It is my opinion that for an asset that has the objective of being a stable pair for another one (in this case USD) using a volatile one as collateral (steem) it has to have a backing of at least 2 to 1.

The changes introduced in HF20 had the aim of preventing SBD to be overpriced by removing the mechanism that prevented the printing of more SBD when the open market was overvaluing it.

We all know what the end result was...during the bear market SBD holders had the incentive to convert their asset to steem and sell it on the open market to prevent or mitigate losses and in the process increased the effective inflation of steem to 17% creating more selling pressure for the underlying token further eroding the peg.

In it's current form SBD is just a source of instability for steem and it should be ditched or fixed.

The idea of having multiple tokens as collateral is good in theory only if the backing assets are not correlated. Being that the crypto market pretty much moves in the same direction regardless of which coin you are looking at I don't believe that it would make much of a difference.

The problem with paying interest is that it has to come from somewhere. Banks are able to do that because they charge a fee on their loans. DAI charges a stability fee if you want to close your CDP. In essence MAKER acts as a bank that loans the value of one USD to all the parties that open CDPs.

In a way the steem blockchain charges a fee to anyone that converts their SBD if you aqcuire it above it's intended value or if the debt ratio exceeds 10% since you would not be getting back the value of one dollar if you do it (assuming that you buy it when it's priced at one USD).

A conversion under those conditions in a stable or bull market is beneficial to steem holders as it would be equivalent to burning steem. In light of the fact that the market is prone to downsings and in a long term downtrend it backfires (remember the 17% inflation we had in the last year) I am in favor of using a different pegging mechanism.

What I propose is the following:

• Have a 2 to 1 backing.
• Remove the virtual supply and instead create a hard coded smart contract where 10% of the inflation is used to create sbd.
• Cap the issuance of sbd to 5% of the supply (this would ensure a 2 to 1 backing).
• Allow anyone to create sbd by sending steem to the smart contract in a similar way as how bitshares and Maker do it with BitUSD and DAI.
• Pay interest but only if the external price of sbd is above a certain threshold (this could be a dinamic mechanism that uses the witness price feed to estimate the rate to be paid).

EDIT: with HF21 the SPS already uses 10% of the inflation to create SBD so I don't see a need to pay content creators with it as this could potentially lead to an emission of steem dollars above the intended 10% of the supply.