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#### RE: HBD savings is paying 10%

in #hbd2 months ago

now we need to get rid of the 5% converting fee and we can expand massively on HBD.

I don't know how to tell if that is a good idea.

I think that the conversion fee is superfluous. The interest paid on HBD savings could be a factor that drives demand for Hive but the 5% fee effectively cuts into the APR right off the bat. There is already an inherent risk that the conversion will result in receiving less HBD per hive due to the 3.5-day delay in completing the operation (compared to the market rate).

Also, if the conversion operation uses the lowest price from the feed as initially proposed by @blocktrades (instead of the median), we have another hidden cost under certain market conditions. But I am not sure if that logic was left in the code.

the 5% fee effectively cuts into the APR right off the bat

It cuts into the APR if you use the conversion operation, but in practice you can buy from the market and not pay the fee (or even buy at <\$1 which is effectively a negative fee). We have no experience seeing sustained market conditions where the price remains at or even near 1.05, so it would be rare for anyone to be paying the fee. The only time it happens is if and when the price of HBD goes above 1.05, in which case you can make an immediate profit by selling it (clearly worth paying the fee).

There is already an inherent risk that the conversion will result in receiving less HBD per hive due to the 3.5-day delay in completing the operation

I guess it's a risk strictly speaking, but you can also receive more.

if the conversion operation uses the lowest price from the feed as initially proposed by @blocktrades (instead of the median)

It uses the median. The lowest price is only used to determine the excess collateral needed for the 3.5 day loan (it is a loan because the HBD is delivered immediately even though the rate is determined and the actual conversion can be said to occur after 3.5 days).

2 months ago (edited)

It uses the median. The lowest price is only used to determine the excess collateral needed for the 3.5 day loan (it is a loan because the HBD is delivered immediately even though the rate is determined and the actual conversion can be said to occur after 3.5 days).

I misunderstood the mechanics of the conversion process. If we view it as a loan instead, then a fee is justified. I still think that it is a bit high (~2 percent would be better in my view), but that is just my opinion.

I would like to see both conversion operations shifted down by half the fee (i.e. convert HBD to HIVE at 97.5 and convert HIVE to HBD at 1.025) which would make the fee 2.5% in effect. But it could be that the total fee should also be smaller (say 1% on each side). In any case I think we should assess for a while before making any changes.