What is HBD? AKA: currently free money! (AAKA: Don't be the bagholder....)

in LeoFinance6 months ago (edited)

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EDIT: I forgot to mention something that I took for granted, but should mention just in case. The HBD/BTC pair on Bittrex has a minimum trade order size of 50k satoshi (0.0005BTC).

With all the talk from the more influential accounts about HBD breaking the peg in a big way and the various attempts to fix it, I think we are missing an opportunity to harness the many smaller accounts that don't know what is going on. Those who are earning and holding HBD but don't know what to do with it. I don't know if this is going to be a useful thing for actually nudging HBD back to the peg, but education and knowledge is always a good thing!

I have learnt that what is bleedingly obvious to one person is not quite so clear for another... especially in the field of crypto. I have written educational articles about crypto for Binance, and helped field questions in their channels as well. It is all too clear that much of what we crypto-nerds take for granted is REALLY NOT OBVIOUS!

So, a quick look around people's wallets... I see some HBD being earned and just sitting there. I don't have hard numbers about how much this is, but the sheer fact that people have no idea what to do with it is quite telling. What people might not realise, is the fact that they are sitting on easy money... (and the ability to add their own little push to help get HBD back to the peg).

All examples use the awesome Peakd interface for HIVE. I suggest that you start using that, it is a better alternative to the vanilla hive.blog front-end which is lacking some of the features that I am going to talk about.

What is HBD?

Hive Backed Dollars (HBD) is an attempt to have a token that is backed by HIVE and pegged to 1 USD. HIVE is the fluctuating asset that you can trade on most exchanges, but HBD is generally not accepted (notable exception of Bittrex).

The HBD token represents a claim on 1 USD worth of HIVE. NOT 1 HIVE! Only 1 USD worth of HIVE at the time of conversion.

This is much like the way DAI works with ETH, 1 DAI represents a claim on 1 USD worth of ETH. It is a way of generating stability in an otherwise volatile market (although, I'm more partial to the recent FEI attempt. DAI works pretty well, because people use it like it supposed to... if it tracks off peg, then people know to grab that tasty arbitrage! But in the Ethereum ecosystem, we are dealing with crypto-nerds... here on HIVE, most of us aren't that sort of person! We just like writing and sharing blog stuff!

Screenshot 2021-04-01 12.41.55.png

The claim for HBD is done via the "convert" function from your wallet. It is on the drop-down menu of HBD when using the Peakd interface. Converting will redeem your HBD over 3.5 days into HIVE.

What was HBD worth again? 1 USD of HIVE!

So, this is the option that you want to use when HBD is worth LESS than 1 USD! As an example, if I buy 1 HBD for 0.5 dollars but it is worth 1 USD of HIVE... I have twice as much HIVE in USD terms. FREE MONEY (in USD...).

But HBD is over 2 dollars!

Yes yes... and what is HBD worth again? 1 USD of HIVE. Someone is going to get a very very very rude shock! Try not to let that person be you!

Currently, if you are holding HBD for whatever reason (you don't know how to exchange it or the exchange you use only takes HIVE), you are a sitting on free money! However, it is not obvious to everyone how to get from HBD to HIVE.

Screenshot 2021-04-01 12.55.08.png

You can sell HBD for Hive on the internal market (click market from Hive or HBD, should send you to hivewallet). There, the relative prices of HBD and HIVE are pretty much priced in. When you click Maret (on Peakd!), you will be taken to the native hivewallet interface (you will need your HIVE name and active (wallet) key for trading here!).

Making up numbers for example:

On external markets let's say HIVE~0.5 USD, and HBD is 2 dollars. On the internal market, you will be able to buy HIVE for around 0.25 HBD/HIVE, which nets you 2x the amount of HIVE that you would get compared to "conversion" (the redeeming of 1 HBD for 1 dollar of hive). You can then send that HIVE to an exchange of your choice and sell it for the "external" price of 0.5 USD/HIVE.

Or Bittrex has a HBD/BTC listed, and then you can sell it directly at the inflated price into Bitcoin.

Current example:

Screenshot 2021-03-31 23.09.04.png

1 HBD converted (redeemed) for 1 dollar of HIVE would be around 1/0.724 = 1.(something) HIVE...

Screenshot 2021-03-31 23.09.02.png

On the internal market, 1 HBD is 2.5(something) HIVE.

How much is HBD worth?

1 USD worth of HIVE.

Of course, irrationality might still prevail and the peg will drift further... but at some point (hopefully...) people will start to realise that they are bagholders of a 1 dollar redemption! Don't be the last to realise, cash in that sweet free money and don't be the dupe that is holding the bag at the end!

If you want to play games with HBD in the hopes that it will go further up, know that you are playing with fire! At some point, lots of people will realise that it only represents 1 USD of HIVE... and it will make no sense to pay anything other than 1 USD (or less!) for it!

So, now you know how to change your HBD to HIVE!

How Much is HBD worth again?

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Nice write up Bengy. I'd like to add a little something. I've been kicked out of both Binance and a Bittrex since returning to the states. KuCoin still operates fine for me without divulging KYC.

Ouch... Unfortunately, Kucoin hasn't listed HIVE!

Oh for sure, it's rough. Blocktrades to the rescue!

Never sat and gone through HBD thoroughly, this opened my eyes that I most probably have looked at a thousand times. Sometimes setting it out differently with "new eyes" assists, which you have done, thanks @bengy

@tipu curate

Glad to have helped out. Of course, there is a bit more complexity to it, as the concept of 1 USD of HIVE varies depending on if you are denominating in USD or HIVE or something else!

Thanks for the curation and support!

Have been, and will be reading more into this once I have some spare time.

At the end of the day each crypto should have a project you support with return going into future.

Thanks for concise reasoning, it covered some bases I had been meaning to get to look into.

Happy Easter to you and your family.

Am learning, thanks for sharing

Glad to help! Please teach your friends as well!

Thanks for the information . I will have to get somebody hive with my remaining hbd soon then .

Thank you

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Glad to have informed! Teach another person!

Thanks I’ll surely do.

Those who are earning and holding HBD but don't know what to do with it.

this is exactly my case! I just convert it to Hive... or earn 100% rewards, most of the times. it is not the best scenario, right?

Not really. With the conversion, you are opting for the 1:1 when the internal market will give a much better rate! If you are denominating (maximising) for HIVE, you are missing out!

so you helped more than one person to open the eyes wider :=)

😁 😇

Greetings, excellent friend, the information that is, you recommend then to change the HBD for Hive in the domestic market so that the currency of hive stabilizes

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At the moment, HBD is trading at well above what its intrisic worth is. Its intrinsic worth (1 USD) can not really be anything else due to the claim function. I would consider it foolish to pay more than 1USD for 1 HBD!

If you are right

Thanks for the lessons!

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My pleasure, teach your friends so that they understand as well!

I will, I reblogged your post if I remember correctly 🙂

Other - non hive - articles I read but also on hive some say that SBD (and therefore neither HBD) are NOT really pegged meaning that there is no asset of the same dollar-value. I still find it difficult to understand who guarantees the 1 USD worth of Hive.

The conversion function is the guarantee, it is the only use case for Hbd. Much in the same way that DAI is pegged by the ability to redeem for ETH via smart contract.

Granted, it isn't a hard peg (hence the deviation), but other than the redemption ability it has no instrnsic value. Long term, it has either value of 0 or 1 Usd.

Wow. years ive been on the blockchain and ALWAYS wondered what the exact guarantee is thank you for putting it so brilliantly!

My pleasure, and glad it clarified things for you!

Of course, it is only so simple if you are denominated in USDT or other currencies like BTC (selling to other fiat/crypto immediately). If you are going to denominate in HIVE instead, then there is a different layer of WHEN you will try and game the conversion/exchange for maximum HIVE. But that is much trickier, and the market will swing this way and that whilst you are trying to time it!

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Greetings, excellent friend, the information that is, you recommend then to change the HBD for Hive in the domestic market so that the currency of hive stabilizes

so you can crosspost ? i see its posted using leo

I'm sorry, I don't understand. Leofinance is a front end for hive with its own token (Leo) as well. No crossposting, it is the same post.

oh. i see thanks for the clarification.. i was not aware of that...

No problem, it is a completely different way of seeing things compared to the current internet interface.