in steem •  8 years ago  (edited)

How is the APR determined for Steem Dollars? I haven't been here for too long, but have seen this fluctuate since I have joined.

  • I am wondering how the APR is determined?
  • Is it set by Witnesses?
  • Is the APR determined the current value of the SBD relative to the peg between SBD & USD which is targeted around 1:1? If this is the case, my assumption would be the APR would decrease as the SBD value climbs relative to the USD. With this assumption, is there an inflection where the Steem Dollars have a negative APR?

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8 years ago by

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      ·  8 years ago 

    Excellent post!! thank you for sharing

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        ·  8 years ago 

      Should we anticipate negative APR's in the future similar to a lot of the European banks?

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          ·  8 years ago 

        I am quite curious about this as well.

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            ·  8 years ago 

          Good question. I've been curious about this as well. From what I understand, the interest rate is set by consensus of the active miners, or witnesses, and is not related to pegging SBD to a roughly $1 equivalent of STEEM.

          The pegging is set by the blockchain and average price of STEEM providing there is enough STEEM to honor SBD redemption. The peg would not function if the price of STEEM were to completely collapse since SBD is essentially backed by STEEM and not the US dollar itself.

          It seems the initial incentive of SBD and interest was to bring people into the STEEM ecosystem while not exposing every participant to as much daily price risk and the initially high inflation of a new currency. Now that the market cap of STEEM has risen dramatically compared to the market cap of SBD the debt to equity, so to speak, of SBD to STEEM is very low, implying a lower interest rate.

          If anyone has a good understanding of this please share as I would like to understand it better myself.

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            5 votes