Towards a truly stable and free SBD: reflections for the Steem community

_{Edited by @kouba01 using Photofilter}

Hello Steemians,

Bruce Fenton, who is known to many in cryptoland for a long time, also recently shared it on X, and I think this could be relevant to the argument around SBD:

_{Bruce Fenton X post}

These remarks serve as a reminder to anyone curious about the future of cryptocurrencies that the original goal of this sector was to develop new forms of money that were unaffected by censorship, uncontrolled by the government and usable under arbitrary circumstances rather than to replicate the current financial system on a blockchain.

Yet, the current reality of the most well-known stablecoins, such as USDT or USDC, is far removed from this vision. These tokens are backed by fiat currencies, stored in banks subject to national regulations, sometimes frozen at the simple request of an authority, and are therefore vulnerable to all the control mechanisms that decentralization was supposed to overcome.

In this context, the SBD (Steem Backed Dollar) occupies a unique and promising position. It is issued directly on the Steem blockchain, without dependence on a bank, and its operation is based on a STEEM-backed debt mechanism and community governance via the SPS. In other words, the SBD could embody what Bruce Fenton describes: a digital currency that is stable, free, and fully controlled by its users.

However, for the SBD to effectively carry out this function, it must be able to accomplish a straightforward yet essential goal with maintaining believable stability around USD 1, but, recent history has shown that the SBD is prone to significant fluctuations, sometimes doubling or doubling in size depending on market conditions and speculative activity. This volatility hinders its widespread use for payments and microtransactions because no content creator or merchant wants to receive a currency whose actual value could drop or rise in a matter of days.

This is where the crucial issue of SBD stabilization comes in.

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The Strategic Benefits of SBD Stabilization

Economically and symbolically, stabilizing the SBD would have significant advantages for the whole Steem ecosystem.

First, if one SBD is regularly valued at about USD 1, content producers, retailers, and platforms that have integrated Steem could use it as a dependable payment method, this predictability is crucial for any digital economy that wants to transcend purely speculative trading.

Second, this stability would encourage the development of an internal economy on Steem. Microservices, tips, subscriptions, or sales of premium content could be conducted in SBD without fear of immediate speculative loss or gain, which would encourage real and regular use.

Third, the Steem Proposal System (SPS) might make money with a well-thought-out stabilization mechanism. The stabilizer could profit from buying low and selling high by taking advantage of market fluctuations, the profits would then be given back to the DAO, stabilization would therefore produce a positive feedback loop with greater trust in SBD, higher usage and more money to support other neighborhood initiatives.

Finally, reducing extreme fluctuations would limit the paralyzing effect of speculation. Currently, when SBD rises to $3 or falls to $0.5, the internal economy freezes as users hesitate to spend or accept payments. Stability would provide the peace of mind necessary for the regular and natural use of our stablecoin.

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Limitations and Technical Challenges

Stabilizing the SBD is not a simple process, and several obstacles must be anticipated.

The first limitation is the relatively low liquidity of the SBD/STEEM market. Effectively intervening on the price requires a sufficient volume of funds to influence supply and demand without causing excessive mismatches.

The second limitation concerns the necessary budget, for a stabilizer to work, it must have an initial capital in SBD and STEEM in order to buy when the price is low and sell when it is high, this budget temporarily ties up funds from the SPS, which requires clear approval from the community.

Finally, the technical complexity should not be underestimated, developing a bot capable of monitoring the market, executing orders quickly, managing conversions and securing funds requires advanced skills, multi-signature management and regular audits are essential to minimize the risks of loss or hacking.

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Risks to consider

Even with a well-thought-out strategy, several risks must be clearly identified.

There is a risk of market manipulation, the presence of a visible stabilizer may encourage external traders to speculate against it in an attempt to force it to sell at a loss.

Another risk is extreme market conditions, where if the value of STEEM drops sharply or confidence in SBD disappears, even a well-funded stabilization mechanism may be insufficient to maintain parity.

Finally, there is a risk of temporary losses for the SPS, the funds used to stabilize the market may be exposed to adverse movements. Therefore, prudent management and a limited testing phase are essential before scaling up the scheme.

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A phased and community-driven approach

A phased approach is advised in order to proceed without jeopardizing community resources.

To test the strategy, a pilot phase could be started with a small initial budget, like 100,000 SBD. When the price drops below USD 0.98, the stabilizer would purchase SBD and when it rises above USD 1.02, it would sell. To guarantee complete transparency, thorough weekly reports would be released, and any profits would be fully returned to the SPS.

Simultaneously, the community could offer an open simulation tool that would enable everyone to test various parameters (budget, price thresholds, market volumes) and comprehend the possible effects on the SBD's stability and anticipated profits.

Finally, a structured public discussion would allow for the collection of opinions from moderators, developers, and active users on key points:

• The initial budget to be allocated
• The thresholds for triggering interventions
• Security and transparency requirements
• The duration of the testing phase before full deployment

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Conclusion and call for participation

The SBD's stabilization offers us the chance to make our stablecoin a genuine, free, decentralized, and trustworthy medium of exchange. In keeping with Bruce Fenton's vision and the cypherpunks' ethos, this project has the potential to improve Steem's internal economy, increase user trust, and bring in money for the SPS.

However, the success of this project will depend on collective mobilization, impeccable technical management, a strategy of transparency, and a phased approach beginning with a secure and limited pilot.

The question now lies with you:

• Do you want to launch this experiment?
• What parameters do you consider most relevant?
• Would you be willing to participate in the technical guidance or supervision of this project?

IMPORTANT NOTE : resteem and Tag 3 friends

The future of the SBD may well depend on the decisions we make together.

Cc- @steemcurator01 @steem.dao @futureshock @symbionts

Best Regards,
@kouba01