I’m calling on all witnesses to take a serious look at the SBD printing that is causing excessive STEEM inflation.
For those that don’t know what SBD is, here is a breakdown.
SBD is a debt instrument. Essentially, you get paid now in debt (SBD) in which the debt is cashed out later (for STEEM).
This creates an incredible source of revenue into STEEM ecosystem. It is a mistake to call it pegged in the whitepaper and goes to show how Steemit Inc doesn't understand economics. Don't get me wrong, SBD is an amazing tool to have. Think of it like the US savings bond. Let's assume that the price of STEEM is over $1.00 and the price of SBD is well over $1.00, then the community cost for that SBD is less than the current price and is a great way to generate commerce and participation which is stimulant for the STEEM economy.
The problem is that everyone thinks that SBD is a pegged currency.
Since the pegs are weak, both Steemit Inc and witnesses have manipulated the supply to inflate it. They did this two ways:
- They removed the ability to "convert" SBD to STEEM in the Steemit wallet (on Steemit.com). This was done for a good reason (when SBD price was high) but was never reinstated when SBD fell to $1.00. By not having the conversion option available to the majority of the population, the next most convenient option was to use the internal market. This only transferred SBD and did not convert it keeping the supply of SBD high. This prevented SBD from being burned back when the conversion ratio was 1:1.
- HF-20 removed the conservative print rate cut-off of SBD. This was specifically intended to flood the market with SBD to artificially suppress SBD price if the market turns around.
What really happened is that too much SBD (debt) was created and we Steemians were left holding the bag to cover the cost of SBD conversions by virtue of inflation (paying for the debt by printing STEEM). What is crazy is that the whole idea to suppress the price of SBD is counter intuitive. All it does is cut off the revenue stream into STEEM ecosystem and cause the cost of SBD debt to be more expensive to pay.
Over the last 3 months, there has been over 11 Million STEEM created specifically due to SBD conversions (That is 1/3 the value of the Steemit Inc power down). This is in addition to the existing inflation rate of STEEM to fund the reward pool and the witness pool. The inflation of SBD conversion is much higher than both the reward pool and the witness pool combined. The average daily inflation due to SBD conversion is 1.8 times that of the combined voting and witness pools together. That is every single day (it should be close to zero). That inflation has long term implications. That much new STEEM compounds all future inflation. HF-20 removed the conservative cut-off of printing of SBD. We are currently printing SBD when the price of conversions is high AND when we have dangerous debt ratio (remember, SBD is a debt). This alarming amount of SBD printing can be removed by reversing the HF-20 change to the SBD only.
There has been a flurry of discussions about worker proposal. This is a movement to allow freelance Developers to program software upgrades to STEEM in which they are paid by Steemit Inc and the Community. The largest concern by far by the community is to not introduce another reward pool to print STEEM to cover the cost of the freelance developers (creating more STEEM inflation). The irony is that there is already inflation happening right under everyone's noses of almost two times the size of the voting pool and the witness pool combined. A freelance developers pool would pale in comparison to the amount of STEEM inflation caused by current SBD conversions.
I can no longer sit idly by and watch this continue
If you have any concern about STEEM inflation, please get witnesses involved in reinstating the conservative cut-off to SBD printing that HF-20 removed.