Often when we look at a problem we may come up with an answer that on the surface seems perfect. However those first instincts that we get are often wrong. There are more posts this week talking about the HBD Stabiliser Fund, a project that is actively trying to devalue the Hive Dollar every time it goes over $1, and yes, that is as crazy as it sounds.
The idea is that it will attract investors who understand the value of a stable coin, the idea is that they'll use HBD to store value and when they are ready to trade they'll sell their HBD and off they go.
However there are two main flaws in this plan:
HBD isn't pegged by any real system apart from a bunch of devs dumping a bunch of HBD when it goes over a dollar and (I suppose) buying a bunch when it goes under that price. Therefore no exchange will ever list HBD as a stable coin.
You can already buy Hive using USDT a real tether coin whose buyers know that it will not fluctuate by more than 2% making HBD laughable to anyone who buys tether.
Original vs Best
One of the very weak arguments for Hive Dollar is that it was the original plan for the coin. Which as I say is a weak argument, by analogy I wanted to be a surfer when I was six, that was my original plan. However I discovered I didn't like deep water and wasn't a particularly good swimmer. If I had the same attitude as the HBD Stabiliser Brigade, then I would just plough ahead and try and be a surfer even if I almost drowned every time I went into the water!
A New Map
You may or may not have heard of derivatives, originally they were used in currency trading but have now expanded out to other regulated areas. In brief, the function of a derivative is to give a price insurance to the buyer.
For example; imagine you are the owner of a company that sells products in a number of countries apart from your own. So let's say you live in the United States and you sell to Germany, France, Japan and South Korea. When you sell a product in the US your price is $100 and when you sell in the other countries your aim is to get $100, but of course those countries have three different currencies between them, the Euro, the Yen and the Won.
What you are not interested in doing, is speculating on the daily fluctuations of currency, because if you sell something in Germany and whilst you are selling it the Dollar falls against the Euro then you will lose money, because what was $100 worth of Euros has gone down and you have lost money simply because the value of the Euro changed.
So how do you protect yourself? Well, you go to a merchant bank and open a derivatives account, whereby the value of the currencies you are trading in remain fixed. So if you sell your product on a Monday for €70 and that is worth $100, then you enter the market at that rate and even if by Friday the Euro rises against the dollar and €70 is now only worth $90, it doesn't matter to you because you will still get the $100 you want. Obviously this works both ways, if the value goes the other way and your seventy euros is suddenly worth $110 you still only get your original hundred dollars.
The HBD Derivative
Rather than create another stable coin, especially one that isn't stable, why don't we work towards turning HBD into a derivative coin? This could work through the wallet, whereby there would be two components to it. The first could use the 'savings' function of the wallet, whereby you lock in whatever value you purchased your HBD at, the second would be where you held liquid Hive Dollar and were exposed to its fluctuations.
The Best Of Both Worlds
This would give us a 'have-your-cake-and-eat-it' scenario, whereby we give people the option of a stabilised coin at a fixed price, and a coin that can be used for liquidity and speculation, that rises and falls like other coins.
A Time For Change
Of course I'm not a software developer or a blockchain coder, I tried to be for a while but coding just isn't for me and there is no point banging your head against a brick wall trying to make something happen when it clearly is not going to (rather like HBD!). So I'm hoping that one of you Hive devs sees this and thinks; "Yeah, that's a good idea and it would only take XYZ implementation to make it work! Let's do it!" Or something along those lines.
If this happens, I see this as the kind of bold statement that will put HBD on the map, because rather than try and pointlessly copy USDT which to me is like trying to copy an Olympic sprinter when you have short legs and are overweight, I mean, sure, you'll both be running... Let's instead turn HBD into a coin that the market hasn't seen before, which will bring investors to Hive in their droves.
WHAT DO YOU THINK? ARE THERE OTHER WAYS TO LOOK AT HBD? IS TURNING IT INTO A DERIVATIVE COIN A GOOD IDEA? OR SHOULD WE KEEP ON BANGING OUR HEADS AGAINST THE WALL TRYING TO MAKE IT FUNCTION LIKE A STABLE COIN?
AS EVER, LET ME KNOW BELOW!
Derivatives Explained - Investopedia
Photo by Tech Daily on Unsplash
Cryptogee
Fuck! This idea struck me like lightning! What a great idea. I don't know about implementation too, but it really seems like a big time game changing idea if it can be pulled off. It would also put hive on the map like you said. Incredible!
I think this idea makes far more sense than intentionally trying to devalue our own coin.
No one is trying to devalue "our" coin. HBD is worth one USD's worth of hive (see my top comment for how that works). The HBD stabilizer is mearly taking advantage of the fact that speculators are trading it above its underlying value. In the process it reduces the circulating supply of Hive (the opposite of devaluing "our" coin) and it increases the treasury of the DHF which is used to fund improvement proposals for the ecosystem.
Yup, let's hope sense is seen, but I doubt it.
Well why are there umpteen posts telling us how the Stabiliser Fund is trying to bring the price of HBD back down to $1?
You can wrap up the facts in as much technical hard-to-understand language as you like, but the perception when an average user reads a post about how HBD is higher than $1 and what is being done to bring it down, is that you are trying to devalue it.
So whose fault is that? Is it the people receiving the message, or the ones giving it?
I know the answer, but I'll let you reflect on that one.
Cg
The type of derivatives that you are describing are called futures contracts. In fact, HBD is a derivative of sorts.
When you buy HBD you are guaranteed to receive one US dollar's worth of Hive from the blockchain 3.5 days after you initiate a conversion as long as the debt ratio of HBD against the virtual supply is equal to or less than 10%.
The conversion is done at the price feed at the moment it finalizes and since the later is determined by calculating the median of the last 3.5 days it always lags the market. That lag can either be a benefit or a detriment depending on what direction the price of Hive is moving.
I am not sure what improvement(s) your proposal introduces to the current economics of HBD.
When you say "initiate a conversion", what exactly do you mean? Do you mean sell HBD for HIve?
Also what is a virtual supply?
The improvement comes from stopping things like HBD stabiliser fund and various people trying to drive the price down when it goes up. This way devs whom claim to want a stable HBD price in order to plan site improvements etc. can have that, and then the rest of us whom want a high HBD price can also benefit from that.
If that really was the case, you wouldn't have people actively trying to drive the price down.
Me too! I doubt it though. Good ideas tend to die around here.
Cg
No, I don't mean to "sell" HBD I mean to initiate a conversion operation. @timcliff has a great post that he published some time ago where he explained how SBD works (that post applies to HBD also). Here is an excerpt:
In other words, the conversion operation can be thought of as the HBD holders acting to enforce the "contract" that guarranties that their hive dollars are worth one USD.
The virtual supply is what the actual supply of Hive would be if the total HBD in existence is instantly converted to Hive via the conversion operation described above. It is also used to determine how many tokens are minted every block and to calculate the debt ratio (see Tim's post for a detailed explanations).
You are responding to someone else's comment, I have a good enough understanding of how derivatives work. HBD is a derivative because its value is backed by the virtual supply. If you subtract the current hive supply from the virtual supply you obtain the amount of hive tokens that are backing up the value of HBD at any given time.
That's a really interesting idea! I don't know much about derivatives or about the mechanism that stable coins use, but I hope this idea gains some traction.
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HBD already acts as a derivative (see my top comment to this post). I fail to see how this proposal improves on the current economics of the coin.
yeah, like I said, I don't know much about derivatives... The OP gave some small insight that surprised me... Hence the comment.
I should really put in more effort to learn these things :)
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