This is an open letter to all Steemians, particularly to the Witnesses of our system, who assumed full responsibility for maintaining the SBD/USD parity.
There had been much discussion lately regarding the undervalue of SBD, which had been trading at 10~15% discount against USD for quite a long period of time. I'm not going to re-iterate through those theories/analysis on how or why this happened, but to focus only on one aspect:
If they keep doing nothing, there's no way that SBD will fall back to the $1 target. (well, by mere luck or random market force, it might move towards $1 or even shoot higher, but definitely won't stabilized there.)
A quick review about the principle of Impossible Trinity:
It's impossible to have all three of the following at the same time:
(1) A fixed foreign exchange rate
(2) Free capital movement (absence of capital controls)
(3) An independent monetary policy
Capital control is against the believes of most crypto community. So, in order to achieve a fixed exchange rate (the SBD/USD parity), we MUST adjust the monetary policy timely in response to the ever changing market condition. And this why Steem had the built-in interest-rate & the price-feed machanism.
Although it's clearly stated in the White-Paper:
The primary concern of Steem feed producers is to maintain a stable one-to-one
conversion between SMD and the U.S. Dollar (USD).
Unfortunately, our Witnesses (so call monetary-policy-makers of Steem) are doing exactly the opposite.
While the market condition keep changing, and causing the value of SBD deviate significantly from 1USD, the Witnesses just maintain the same interest rate for SBD all over the time (in fact, all 20 top witnesses now simply leave it as default, which is 10%). And their STEEM/SBD feeds giving a median value that is always mirror the external market price.
With this kind of "independent monetary policy" which totally ignore the markets, there must be a miracle to see the value of SBD stabilized at $0.99~1.01.
To maintain the SBD/USD parity, take either/both of the following actions:
Personally, I'm more favor into the latter, which sound more intuitive for ordinary market participants. A cheaper rate for internal SBD-STEEM could boost the demand of SBD hence bid up the price to parity.
All the price-feed producers need to do is just adding few more lines into their algorithm, so that the bots can be easily configured to quote prices at premium/discount to external markets when needed. It is the responsibility of Witnesses to keep an eye on SBD market price, and adjust the amplitude of premium/discount from time to time.
Theoretically (as mentioned in the White-Paper), some short-term swing of market should be absorbed by liquidity providers. Nevertheless, due to the absence of big market-makers in present ecosystem, the Witnesses should take higher responsibility and intervene the market more frequently with the monetary tools.
It will be good if Steem's witness could make some regular announcement/summary, perhaps weekly or bi-weekly, just to signal the market that you are watching closely and ready to take actions when necesary.
Anything we can do to help the stabilization of Steem Dollar?
YES.
We have the power to vote.
Please pay a visit to steemd.com/witnesses, and take a look into the Feed & APR columns, which represent the STEEM/SBD conversion rate and the anual SBD interest rate quoted by each witness.
During the current period where SteemDollar is trading significantly lower than $1.00, it's recommended to vote only for those who set their STEEM/SBD ratio lower than external market price.
To cast your votes, simply log-in to steemit.com/~witnesses, and click on the arrows besides any witnesses that you like. (Each account are entitled to vote for 30 witnesses.)
Together, we can make a better governance for the community.
