I joined Steemit in January, so I haven't caught the times when Steem and even SBD were worth less than $1.
SBD is designed to account for the debt of the Steem blockchain, while Steem and Steem-vested Power denote the ownership on the Steem blockchain.
When the SBD total amount grows, the debt of the blockchain grows. When it shrinks, the debt reduces. The way to do that is via conversions from SBD to Steem (the vice versa is not possible), or via internal blockchain mechanisms which regulate too high debt compared to ownership (when it reaches 10%), and the pegging of SBD price to $1.
About the pegging of SBD price to $1, currently there are mechanisms to do this only one way. If the SBD price falls below $1 and the debt level is high, witnesses are recommended to increase the price feed to print more Steem compared to SBD. Thus, eventually the demand for SBD will increase and so will its price. Here's the excerpt from the white paper about this matter:
If SBD trades for less than $1.00 USD and the debt-to-ownership ratio is high, then the feeds should be adjusted upward to give more STEEM per SBD. This will increase demand for SBD while also reducing the debt-to-ownership ratio and returning SBD to parity with USD.
So, if the price of SBD ever will go below $1, as long as Steem remains a functional blockchain and its witnesses reliable, there are mechanisms that will assure the price will reach its $1 peg. How long it takes before it happens, we don't know, because it depends on the actions of witnesses and also of the levels of indebtedness (how much SBD is there, compared to Steem and SP).
What if the price of SBD increases above $1, as we've seen during the past few months. Here's what the white paper has to say:
The primary concern of Steem feed producers is to maintain a stable one-to-one conversion between SBD and the US dollar (USD). In a market where debt still demands a premium, it is safe to say the market is willing to extend more credit than the debt the community is willing to take on. If this happens a SBD will be valued at more than $1.00 and there is little the community can do.
Ever since SBD started to run wild on the uptrend there has been a constant pressure from various members of the community to peg it to $1 from both ways, meaning not letting the price grow either.
Here, there are two opinions:
- those who say SBD was meant to be pegged and a non-volatile token has its purpose and value, because it's easy to predict, calculate and make business plans based on it (and I think it does also)
- those who enjoy the bigger rewards resulted from a higher priced SBD, or want to speculate on its fluctuations to get more Steem (or to cash out)
Recently we've seen SBD drop really close to $1 again, and there have been discussions whether or not now is the time it should be pegged to $1 both ways, because the psychological influence of a small drop from its current price to $1 isn't big. Whereas, if the price of SBD would be $5 when or if that would happen, people would be wondering what happened, why the sudden drop in price.
I also believe, if we were to peg SBD to $1 both ways, when it's close to the peg value is the best time to do it. And I would do it.
What do you think? Should the pegging be done to $1 both ways? Now or it doesn't matter the timing? Leave it as it is? Or remove SBD completely?