Witness SBD pegging policy update

I have updated my witness SBD interest rate to 15% from 10%. My feed discount is unchanged at -12% (1-1/1.136).

I have done this because SBD is effectively debt to the Steem blockchain, representing a claim to receive upon demand (with 7 days notice) approximately 1 USD worth of STEEM. Given the decline in STEEM price and market cap, this debt has become distressed. SBD holders may reasonably doubt whether they would actually be able to receive and successfully liquidate 1 USD worth of STEEM as repayment). This is somewhat exacerbated by the 'SBD stability' feature which reduces repayment rates should SBD debt exceed 10% of STEEM market cap. It is currently at about 7%, meaning SBD holders are close to taking a 'haircut'.

The previous 10% interest rate has been in place since SBD creation started on July 4. It was almost never sufficient incentive for investors to want to invest capital in holding SBD on a new and in many ways experimental system. For that reason SBD has consistently traded at a discount (resulting in a higher implied interest rate), even when the debt load was modest. Thus it is reasonable to assume, outside of debt issues, that the interest rate should probably be somewhat higher anyway.

If we do not pay an interest rate commensurate with the risk of holding a token with the properties of distressed debt, then SBD will trade a larger discount. Recently the price of SBD declined quickly from 95 to 87. This will encourage more SBD holders to want to "cash out" by demanding their 1 USD worth of STEEM. While orderly debt reduction is good, collapsing demand to hold SBD is not good.

The cost of an increased interest rate is modest. Currently there is 1.9 million SBD outstanding, a number that continues to steadily decline as debt is reduced. The increase from 10% to 15%, assuming adopted by other witnesses, would cost approximately 260 SBD per day.

Finally, when feasible I believe we should continue to work to keep SBD close to 1 USD in value. Increasing the interest rate will facilitate this, by removing the need for the market to impose a higher implied interest rate with a trading discount. This will encourage continued use of SBD and development of a larger Steem-based economy (which we have seen in its embryonic stages as many initiatives and projects have been funded and operated with SBD as a payment instrument, including Steemfest and the associated travel reimbursement fund). The more participants are concerned about SBD declining in value while they hold it, the less its use as a payment instrument and store of value will flourish.

For all of these reasons I have increased my witness SBD interest rate to 15%.

(payout declined)