Why We Shouldn't Be Funding HBD Stabiliser - We've Got It The Wrong Way Round

in LeoFinance5 months ago

As a long term user of the Steem/Hive blockverse I feel that I can speak on this subject without fear of repercussion (I hope). I know that a lot of users feel this way, but because of the nature of our blockchain they are afraid to speak out against this madness.

First of all let me say, I do respect @timcliff and @smooth whom I've had various past debates with on this subject. As @timcliff himself intoned, it is often through disagreement a happy medium can be found in an organisation. So without further ado, let's look at why destabilising HBD is the crypto equivalent of shooting yourself in the foot.

What Is HBD Stabiliser?

I'm not going to go into the ins and outs of what the Stabiliser project is and does, lord knows there are already a plethora of near-identical posts that explain it all to well. Suffice to say, the HBD Stabiliser Fund sells its HBD rewards to buy Hive. With the purpose of stabilising HBD at a fixed price of $1 (US).

The Universe Is Talking

On the last post @timcliff made about the fund I wrote in the comments that I would love HBD to be $10, because why not? His reply was;

There is truth to this, but the same can be said about HIVE going to $10.00. HBD functioning as it is designed will also attract investors as well. There is a lot of value in stable-coins. Personally, I would like to see HIVE at $10.00+ and HBD sitting at $1.00.

To some extent I agree with that, it would be great to see a $10 Hive price, which would be great for content creators and investors alike. However there is a saying in business;

the market tells you what it wants, not the other way round.

You can clearly apply this philosophy to crypto. For instance, you may believe that EOS is way better than Ethereum and that it is more valuable, better, shinier than Ethereum. However the market shows you that you're wrong, Ether is worth over $2000 whilst EOS is barely $5. No matter how much you bemoan Ethereum's high gas prices and slow block times, the fact that the market is investing in the platform shows you one very important fact that you should not ignore.

YOU ARE WRONG!!

HBD & The Time Investors

By @timcliff's own admittance the people most keen to see HBD fall to a one dollar level are the ones whom have invested big in Hive. They have backed Hive with their hard earned cash and they want to see it go to the moon. There is clearly nothing wrong with this, if you buy something for investment purposes, then you are buying it because you are hoping to sell it for a profit at some time in the future.

However Hive in its current form creates a kind of oligopoly whereby the people who can afford to buy lots of Hive are the ones who can influence the platform the most. Whereas content creators who invest the time into the platform and get rewarded a pittance are at the mercy of the Hive Oligarchs, better known as Whales.

A thriving HBD price helps to redress this balance. Now, somebody like myself whom may take up to a week to publish a short story, can feel like they have been rewarded nicely for their efforts, which encourages them to put in more time.

What they do with their rewards is up to them of course, however someone earning 18 HBD when there's a high price, can think to themselves "okay, now it's worth investing some of this back into Hive so I can have a bigger vote and thus get more people to vote for me."

Ultimately I remember the year before when we were still Steemit, SBD was at $12 and everything was gravy. I used the extra money to run competition giveaways. The more I gave back to the community, the more my influence grew and it was great. Others decided to use the SBD to buy Steem which helped them get more influence and also noticed.

Shooting The Crypto Foot

The last and most obvious reason for not destabilising a strong HBD should be obvious to everyone, but it doesn't seem to be so I'll point out the elephant in the room.

Destabilising your own coin looks mad to the casual investor!!!

Too often on Hive, we behave as if we're in a bubble whereby the outside world cannot see us. But the fact is, this post that I'm doing now, will be indexed by Google and the other search engines, meaning that at some point, it could be found by a searcher whom has nothing whatsoever to do with Hive.

The same can be said for any article pertaining to destabilising HBD. To the casual observer it looks mad, why would anyone invest in a platform whereby its users are trying to make it worth less money?

You can talk about how you're trying to make one currency worth more, whilst making the other less till you're blue in the face. However to a casual just-came-across-your-site-whilst-browsing user, they will think to themselves "Hmm, that's mad, why would you do that? I'm not investing in these maniacs!"

Back To Front

Of course I'm being a bit glib and having a bit of a tongue-in-cheek poke at the HBD Stabiliser project and others like it, and I'm not saying that our own stable coin would be a bad idea. I just think that in reality the Hive Dollar could be so much more, as could Hive itself.

If we can create another utility for Hive and HBD perhaps in the NFT world, then we won't be worrying so much about whether HBD is stable or not, because we'll be sitting on a very valuable blockchain with two strong currencies. Perhaps with the nature of Hive, in that a lot of it is tied up within various Hive accounts, it is Hive that will turn out to be the stable coin whilst HBD is used in a much more fluid manner.

WHAT DO YOU THINK? IS HIVE MORE SUITED TO BE THE STABLECOIN OR SHOULD WE STILL BE STRIVING TO MAKE HBD STABLE?
AS EVER, LET ME KNOW BELOW!

Cg

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I’ve come to be a fan of the HBD stabilizer. There is no rational or knowledgeable investor who is paying $8-$12 for a token thats single utility is that it can be exchanged for $1 of another token. These are not investors, they are traders... and that’s an important distinction to make. HBD is only attractive on the markets due to it having just the right market cap and liquidity that it can be manipulated for profit.

I enjoy the fact that those currently attempting such trades probably haven’t even done enough research to see that the blockchain is actively working against them! I love scalping the profits of these traders and stashing the proceeds in the DHF for future investment.

And most likely in a few months time we’ll have working reverse conversions from Hive to HBD. That is still planned for the next hard fork as far as I know. HBD will never run this high again, it’ll better serve its intended purpose and the stabilizer operations will be a thing of the past. But in the meantime I’m more than willing to arbitrage against traders and profit the blockchain as a whole.

The point you make about the tradeoff between high HIVE prices benefiting existing stakeholders vs. high HBD prices benefiting smaller users who want to use their HBD rewards to buy more HIVE is a good one. It's the best argument I've heard against the stabilization effort.

The thing though that most users who receive HBD rewards are not using the HBD to buy HIVE. If you look at the stats on that, the numbers are really low. The vast majority of HBD that is paid out in rewards is sent to exchanges to sell. In that scenario, having HIVE being worth 10x and users getting 10x as much in rewards vs. HBD being worth 10x and users getting the same rewards that are worth 10 times as much is net zero.

There is a tradeoff with these decisions, and as with most financial/economic tweaks to the platform there are going to be winners and loosers to the change. Unfortunately the very small amount of users who are actually trying to use the high HBD prices to increase their HIVE position is not significant enough to outweigh the benefits to making the price of HIVE go up.

The Hive platform is still very small. The biggest risk to everyone (regardless of the amount of stake that they have) is that the project stays small, never innovates and advances, and eventually we fall into obscurity. The witnesses and stakeholders are trying to make the right moves to move the platform forward and hopefully deliver exponential growth.

Everyone is entitled to their views and opinions on this. The way the platform is designed though, the users with the largest stake in the platform have the most say. It is how the platform was designed and intended to function.

As far as how the stuff we are doing looks to the "casual investor" (i.e. somebody who hasn't done enough research and doesn't actually know what they are talking about) I am not too worried about that. Casual investors are good and I'd like us to try and be welcoming to those types, but in my view making the changes that serious investors (i.e. the ones who do their homework and make smart financial decisions with their investments) are more important to consider. For that group, the stuff we are doing should look pretty smart.

All my HBD gets converted to HIVE, for what good it does :)

Let's set aside the "stabilization" goal itself for a second.

Isn't it, for example, a good idea for us to sell about 25000 HBD per day for about $47000 worth of HIVE, just in case HF25 manages to achieve an upper peg later on? If HF25 actually accomplishes this, we have captured 22000 HBD per day, for a rainy day.

Tell me if I am wrong but your whole argument boils down to saying "let the market decide the price of HBD".

There is only one problem, in it's current form the supply of HBD cannot increase to match the demand hence the price above it's intended value.

In an open market (btw I hate the term "free market"...but that is another story) when the demand exceeds the supply the price goes up but it also creates the incentive to increase the supply. This cannot happen with HBD...the rate at which hive dollars are produced is inflexible.

Since there are obstacles for the free flow of the supply (by design) the calls for letting the "free" market decide are misplaced.

This discussion will be moot once the next hardfork is implemented. When that happens anyone will be able to convert hive to HBD and take advantage of the price manipulation that is happening on the Upbit exchange which will bring the valuation back down closer to one USD.

This is close to the market perspective I use to view it. The blockchain has the ability (currently limited in volume, but still there) to create HBD using $1 worth of HIVE. The market is paying $2 for HBD. So stakeholders are doing the only natural thing one does in a market, selling as many dollars bills as you can get your hands on for two dollars.

Whether or not this actually results in the market price of HBD being driven down to $1 is somewhat irrelevant, and I have said so in just about every single post about @hbdstabilizer since the very first one. Even if it doesn't, selling $1 worth of HIVE for $2 still accrues to the benefit of stakeholders and the DHF (which is mostly the same thing).

I probably should have qualified my reply by adding that having the ability to convert hive to hbd (which is what the hbd stabilizer does at the end of the day) will make it more likely that the price of HBD will be closer to one dollar.

We can talk about mechanism and such all we like. The plain simple fact of the matter is that HBD and Hive prices are linked. If one goes up so does the other, if one goes down, so does the other.

Look at the Steem Dollar price, around $9.30 and the Steem price around $1.20, both have risen.

Now look at the HBD price $1.81 and Hive $0.67 both have gone down and casual investors hearing that a community is actively trying to drive down the price of its own crypto, will run for the hills.

#LeaveHBDAlone

Cg

Imagine the face of horrified investors when they see a group of stakeholders trying to stabilize a "stablecoin" and in the process reduce the circulating supply of the native asset. Jokes aside, picture the sentiment of the casual SBD investors when they realize that they were a victim of a pump and dump scheme of a "stablecoin".

Anyway, as I said before all of this discussion will be a moot point once the next hardfork goes into effect. I am very confident that the economics of having conversions from hive to hbd will drive its price closer to a dollar and increase the demand for hive...unless if a big enough group of stakeholders opposes the change by voting out the witnesses that are driving this initiative (I don't see that happening).

I get it, having a high valued secondary coin is good for content creators. That is the only compelling argument I have read across different posts and comments on the subject. The calls for preserving the sanctity of the "free market" in the presence of a pump and dump scheme ignore the fact that the stakeholders that are trying (emphasis on trying) to align HBD to its intended value are valid actors in an open market.

I couldn't agree more! Not talking about the math and theory behind the stabilizer, it just feels weird and does not look good.
But people who run it are quite stubborn about it.
I also do not see an impact on the hbd price.

Also, looking at the huge amount, I think this would be better invested in developement or simply rewards.

Thanks for speaking up, the discourse on Hive is quite aggressive some of these days and I prefer to stay out of it. Thanks for Leo!

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Thanks for speaking up, the discourse on Hive is quite aggressive some of these days and I prefer to stay out of it. Thanks for Leo!

No problem! Hopefully this can spark some energetic and respectful debate.

Cg

But people who run it are quite stubborn about it.

That's the crux I think. But I'm with you . . .

the discourse on Hive is quite aggressive some of these days and I prefer to stay out of it

!ENGAGE 20

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I don't even understand why HBD token exists. Couldn't we operate with only one token making everything simpler and be a little higher on the coinmarketcap list instead of having a second token that was supposed to be $1 but the value is anything but stable?
I don't know why would anyone invest in something with the name hive BACKED DOLLAR...
PS: This is a very uneducated comment

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It's a fair point, why do we have a second currency?

Originally the idea by Dan Larimer, creator of the Steem Blockchain that eventually morphed into Hive, was to create a stable coin backed by Steem, hence the name Steem Backed Dollar.

This soon became apparent that there was no such backing and the value of the SBD (HBD) was arbitrary and for a while it did hold at around $1, but because there is no actual system beyond wishful thinking, to make it stay at that price it can go up or down just like any other crypto.

Like I say, the main function of the HBD should be to reward creators and add liquidity to various Hive markets.

Cg

Cg

Couldn't we operate with only one token making everything simpler

That would be nice. 😊

!ENGAGE 20

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Thank you for your engagement on this post, you have recieved ENGAGE tokens.

Thanks for speaking up, the discourse on Hive is quite aggressive some of these days and I prefer to stay out of it. Thanks for Leo!

No problem! Hopefully this can spark some energetic and respectful debate.

Cg

Oh man @cryptogee, I agree with you!!

If we want Hive to increase in value we should find a way of going about that without reducing the value of something else we have! Having a currency of high value is too important that it should not be sacrificed because we are trying to improve on the value of the other currency we have. We already have something of a high value, let's be happy and let it soar rather than clip it's wings to make something else soar.

I would understand if it was only a mere wish, like if it is said 'I wish hive was mooning rather than HBD; if only HBD could stay at $1 and hive soars it would make for more ORDER/HARMONY'. I would understand if it was a mere wish but the fact it is not just a mere wish that we are investing time, money and efforts into reducing this HBD we're all still gaining from in order to achieve order/harmony is painful and quite self-implicating.

Is order/harmony more important than abundance?

I know the hbd stabilizer move is still aimed at creating more value but:

Is this the right way to treat a bird in hand?

You might actually get two more in the bush but does that mean you should throw away the bird in hand? Wouldn't it be beautiful to have a bird in hand and the two more in the bush if you can get it? And luckily in this case you can get two in the bush with throwing away the bird in hand.

Finally, @cryptogee for your point about those who are in support of HBD stabilizer being those who have invested in hive and wanting it to yield profits. I'd like to add that if HBD is $10 they stand a great chance of making a lot of profits as they can earn countless HBD with their hive and cash out without even selling off their investment in Hive.

PS: I'd like to acknowledge that those in support of the HBd stabilizer have good intentions, are looking out for the good of everyone and are working hard towards it.

I'd also like to acknowledge that my status in this community can be quite laughable based on it's small size.

There is already proven ways and mechanicms way better than HBD that work on Ethereum and other chains. Nobody wants to copy that and port it to HIVE for some reason. NO idea why.

Maker and DAI work just fine and is decentralized. The lowest DAI ever went was 92 cents and highest was 1.06. It stablizes very well with the mechanisms they have in place.

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we need a stable asset to pay for development and other costs. what you’re saying that let hbd be 100 dollars or 0.1 dollars, let the market decide. how can we budget development costs if it’s all over the place like that? we need it to be stable not all over the place. I bet you would like to see usdt going off its peg as well if that would make you richer somehow.

Why not constantly adjust the funding to the hbd price in $?

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First of all thank you for replying. Let me answer your points as best I can, in order.

we need a stable asset to pay for development and other costs

Okay, I understand there are development costs, however I don't understand why they're linked in particular to HBD. I think what you're intimating is that if Hive say is fluctuating all over the place, then we need a stable coin that we know what it will be in the future. (If not, please correct).

Well I would counter that argument by first asking, why does it have to be HBD? Why can't, as I've suggested above, Hive be the stable solution?

Secondly wishing the coin to be stable does not make it so. Stable coins like USDT are backed with real cash in a real account, thus its value fluctuates +- 1%.

I bet you would like to see usdt going off its peg as well if that would make you richer somehow.

That's not a fair comparrisson for two reasons;

  1. You don't invest in USDT to become rich, how its pegged to the dollar is quite clear and transparent therefore anyone investing in this coin is doing so as to hold their crypto, or to day trade on small fluctuations.

  2. You can't compare HBD to USDT, it has no peg and its value is controlled by market forces. Plus I earn HBD by creating content for the Hive site, ergo it is quite reasonable for me to want its value to be allowed to increase unfettered.

Cg

You can't compare HBD to USDT, it has no peg and its value is controlled by market forces.

Not for long. HF25 will include a mechanism to convert HIVE to HBD, and the peg will be easier to maintain within a certain range.

Hmmm, will this Hive sit somewhere? Will the value amount of Hive equal HBD regardless of price?

I still suspect it won't be a true peg.

It's just so frustrating watching this play out. This whole platform is at the mercy of people who think they're right and have huge influence, so the rest of us just have to suck it up and watch.

If you guys are successful in pushing down the price, I guarantee that will negatively effect Hive and me and a lot of content creators will simply go, leaving you guys to play with your toys on your own.

Cg

Also, why not convert Hive into USDT if you want long term stability.

Just a thought.

Cg

Also, why not convert Hive into USDT if you want long term stability.

Just a thought.

Cg

I do struggle to understand some of the economics of Hive, but a stable coins would seem to have uses for commerce. There are plenty of 'stable coins' around who manage to maintain their values pretty, but I have no idea how they do that. HBD could be more volatile as there is so little of it. SBD is up around $10, so I guess they don't care so much over there.

I know people say 'the market is always right', but I think the market is generally selfish and doesn't care if its action destroy things or even about the technical merits of coins.

Part of the impact of high HBD is that some proposals are not getting votes. I don't know why they can't just set the daily payouts as a dollar amount and pay the equivalent of that rather than a fixed HBD value.

Stable coins are created with real money. So USDT has the equivalent amount of dollars, euros, etc in a huge slush fund, thus the price stays stable to within a 1% fluctuation.

HBD has a bunch of people running round selling it to buy Hive thinking that that will magically make it worth $1. According to @pfunk below, after HF25 this will change, so I guess I'll have to wait and see. But as someone who has recently decided that creating content for Hive is just about worth my time, this sucks and makes me want to leave again.

I know people say 'the market is always right', but I think the market is generally selfish and doesn't care if its action destroy things or even about the technical merits of coins.

Of course it is selfish and of course it doesn't care about technical merits of coins. I have been saying this from day one till I'm blue in the face. You can go on about fast block times and use loads of fancy coding terms that nobody understands, but at the end of the day the market is made up of people whom want to make money!

That is why Ethereum, despite its mega-high gas fees and slow block times, is light years ahead of EOS which apparently is a technically better product.

Part of the impact of high HBD is that some proposals are not getting votes. I don't know why they can't just set the daily payouts as a dollar amount and pay the equivalent of that rather than a fixed HBD value.

I'm not too sure on that, can you elaborate on what you mean please?

PS, thanks @steevc for putting in your tuppence! 😁

Cg

Thanks for the info. Blocktrades gave his reasons for unvoting proposals a couple of weeks back.

I meant that proposals could be for $50/day rather than a fixed HBD value.

the market tells you what it wants, not the other way round.

I was thinking the very same thing. Trying to force it to do what you want it to do seems mad to me.

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Absolute madness! Look at SBD at the moment, it's about $12 and thriving.

Cg

Well said!! There is nothing that will attract investors to Hive other than a network effect, simple as that. It can be as shit an experience as you like it doesn't matter, Ethereum has proved this. I don't believe it should be stabilised either but what ever ill go with smarter peoples beliefs over mine. Hajins technical analysis on Steem recently just blew me away, i knew it was going to go up this year into the dollar range but according to his elliot wave theory he thinks Steem is on track for 30-50 dollars. That alone will send Hive up to $5 at a minimum even if we all left and nobody posted here. Funny old word isn't it.

I really don't like Haejin, however I wouldn't be surprised if he's right.

Cg

hes pretty much always right.

Anyone speculating on HBD, including this casual investor example, is responsible for themselves, and their own wealth. If they don't understand what HBD is and refuse to investigate, then only the market can deliver them the information.

There's no point in having HBD unless it's stable. Just think about how many issues there would be if the bills in your pocket were to change value all the time, even if it were to only be able to go up. The people accepting those bills would not be happy about it. An economy does better when the means of exchange is predictable.

HBD as a stable token has the chance to add a lot of value to the Hive network. You just have to stop pretending it's walled off to just a blogging platform: https://hivel.ink/steem/@dan/steemit-s-evil-plan-for-cryptocurrency-world-domination

Anyone speculating on HBD, including this casual investor example, is responsible for themselves, and their own wealth. If they don't understand what HBD is and refuse to investigate, then only the market can deliver them the information.

Well the market is delivering the information loud and clear HBD is worth more than a dollar to us!!

I could flip your statement on its head and say, any developer not understanding that HBD is being used as an investment coin and refuses to investigate or listen to the users, then only the market can deliver them the information.

There's no point in having HBD unless it's stable. Just think about how many issues there would be if the bills in your pocket were to change value all the time, even if it were to only be able to go up. The people accepting those bills would not be happy about it. An economy does better when the means of exchange is predictable.

Erm, that's how crypto works and it hasn't put me or millions off so far. Plus why does it have to be HBD? The market is telling us that Hive is more likely to be the stable coin.

An economy does better when the means of exchange is predictable.

Lol, tell that to the Bitcoin investors. BTC can lose or gain 10-20% in a day, yet still vendors across the world will accept BTC and even give you a discount for using it.

HBD as a stable token has the chance to add a lot of value to the Hive network. You just have to stop pretending it's walled off to just a blogging platform: https://hivel.ink/steem/@dan/steemit-s-evil-plan-for-cryptocurrency-world-domination

As I said, it's value will come from its utility and its liquidity. You have to stop pretending that you can control its price for this misty-eyed ideal.

That article is so dated, Dan spouted a lot of shit while he was around, but never actually backed any of it up.

By the way SBD is over $9 dollars, there has been an 8.1% uptick in the past 24 hours and in the same period a 1.81% uptick in Steem.

I beg you and whomsoever has the power on this platform, stop messing with HBD, a higher price is always good as it will attract quality content creators who in turn add value to the Hive cryptocurrencies.

Cg