Q: What would be the actual reward payouts? Only SP? How much?
A: Steem and SP at a 50% split
Q:How would you convert current users' SBD into Steem / SP?
A: There is a conversion feature on chain that converts sbd to steem
Q:What would be used as liquid asset between accounts? Currently, SBD is mostly used for that (e.g. to pay bots) because the opportunity cost is smaller than with Steem (which you'd ideally like to have powered up)
A:Steem would be used as a liquid asset, bots already take steem and so do eCommerce solutions. Steem can do what sbd does and more.
Also the hitbtc had a huge impact on the market because it changed the avg on sbd for people who were using apis to track the price and in turn they got taken for more than a couple of percent. The sbd market is so dead that it was easy to play with on hitbtc where they have low volume.
Thx, but still this doesn't look like a solution - there is strong incentive for users to stake (power up) Steem to get an ROI which reduces the velocity of Steem. As a means of value transfer it's therefore not the ideal candidate. Why try to ignore that and use Steem for that anyway, if you can just use a second token with a high velocity?
It still seems that simply the wrong price oracle was being used. If you want a good benchmark, use the price of the most liquid market.
That said, I'm not sure whether there actually are markets which are liquid enough. @blocktrades and the built-in Steemit market seem like good candidates, but to me this is a market discussion, not a protocol one.