Law of Supply and Demand Definition and Explanation OR Why the @sbdpotato experiment just won't work


Related Article and Relevant Article

OK, this one goes to those involved on the discussions related to the @sbdpotato project. Just as a way to try to keep the discussion going (It's an interesting one, and i think an important topic to be discussed), i am going to tag here whoever i had interactions related to this subject.

So, please, @acidyo, @smooth, @cardboard, @justineh, @epic-fail, @lordbutterfly, @steevc, @thecriptodrive, let's keep this talk going.

(And BTW, please don't mind if i get exalted on some writings. It's just the way a write when is something i get interested in, and it's nothing personal. If i somehow offended any of you, please accept my apologies)

I think that, altough there is probably good intentions behind all of this, i don't think this was actually thought through.

To me, the whole concept is ignoring well proven economic laws, and it's effects could be even more damaging to the Steem ecosystem than it seems at first.

The first problem i already discussed somewhere is that this project is trying to create an fake demand.

The main idea that i bring from this article i linked is this (about the law of demand):

The amount of a good that buyers purchase at a higher price is less because as the price of a good goes up, so does the opportunity cost of buying that good. As a result, people will naturally avoid buying a product that will force them to forgo the consumption of something else they value more.

The basic reason people aren't buying SBD is that right now, the price is too high.

Yes. Your read it right. It is too high.

The point is, SBD don't have enough value when compared with any other similar assets.

Some examples:

  • If you buy STEEM, you get value of your increased influence on the STEEM blockchain
  • If you buy EOS, you get value on being able to do more free transactions on the EOS blockchain
  • If you buy BTC, you get value because you can use it to buy a lot of different stuff
  • If you buy ETH, you can pay to do transaction on the Etheretum network
  • If you buy BAT, you can use it to pay for directed ads to those that use Brave browser.

In the end, all this "idea" of @sbdpotato is null, because it is trying to virtually increase the demand of something that doesn't have any demand.

On the other side of the Supply and Demand law, we have this:

But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.

If, eventually, the "experiment" have some actual effect on the price, before it goes back to 1 USD, two factors will take place:

1 - The debt ratio will decrease, therefore, more SBD will be printed as programmed by the blockchain and enter the system again.

2 - A lot of people that is holding SBD will start to sell it, because it will be an opportunity to reduce losses, and in some cases, realize profits.

The result of this is that the supply will increase again, forcing the SBD price to go down again.

This is the economics 101 i wrote about somewhere on the comments.

In the end, artificially decreasing supply on the market won't have any long term effect, because the majority of people in the world won't see a good reason to spend money on SBD, and will be more willing to spend it on other similar asset that have more actual value.

As a closure, here is another quote from the article:

Factors Affecting Demand

The number of available substitutes, consumer preferences, and the shifts in the price of complementary products affect demand. For example, if the price of video game consoles drops, the demand for games for that console may increase as more people buy the console and want games for it.

My opinion here is that @sbdpotato and everyone supporting it is directing energy (and money) to something that won't work.

Unless the end game here is to make just a long term pump and dump scheme. But that is another topic i will talk about in the future.