1 SBD = $0.884 USDT - How it maintains a value close to the US dollar?

puncakbukit (78)in #sbd • 2 days ago

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The Steem Backed Dollar (SBD) is a semi-stable cryptocurrency on the Steem blockchain, designed to maintain a value close to the US dollar. Recently, a technical analysis revealed a Bearish Harami pattern, which suggests a potential shift to negative momentum for the token's price. This particular candlestick pattern often signals that a price uptrend may be coming to an end.

SBD's "soft-peg" to the US dollar is maintained through a unique, decentralized mechanism on the blockchain itself. Another key technical indicator, the ADX-DI, has been in negative territory, supporting the view of a lack of strong positive directional momentum. This indicator is a part of the Average Directional Index (ADX) and is used to measure the strength of a trend.

The stability mechanism of SBD is further supported by a decentralized price feed. This feed is managed by the network's elected witnesses, who are responsible for providing the correct conversion rate between SBD and STEEM. This system allows for the necessary on-chain adjustments to manage SBD's supply and help it maintain its peg.

About Steem Backed Dollar (SBD)

Steem Backed Dollar (SBD) is a semi stable-value cryptocurrency asset issued on the Steem blockchain, designed to mitigate the price volatility inherent to its parent token, STEEM. The fundamental purpose of SBD is to serve as a reliable, non-volatile medium of exchange and reward mechanism within the Steem ecosystem, which is a social blockchain that incentivizes user-generated content and curation.

SBD's unique technical and economic model distinguishes it from other stablecoins. Instead of being collateralized by fiat currency or other cryptocurrencies in a centralized reserve, SBD maintains its "soft-peg" to the USD through a sophisticated, decentralized, on-chain mechanism. This mechanism hinges on a convertible relationship between SBD and STEEM.

Here's how it works:

When the market price of SBD deviates lower from its target of $1 USD, the Steem blockchain's consensus algorithm, Delegated Proof-of-Stake (DPoS), adjusts its behavior. If SBD's price falls below $1, the network reduces the creation of new SBD and incentivizes users to convert their SBD into STEEM. This conversion process, which is a one-way transaction from SBD to STEEM, effectively "burns" the SBD, reducing its supply and, in theory, pushing its price back towards the peg.

Conversely, if SBD's price rises above $1, the system incentivizes users to create more SBD by rewarding content creators with a higher proportion of SBD in their payouts. This dynamic supply adjustment, combined with the arbitrage opportunities it creates, is intended to stabilize the token's value. The system is also governed by a decentralized price feed, maintained by the network's elected witnesses, which provides the conversion rate between SBD and STEEM. This architecture provides a unique, trust-minimized approach to semi-stablecoin functionality, intrinsically linking its stability to the health and activity of the underlying social network.

Disclaimer: This is not financial advice; the information is for education only, so consult a qualified professional before making decisions.

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1 SBD = $0.884 USDT - How it maintains a value close to the US dollar?steemCreated with Sketch.

About Steem Backed Dollar (SBD)

1 SBD = $0.884 USDT - How it maintains a value close to the US dollar?