I could do that, I’d just like to read more about the arguments for keeping it at exactly 20% and to find convincing arguments
When I lowered to 16% I felt like the arguments for lowering a little bit were stronger (as the whole world is lowering interest rates and 16% felt still high and competitive, among the highest available in DeFi but not too much high)
I could raise it back to 20% but I’d need to read and understand the arguments for it so that I myself feel convinced but also that I can take the arguments as mine to explain to others of why 20%
@edicted wrote great posts about why 20% make sense.
I have read those posts back then and have read his comment now connecting the arguments to each other, makes sense
All the on-chain data suggests that 20% is appropriate.
Simply the fact that we got through an entire bear market without the debt ratio going up is evidence enough of that. Hive (the collateral for the HBD debt) dipped over 90% from peak but our debt ratio has been in the 5%-7% range the entire time.
The main reason to support 20% is that 20% creates a flywheel that will almost certainly create more than 20% growth in demand for HBD. This means that we can basically offer 20% for free because the demand to actually hold the debt will go up by more than 20% year over year. In crypto, 20% is actually a very small growth target as coins like Bitcoin can do 70%-100% per year.
There is a very real chance that stabilizing yield to 20% creates a kind of stability and trustworthiness that doesn't actually drain the network of any value but rather adds value to it.
We can think of high APR on HBD as "going long" on Hive while low APR on HBD is "going short" and "paying back the debt" by removing incentive to hold that debt. Once Hive is over $1 I might advocate reducing the yield. Once Hive is $2+ it would be very appropriate to lower it so that we have room to increase it again later during harder times. This is the network equivalent of buying low and selling high. High APR when Hive needs to buy low and low APR when Hive needs to sell high.
The idea of high interest being analogue to going long on HIVE makes sense in my head. I am in for stability then, since the debt indeed did not go up showing 20% is affordable.
I have read your posts about that but reading it succinctly like this makes the arguments easily connect to each other.
Yeah I thought it might help to shorten the points.
Those are the main ones.
Another one would be USD is being devalued by inflation every year.
Which is also a huge factor when inflation is high.
If the cost to pay back the debt goes down because USD is worth less this also makes the position more sustainable.