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.
But what will cause it to rise again?
If anyone has a good understanding of this, please comment or correct as need be. I would like to understand this better myself ; )
Very interesting - im still trying to fugure out how this site works, thanks for posting - Voted & following!
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SBD is already trading at higher than its $1 USD target price. Paying interest would only exacerbate this problem. The interest rate is therefore set at zero partially as an attempt to restore the $1 USD target, or at least prevent additional drift higher from it.
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Why is the STEEM Backed Dollar trading for more than one dollar?
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Nobody is really sure why, but its been trading at nearly double the target (so...$2). The only answer I can give as to why is "supply and demand".
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Up vote for "supply and demand", for sure.
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we are in a good place and the right time. Everything is on sale and now is the time to buy.
I do not imagine prices being this cheap again so make hast while the sun is shining.
upvote, resteem, and follow me too @williebeaman
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