SBD – Why Are We Afraid of Pegging it to a Dollar?

I remember meeting with @roelandp last year. This was two months before the Steemfest and we were discussing his plans for Karkow. At one point he said that he wanted a special setup for the Steemfest through which steemians would be able to buy coffee using Steem tokens. I don’t remember the exact details but one of the problems was obviously the fluctuating price of Steem and at that time I mentioned my desire to see SBD come through as the ‘pseudo-stablecoin’ of the Steem ecosystem. That was back almost 8-9 months ago...

I want to keep this discussion honest so I am not going to hold anything back and speak my mind. I have discussed this issue for a long time now and there is no easy way of saying this, but the truth is that most of us here don’t give a shit about this important issue.

Blind devotion to any cause ends up in a massive failure. One of the primary ways of making Steem a success is through meaningful communication that can lead to resolution of important issues. We can choose to hide behind the façade of civility and not point out the truth but in the end it’s selfish and not beneficial to the platform. What are we afraid of – not being liked and getting downvotes? Criticism sucks doesn’t it? How about a scenario where this whole thing goes bust. That ladies and gents, is what’s really going to suck.

We already have a lower threshold fixed for the SBD prices and you can always redeem them for one dollars’ worth of Steem. What we don’t have is an upper threshold to this limit and for that reason we keep seeing SBD prices bloating beyond its dollar value limit. Hell, there was a time in 2017 when we crossed ten dollars per SBD.

It feels really good when we start to rake in those unexpected profits and for a while we can all party like Mike Tyson…. But not for long because the law of averages always has the last word. We saw it happen in the past few month and when the issue of fixing the peg is raised, I see people walking away from the conversation. This is a sign of short sightedness that will eventually lead us to much bigger problems.

So what is SBD? The Steem Backed Dollar is technically a smart contract that acts like a debt instrument. Whereby it can be redeemed for one dollars’ worth of Steem tokens. This conversion is done on the blockchain and takes about 3 days (not sure about the amount of time).

The introduction of SBD was meant to bring about a stability in the ecosystem. The idea was that since the world of crypto is already so volatile, it made sense to introduce a token that could bring about some stability. This in turn would reflect as the platforms commitment to provide stability during the turbulent times in the market. I have actually seen arguments on Steemit claiming that SBD was not meant to provide stability at all and all its purpose was that of a mere safety net. It makes me wonder if these guys have ever read the white paper or taken some time to at least watch a couple videos about the issue.

It feels good when price of SBD rises beyond one dollar and why not, because it’s free money right? But how about the fact that this comes at the expense of an initial idea that sought to bring about that much needed stability. If this current volatile status of SBD is to remain then why do we even need it? Or why is it even called the ‘Steem Backed Dollar’?

Imagine how much a stable SBD be worth to you - $1 EXACTLY! That is what makes it so powerful. No rocket science behind and it leaves you with a way of managing your wealth on the Steem platform without leaving your portfolio completely at the mercy of the markets. If it was pegged to one dollar then you don’t have to worry about Converting your Steem to fiat after a bull run. Smart people sold there Steem in early 2018 and converted it into fiat and bought back in at less than thirty cents a token. On the other hand a whole bunch of other people didn’t even think about doing it. But I bet if a functioning stable coin was to be made available then a lot of the people might have tried this with at least a portion of their Steem tokens.

A stable SBD means that actual businesses can enter this ecosystem without having to worry about the blowback from the volatility of crypto markets. This is a huge ….HUGE advantage that we have over other platforms that depend on external stable coins to provide them with stability. People complain about EOS taking the lead from Steem when in truth we have more weapons in our arsenal lying dormant and waiting to be activated.

Trust me, a stable SBD doesn’t mean that you are going to lose that ‘free money’ that comes with not having an upper threshold for the SBD peg. Either you’ll have more SBD tokens to compensate for it or you’ll have more Steem. Proposals have already been made on possible mechanisms of doing it.

I would love to hear your thoughts and insights in the comments section!