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RE: Below the haircut threshold - SBD Supply does not affect inflation

in #blockchain • 16 days ago (edited)

Ironically, in terms of value, those conversions didn't eliminate any debt at all. All they did was to create new STEEM and lower the haircut price.

I'm not following this. Eliminating SBDs should count as eliminating long-term debt. Also, I have no intuition for what "raising" or "lowering" the "price" of a trade between SBDs and Steem tokens means, since either one could plausibly be the baseline, so that may be contributing to me having a hard time following the argument. Explicitly tacking Steem-per-SBD or SBDs-per-Steem donominations onto "prices" might be helpful (or maybe "the price" is a USD-equivalent?).

16 days ago in #blockchain by
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     16 days ago 

    Brief reply 'cause I'm using a phone.

    Example:

    1. The debt is 10% of the total value.
    2. Convert 100,000 SBDs
    3. The debt is 10% of the new, higher total value.
      • new STEEM were created, remaining SBDs gained in value because the transaction raised their conversion value.

    Because the value of SBD loses the peg, conversions can only reduce the debt when the STEEM price is above the haircut price. Otherwise, it's more like a debt transfer to the SBDs that remain. It's just the way it's designed.

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