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RE: How to Reduce Hive's Inflation Problem - Our New DHF Proposal Voting Criteria, HBD APR, and a Proposed Value Plan S.O.P

in #dhf • 3 months ago

A drastic lowering of HBD APR at this time may have unintended consequences. It may be highly inflationary. Hive stakeholders do not want HBD being converted during bear market, this is highly inflationary.

Buyers of HBD are compensated for risk with high APR when staking. Risk with HBD relates to the debt ratio, it is higher when debt ratio is high and lower when debt ratio is low.

Sound monetary policy for HBD would be commensurate with risk AND relate to the ideal outcome for stakeholders:

  1. HBD should be converted when Hive price is high, reducing long term inflation. Therefore APR should be lower during bull market.
  2. HBD is less risky when debt ratio is low. Therefore APR should be lower during bull market when debt ratio is typically lower.
  3. HBD should not be converted when Hive price is low. Therefore APR should be higher when Hive price is low to avoid conversions and high inflation.
  4. HBD should compensate for higher risk duing bear market. Therefore APR should be higher during bear market.

Hive witnesses have taken "stability" approach, which is poor economic policy for HBD. The price of HBD should be stable, APR does not need to be. While HBD savings is not the main driver of inflation at the moment, it can contribute to it in the long run. Drastic reduction of APR at this moment is likely to lead to HBD stakers selling and as a consequence, HBD being converted in larger amounts, leading to immediate high inflation.

3 months ago in #dhf by
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     3 months ago (edited) 

    Some great points here!
    We think that it’s starting to look risky to hold HBD here due to looming haircut and so a bunch of conversions will likely happen regardless of the HBD APR. we also don’t think that the APR will get down to 6% anytime soon, but it is starting to become a major factor in inflation another 2 cents Lower from here and it will become significant. Maybe it will work out that as we move back into a bull, the HBD APR will be slowly decreasing as you say it should be above (which we would also like to see).

    Respect and value ur opinion as always Demotruck. Appreciate the comment

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