As you know, the Hive-Backed Dollar (HBD) is pegged to the US dollar, and while this seems pretty good, there are some downsides to pegging to a fiat currency. One of the more obvious ones is that when the US dollar loses its purchasing power, so does HBD. Even though HBD is supposed to be its own separate currency, it is essentially based on the performance of the US dollar and on the various political and economic decisions in the U.S.
Pegging HBD to the most-performant asset from a group of assets
Is there an alternative? There have been various lines of thinking over the years about what a stablecoin could be pegged to. An idea mentioned sometimes is that a stablecoin could be pegged to the average price of a group of assets.
I would like to propose for discussion that HBD can be based on the best-performing asset from a group of assets. "Best-performing" here means that at one point in time HBD can be pegged to one asset and at another point in time it can automatically be pegged to a different asset that is performing better.
This group of assets could include fiat currencies, precious metals, other metals or materials widely used in industry, base agricultural products, and more.
How it could work
Although it sounds advanced, this might not be super difficult to implement. We can expand upon the success of the hbdstabilizer which has been instrumental in keeping the peg to the US dollar.
Such an expanded hbdstabilizer can compare all assets from the group against each other and determine which one is performing the best. It can make this comparison at any frequency desired. It would then act to peg HBD to that asset.
As an example, let's say that the US dollar is down 2%, whereas gold has remained at the same level. It would compare the price of HBD against that of gold and take action to peg it to gold so that 1 HBD buys the same amount of gold.
To take another example, say the US dollar is up by 2%, whereas gold again has remained at the same level. It would then check all assets against each other and if the US dollar is the best-performing, it would peg HBD to the USD so that 1 HBD buys 1 USD.
Pegging on the upward side (when in the past due to speculation some people have pushed the price of HBD to above 1 USD) can be done similar to now - both the hbdstabilizer and the blockchain's HIVE->HBD conversion could work with a peg different than the USD.
In this simplistic theory, this amounts to hedging against inflation. HBD becomes an asset that always appreciates compared to the other assets in the group. Of course, the real world works in more complex ways and it would be good to have more thoughts and expert opinion on this idea.
It's not the technical implementation but the community embracement
My overall feeling is that this will only work if the community at large embraces it. After all, an asset is worth what someone is willing to give you in return for it. If people are willing to sell you 1 HBD for 1 USD, even though the price of USD has gone down, then they are pushing the peg towards the USD. If, on the other hand, they are not willing to sell you 1 HBD for 1 USD because they know the USD's price has done down, then they are helping keep the peg to a more performant asset.
Making an experiment
If there is interest in this, an experiment could be set up to do some testing of the idea. One way would be to create a token and apply the idea to it. Another way would be to take a little bit of HBD and do an experiment with that.
Either way, let's see what people think.
(Btw, if you'd like to help support me do more developments on Hive, you can vote for me as a witness.)
HBD is not a reserve currency. It is a pegged currency and it is a debt. You could say HBD or dollar losing value is a good thing for Hive as it means lower debt. Imagine pegging HBD to BTC instead of dollar. Hive would be screwed trying to pay back that debt.
I guess it depends on how it is implemented. Right now, the blockchain itself only promises you $1 worth of HIVE for every HBD you hold (through the HBD->HIVE conversion), and this is only if the debt limit is not reached. So if right now the hbdstabilizer were able to magically peg HBD to BTC, the debt on Hive would not change as the blockchain would still only promise you $1 worth of HIVE. But you would be stupid to use the blockchain since you could sell your HBD on the market for a much higher price.
Using the hbdstabilizer approach nudges the HBD market price to the desired peg. When the hbdstabilizer started operating and it moved the price of HBD from $0.95-ish to $1.00, this didn't affect the debt, as far as I am aware. It only made it so that you could sell your HBD on the market. I think what matters for the debt is how much HBD is in existence since the blockchain considers HBD to be a fixed $1.00. Arguably, if the HBD price is higher, there would be less HBD in existence, so less debt.
Having a stable HBD price, pegged to the USD, has been quite useful. I guess the question here is whether it would also be useful to have something that hedges against inflation. A place where people would want to put their money in, which at the same time has all the features that crypto offers.
Many stablecoins offer yields, and perhaps a difference here is that you don't get a yield (additional printing = debt), you get a higher market price.
The main risks would probably be that the market cannot support the price if people start selling, so there would be a price collapse down to $1.00. At that point, people could use the HBD->HIVE conversion, subject to the debt limits. (Also, the market would be able to absorb a bit of selling via hbdstabilizer bots and people would be able to sell like they do now, as long as they are patient and wait for the bots to nudge the price. But don't know how scalable this approach is.)
I'm definitely not an expert on any of this, I'm just putting it out there for discussion. Maybe there's something in all of this that could lead to a useful feature. The main thing on my mind is that if capital flows into the ecosystem, it seems useful to preserve it. HBD has proven that concept, don't know if it can be expanded upon.
The only thing informing the peg currently is the witness price feed. If all of them decided to peg it on a basket, or the DJIA... they'd only have to update their price feed.
If half of them decided to do it, the peg would be halfway between the dollar and the basket.
I'm not suggesting it should be done that way, though. It can be something more like building upon what is currently working successfully rather than modifying it.
The stabilizer doesn't have infinite funds. The peg for HBD comes from the witness price feeds, then the stabilizer arbitrages the chain value(price feed) to market value; often earning a bit.