Any attempt to stabilize Steem Dollars meant increasing volatility in Steem. Potential gains in Steem dollars must be transferred to Steem/Steem Power holders and potential losses must be transferred as well. There is an inherent link between the two where increased stability of SBD means increased volatility of Steem.
Ned Scott didn't like Steem Dollars, he had the above insight and was correct about it. He saw this undermining Steem, which he saw as the preferred currency long term.
The insight still applies to Hive and Hive Dollars. As we are currently seeing Hive Dollars stabilized, the DHF is converting HBD to create Hive, dump it and buy more HBD. We got the benefit of that in the bull market when we eliminated millions of Hive from the supply, but in order to maintain a HBD peg - and to profit from the market mispricing it, we must accept sharper drops in Hive price as well.
There is a consequence of this - Hive cannot be money, it can only be a form of equity in the system. If we focus on having a monetary instrument in Hive going forward - it must be HBD, not Hive.
I think a lot of this stuff goes over the heads of most users and I don't get it all. Having two tokens tends to cause confusion. People only care that they earn something that they can sell for fiat or whatever and that counts as money to them. Trying to maintain one at a fixed value means there has to be some manipulation going on, even if it's supposed to be automated. What would be the consequences of scrapping HBD?
In my opinion, there is vastly, vastly more for Hive to gain by successfully having a stablecoin than the costs. I would go so far as to say that scrapping it would be one of the stupidest things we could do.
In fact, greater volatility in Hive is itself a gain - higher volatility generally also means more profit. Volatility is only a big problem if you're trying to use it as money or if you have a short term outlook.
It's not just a stablecoin we are getting, but a basic DeFi implementation along with it.
I consider myself among those who don't really get it. I do, however, get "7% interest" and stablecoin. It makes me pause and think about where to park cash. In the long-run, it could potentially lead to a higher market cap for Hive thanks to people who may have no interest in the blogging or curation. In fact, some of the protections coded into Hive to protect against hostile investors may be a selling point for protecting your money.
Blurt tool the easy route getting rid of stablecoin. If we take the tough road I'd still say we might have something super unique. Stabelcoins have some of the biggest marketcaps and trading volume.
Equity in the system is going to have high volatility regardless, because that's what equity does. As economic conditions change and more importantly sentiment about future economic conditions changes, equity values fluctuate a lot.
Ned Scott may have been right about SBD increasing the volatility of Steem (although, I personally don't recall him saying this and I'm also quite sure that it was widely understood so even if he did, it wouldn't have been any great insight), but he was completely wrong about trying to combine a utility token with a currency.
He said in an interview that he thought Steem would be improved by simplifying the token system by having fewer tokens, and threw out the idea of removing SBD. Afterwards in the comment section he made the point above that the existence of SBD inherently made Steem more volatile.
This is from my memory, I searched for the actual interview when I was writing my post but I haven't managed to find it yet.
The former I remember. The latter is entirely plausible, but was common knowledge. I'm pretty sure Dan Larimer posted about the same thing much earlier.
In any case, my main point, more relevant to the present, is that expecting an equity/utility token to function simultaneous as a currency is a bad idea. The two functions are fundamentally in conflict.
Yes, I'm totally in agreement with that. I think it was one of the major innovations of Steem at the time that was somewhat given up on, where the default among cryptos is to try and have one token that is simultaneously equity in the system while also being day to day currency and/or store of value.