"Blank Check" Money Attack

in LeoFinance2 months ago

moneyattackhbddollarnews.jpg

Alright so I've had a day to think about the proposed changes regarding HBD increasing APR and quarantining that yield to the savings accounts. I did learn some things from the smart peoples who run this pony show.

I'm actually not 100% sure where the inflation for HBD comes from. I know the witnesses set the target, but I'm not really sure if this money appears out of nowhere or if it comes from somewhere else. Any help on that front would be appreciated.

So apparently the inflation does indeed come out of thin air.

HBD APR is printed in addition to all other Hive/HBD rewards.

It's amazing how I can keep learning new things about this network even after extensively studying it for years. Truth be told a couple years ago I would sometimes just theory-craft problems/solutions for the network that didn't even exist because my understanding was so limited back then. Easy way to bait people into commenting & telling me I was wrong so I could learn quicker. :D

And so I will now theorycraft another non-existent problem!

To quote @blocktrades:

To make staking of HBD more familiar to the average cryptocurrency investor, it seems likely that it would make sense to make a change to the current interest payment mechanism: instead of all HBD receiving interest, only HBD in savings accounts would receive interest.

Ah so the goal is to mimic other Defi platforms eh?

This is a problem, because if we're allocating high yields to HBD holders in the savings accounts, competition is not a factor. Under the current rules it doesn't matter how much HBD is in the savings accounts, all that money will be increased by a static APR.

Essentially we are writing a blank check

No matter how much HBD flows into the savings accounts we are going to award that money the same yield percentage regardless of how much demand there is for this function. If the goal is to mimic other defi platforms, we are definitely doing it wrong in that regard.

Take CUB for example

When more people enter the CUB farms, APR goes down. That's because CUB inflation is created linearly (1 CUB per 3 second block on BSC). Pegging APR to a certain level means instead of linear inflation the network is now engaged in exponential inflation. This means that inflation creates more inflation. Read by post on APY to see how out of hand exponential inflation can get.

To quote @blocktrades again:

It’s been suggested that this interest rate should be increased to something more substantial (e.g. 10-20%)

Wow, 20%. That's a sick yield (compared to the current 3%). Let's go with that. So in the next Hive fork it looks like we are going to implement Hive >> HBD conversions. There's a 5% burn tax here to mitigate exploitation. This effectively caps HBD at an upper bound of $1.05 before it becomes profitable to destroy Hive in order to flood market demand.

But if we're offering HBD in the savings accounts 20% APR (22% APY) it will take less than 3 months to earn back that 5% burn penalty. After that it's all profit. Someone with deep pockets could swoop in and pump quite a bit of HBD into our savings accounts.

Awesome! Let them!

Right? If someone did this that means a lot of Hive is getting burned to create the HBD. The price of Hive would go up. Score. At the same time, the 10% haircut is still in play, and if too much HBD exists compared to Hive's perceived market cap (as determined by the witness price feed average) the system could become unstable again and break to the upside, only to wreck us on the way down during the next bear market cycle just like in 2018.

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Why is this a non-issue?

Well for one this scenario kind of assumes that the network isn't paying attention to what's going on as it allows someone with deep pockets to continually burn Hive and shove the HBD into the savings accounts with the expectation of a 20% return. The Hive witnesses can kill that party whenever they want by lowering the yield of the savings accounts.

There's also the issue of outside competition. Why try to make a play like that on Hive when there are tons of other defi networks out there that have higher yields than 20% (and lower deposit fees than 5%). Financially it doesn't make a lot of sense.

But you know what also doesn't make a lot of sense? Mega-bubbles. In particular, despite trying our damndest to stabilize the price of HBD with the dev fund it is still trading at $1.70. Clearly there are entities out there that are more than willing to try and exploit our tokenomics and create a pump and dump due to our thin liquidity. It's possible that HF25 could ironically make it even more worth it for these people to engage in this behavior.

Conversions take 3.5 days.

It's also important to note that HBD >> Hive conversions take 3.5 days to complete. The average price of Hive over this time period is used to determine how many coins are minted. This average exists to eliminate potential manipulations: IE buying cheap HBD and immediately converting it to Hive and dumping for more HBD. I have to assume that the reverse conversions will work the same way, except with a 5% burn fee to even further discourage conversions and encourage marketplace trading.

Analysis

Mostly false alarm clickbait, but that's how theorycrafting goes sometimes. I could spend hours thinking I've made some discovery by refactoring the variables of a complex system only to realize nope: nice try no cigar.

The main message of this post would definitely be to keep an eye out on HBD yield. If our goal is to mimic other defi networks we probably shouldn't be writing these kinds of "blank check" APY yields, but then again even a 20% APR is only a 22% APY. The numbers don't get absurd unless multiple years pass by without fixing the "problem".

True threat

I guess my greatest concern would be if the people who are already engaged in the market manipulation of HBD see this as an opportunity to double down without having to take much risk. Again they could use conversions to mint a lot of HBD and try to push us to the haircut limit on purpose.

If they fail they won't lose much, or may even gain a return from the yield on the savings accounts. If they succeed HBD will break to the upside again and we start this process all over again. Except this time when HBD breaks to the upside they were able to buy millions of HBD at a price of $1.05 without having to suffer slippage overhead.

Regardless of all these slight concerns: I've made it abundantly clear that I am a stanch defender of high inflation. If it were up to me I'd rewind Hive's inflation back to a flat rate of 10% a year. Anything we can do to increase inflation and put that power into the hands of citizens themselves is a good idea and promotes network growth while leaning in to the undeniable defi trend.

Seeing that HBD savings account inflation doesn't pull funds from anywhere else is a huge benefit in my opinion, even if we should consider variable APR rather than writing a blank check for anyone who wants to enter the savings accounts. Truth be told this might not be something we need to worry about a the moment as the witnesses can just dictate the APR manually until we figure it out.

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I have to assume that the reverse conversions will work the same way

Yes, it will use the average (median) price over 3.5 days.

Mind if I ask why you flagged me?

Not personal I look around and if I see things where the reward looks excessive to me I'll downvote to bring it down, usually by a modest or moderate amount. That doesn't mean i think the content isn't good and should be rewarded, it's just a matter of degree, and my opinion.

Right on, well idk if you read my post or not but I just got robbed for $3,000 and your post payouts are quite high as well. Not sure why I qualified when there are people making 2-3 posts a day with higher rewards. Just feels kinda like, idk, heartless. But, thanks for responding. :)

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He’s obviously a fraud. Who in their right mind would care about someoen making 60 dollars as a one off when they post every single day sometimes for a dollar meanwhile people are making hundreds. People like this ruin the blockchain.

What a waste of time. Stopping a few little fish to get somewhere on the platform. Great use of tokens to use them taking away from people rather than helping them grow. Talk about a dictatorship. What you sow you reap.

Yep, not once have I gotten an upvote from him but on a post that literally got worldwide attention and brought several interested parties to Hive, he chooses to flag that specific one. Total loser maneuver.

Of course he doesn’t upvote these people just take take take and upvote themSelves. How do you blacklist ppl?

Unfortunately, there is no way to get rid of him or people like him. You just have to keep working hard knowing that there are complete scrubs out there who just want to take it away from you. Life...

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Maybe if we get enough of us together we can go around and upvote the users he takes away from.

Does the mute button stop people seeing your posts or just you theirs. I never even use these controls normally. But this guy is a real bad apple.

Meanwhile this guy upvotes all his own posts!

Typical behavior of this type of person. More for their greedy selves, less for the less fortunate.

You go look at all his comments he upvotes himself. Then no doubt he pretends he’s ‘helping the community’ downvoting decent payouts

Which of my comments? Stop lying.

https://hive.blog/@smooth/comments

I. Guess you only deem your own posts as worthy of money. List me a few small creative accounts you follow and regularly support?

Nope. Only if they are fundraisers that don't benefit me, in which case I'm voting to reward the beneficiary, not myself.

He upvotes his own posts. Go check unless he now removed the vote.

This guy is the opposite of Robin Hood he thieves from the poor to pay the rich lol 🤣

You mean your upvoting only you and your mates and any small content creators or creatives who get a freak nice upvote you take from.

I guess I learn more and more about the system. I always thought the conversion option just gave you HIVE bought off the wallet market.

Am I right in assuming that the HBD to HIVE conversion is done internally and off the traditional buy/sell market? It just uses the average price in that market to determine the rate.

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There are two on-chain mechanics available to swap HBD for Hive.

The most common way is the internal market:
https://wallet.hive.blog/market
This market allows us to atomic-swap Hive for HBD and HBD for Hive between users.

The conversion feature is a little weirder and more of an advanced maneuver.
An average for Hive is calculated over 3.5 days and then the HBD is destroyed and creates Hive.

Thanks for the clarification. I usually just set a buy order on wallet.hive because I prefer to know the amount I am getting.

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Before all this I had no fucking clue.. I just thought it was a simple conversion.

Yea there is just too many things in HIVE and when you know the input and the output, you skip the steps in the middle.

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Comment 10% downvoted to make it less visible. This message is self-voted to be more visible among others.

@keys-defender

20% might be too high then.

As you said, still below other yield farming but who says that has to be the goal.

Maybe a rate of 8%-10% on the HBD in savings.

Still high enough to put money into, especially compared to the banking system, yet not so outrageous as the 20% level.

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the number is not definite and witnesses can adjust it when ever so i think it will be a let's see how this number works for a while.

Regardless of all these slight concerns: I've made it abundantly clear that I am a stanch defender of high inflation. If it were up to me I'd rewind Hive's inflation back to a flat rate of 10% a year. Anything we can do to increase inflation and put that power into the hands of citizens themselves is a good idea and promotes network growth

fs - Copy (3) - Copy.JPG
(@revisesociology hasn't done another report since)

Reconcile?

If the equation stays the same, inflation just goes back into the large accounts (with the illusion of spreading wealth/network effect, blah blah..)

That’s only a three-week period. To get an idea where trends are going, it would be more valid to compare a current @arcange report to one from six months or a year ago.

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heh man I've gone from 0 to 200k Hive and people are still like "but the rich keep getting richer!"

Explain how inflation is somehow siphoned by the wealthy when everyone has the choice as to what they upvote. There isn't some magic lever that puts a higher percentage of inflation into the pockets of the rich here. This isn't a central bank where they can just print money.

Consider that perhaps if a wealthy account is acquiring more stake they're actually bringing value to the network with development or buying stake off the open market.

DPOS is a positive feedback loop (oligarchy + sycophancy- i.e not merit).

This is illustrated by the wealth movements (or lack of).
It's not new - it's since the early steem days.

ALL postive feedback loops are unstable mechanisms with a wealth transfer upwards.(in economic terms).

...it's not ideological, it's mathematical. It's a dynamic seen throughout all of a nature.

Negative feedback loops lead to stability, and to merit based success.
It's a dynamic seen throughout all of a nature.

Word salads may give the illusion to the masses, of a pig looking like Marilyn Monroe,but the make up has to come off at some point.

Look at who upvotes my posts, Kumquat.

Literally impossible for me to circle jerk because the people upvoting me don't post.
Jack ass.

I went to 200k because I bought the vast majority of my own stake, moron.

Look at the numbers.

https://hiveblocks.com/@edicted
I've only made 31,242 Hive from blogging rewards.

DUH!

Do everyone a favor and Wake up from your delusional slumber.

proud of myself. i managed to NOT tldr XD
thats rare for me in my non-medicated ADHD state atm ;)

it was tldr status :D

we need HBD to ba a stable coin so we can trade hive and freeze our hive without moving them to external exchange

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Shhhh...don't give away my master plan.

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To make the APR fluctuate based on TVL means significant analysis and more code changes. Not going to happen for HF25.

I'd go with this simple implementation right now. Maybe not set the APR at the higher end of the interval (12-15% could be more reasonable for an initial attempt while still being enticing).

Being a witness parameter makes it controllable without code changes.

After the dynamics of the new changes will be analyzed, tweaks and refinements can be implemented.

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Interesting ideas, 20%, 10%, haircuts, 5% burns, there is a lot of complexity here. All changes seem to intended and unintended effects, I guess it’s hard to determine ultimately if they are good or bad, but nice exercise and chance for all of us to learn.

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