I think that one thing that many rebasing tokens have demonstrated is that when a rebasing token drops below its peg, it can trigger a downward spiral of token price, despite the rebasing mechanism, making it very difficult to get back to its peg.
There will always be short-term-timeline actors, but I think that with proper incentives, the subset of users that might panic sell during a negative rebase can be reduced.
Political arguments and theories aside, I think that one thing that many governments understand fairly well is that while you generally can’t force people into certain behavior, such as starting a business, if that’s the kind of thing you want to see, then you incentivize it (e.g., tax breaks, etc).
To that end if Digg falls below its peg, there are two behaviors, when taken together, bring the price back up to its peg: holding and buying. A negative rebase plays into this, because it affects liquidity for those looking to buy. I’m not sure about incentivizing buying. ESD and others offer bonds, which incentivize buying in the future, when ESD is above the dollar peg again. There’s some game theory behind their whole thing, but I’m not convinced that it works.
What can be incentivized fairly easily, of course, is holding. This already happens to a great extent, obviously, with emissions, rewards, etc. So, the mechanism is already understood, built, and in active use.
I don’t know what the right balance of numbers would be, but I think that if Digg rewards during a negative rebase were to actually increase, with maybe some sort of bonus reward if/when the peg is re-achieved, you might be able to decrease the number of people that panic sell when the price drops.
This kind of mechanism would require some pretty careful design, though, because it could open the thing up to abuse/manipulation. One potential solution to that would be to get liquidity to be so high that it’s just not worth the cost to deliberately manipulate the price. That’s of course easier said than done.
So, I don’t have any real, concrete answers, and my suggestion above for increasing Digg rewards during a negative rebase is just an idea. I’m sure much has been discussed about this already, and if I’m rehashing old and/or settled issues, I apologize. I’m curious to hear what thoughts others have to try to mitigate the risk of downward price spiral for Digg as seen with other rebasing tokens.