This common theme pops up over and over again when it comes to the Resource Credit discussion on Hive. I'll say something like,
The cost of transactions on Hive is going to get very expensive; resource credits are going to run out.
And what response do I get?
Oh well, plenty of whales aren't using their credits so if we run out of credits there are plenty more where that came from.
WHAT?!?
Uhhhh... no... that can't be... no...
noe
I mean, sure, it SOUNDS right.
If there is a shortage of RCs, and there are a bunch of whales that aren't using their RCs, and we open up RC delegations, then we'll have plenty of RCs to go around, right?
No though...
Because RCs aren't the real asset. RCs are just a ledger telling us which accounts have access to the real asset. Does anyone care to venture a guess what the real asset is? I've talked about this at least a half dozen times over the years.
Users on Hive don't seem to understand that the cost of operations can go up dramatically if we end up seeing the increased usage we are looking for. So when someone tells me, "Don't worry whales have plenty of RCs," I'm thinking, "Wow.. okay... but that's going to make the problem even worse."
Exponentially worse.
Does anyone remember what it was like when everyone was paying bidbots to upvote their garbage to the top of the trending tabs? That's what we call rent-seeking behavior, and it is not ideal in many circumstances (especially the trending tab). The trending tab's goal is to curate the best content for everyone to see. If we allow people to rent the trending tab like we did during the bid-bot era, then the trending tab's entire purpose has been toxically monetized and undercut.
Uh okay, what does the trending tab have to do with RCs?
It's the concept of rent-seeking behavior that becomes extremely valid in this case. We are constantly marketing Hive as a place where users can come to get free transactions. That is simply not true. All transactions across all blockchains cost something. This is a fundamental requirement to avoid Sybil attack, DDoS attack, and mitigate all manner of threat vectors to these networks.
This is the fundamental difference between WEB3 and WEB2.
WEB2 was founded on the free-to-play idea that offering 'free' service is the best policy. 'Free' service leads to the most users. The most users leads to mountains of raw data and advertising revenue by organizing that data into a targeted function. It is in this way that WEB3 shares more similarities with WEB1 (subscription model) than it does with WEB2. We are coming full circle with the ideology, and the transition phase is brutal.
Have you had enough time to contemplate the true resource that RCs give us access to?
Spoiler alert: the answer is on-chain bandwidth.
Actual on-chain bandwidth is the real resource.
Getting your operation onto a block is the real resource.
RCs are just a ledger to determine who gets their information on a block.
So again, when someone is like, "Whales have plenty of RCs," I'm like... holy hell... yeah, and when they engage in rent-seeking behavior and start selling their RCs for a profit, that's going to destroy the entire narrative we've been peddling from the beginning (that's operations on Hive are free). Which is fine... because they are not free.
But also when the whales start doing this, what's going to happen? Hyperinflation. RCs that were not in the ecosystem will now be constantly dumped onto the ecosystem for their share of bandwidth (now that bandwidth has a non-zero value). So when I say that we will run out of RCs, whales dumping their RCs on the network means the problem gets exponentially worse. The cost of operations is going to skyrocket when our blocks (bandwidth) fills up.
Level 2 noob argument: we will just increase the blocksize.
Inevitably this is where the conversation naturally leads to next. Okay well if RCs are virtual and the real asset is blocksize, then we will increase the blocksize. Again, this is objectively false. Hive is already overclocked to the point of guaranteed instability when the blocks are filled. Scaling an inefficient decentralized network is the hardest thing to do. That's why everyone talks about scaling. It is the primary goal for mainstream adoption.
Failing to scale, gracefully over time.
To just assume that Hive can beep boop beep scale without going through trials and tribulations? That's simply ignorant and borderline delusional. We run this entire network on 22KB/sec, and every time we've been stress tested at these levels we've been shown that the network becomes too unstable. So again, the "we'll just increase the blocksize" argument goes straight out the window.
Say we run out of resource credits because the cost of operations increases. Now RCs have a non-zero value. Whales come in offering RC delegations on the cheap. This is guaranteed to make the problem worse by increasing the cost of transactions even more.
Do I think RC delegations are a bad idea?
No I think they are a great idea and fix a ton of problems. That doesn't mean that they won't lead to a rent-seeking system where new users have to pay for transactions on Hive. Hive is one of the few networks that allows users to yield farm bandwidth itself. It only makes sense that weird stuff would happen that doesn't happen on other chains that require payment upfront of the main token.
Yeah well that's not a 'now' problem.
Now this is something I agree with. If we see RCs increase to a non-zero value, the price of the Hive token will absolutely skyrocket. Again, this is something I've mentioned a lot: I wouldn't be surprised to see Hive go 100x in that scenario. Of course that result leads to more instability and volatility, but who cares, amirite? 100x is 100x. Just don't be the sucker that buys the peak. Sorted.
We've yet to see how this concept of yield farming bandwidth is going to play out. We've basically never run out of bandwidth on Hive. We've never choked users so hard that they had a difficult time getting access to RCs. We've never had RC delegations. A lot of variables are going to be interacting all at the same time and we are sure to be surprised by the emergent outcomes of a complex economy.
So how hard is it to choke the bandwidth?
How hard is it to use 22KB/sec for every single person on the network? Granted, that 22KB/sec is all text, but at best that's only 22k characters per second for all users on Hive to share. Even if we were somehow able to double the blocksize (we can't at the moment) that's only 44k character per second for all users. That's a very very tiny amount. A single popular dapp (probably a game) could gobble all that bandwidth up instantly.
Deflationary
The fact that bandwidth is farmed on Hive by stakeholders makes it inherently deflationary. Even though it seems like RCs are printed to infinity and everyone has full access to the network at all times for "free", that's just because we've never been properly stress tested. When supply of the actual bandwidth resource gets choked, we will see just how deflationary RCs become. Users who were once able to post to the chain 100 times a week (more than they use) may find that number get cut down to 10. They'll either need to post less data to the chain, buy Hive and power-up, or get an RC delegation.
But why deflationary?
From another perspective, the supply and value of RCs will appear to be hyperinflating. It just depends on how we look at it. I would call it deflationary because (like Bitcoin) the users that were here first have access to all the resources, and new users coming in are going to get railed by volatility. That's an extremely deflationary thing to happen (hoarding resources and a complete lack of elasticity). The hyperinflationary angle is also a valid one. They both lead to the same results and they are founded on the same principals. Only the perspective we view the issue from differs.
This is actually already happening.
A few months ago some random was in Discord asking for a delegation so they had enough RCs to post to Hive. I delegated them something like 10 Hive thinking this would be more than enough to make at least one post. It wasn't. I was amazed to realize that even after delegating 10 HP he still somehow didn't have enough credits to post to the chain. Mindblowing, as 10HP a year or two ago would have been enough for like 10 or 20 posts a week. This situation is going to continue to escalate as Hive blocks fill up. It may require 100-200 Hive just to get free transactions. Imagine how crazy that would be given a $50 token price. All of a sudden a new user needs to invest at least $5000 into the network just to yield farm bandwidth to maintain operations. Mark my words: we are going to see some crazy stuff. It might take 5 years, but it will happen.
Stability and consistency
The really nice thing about yield farming bandwidth on a network like Hive is that this leads to a certain kind of dependability and security when speculating on future events. Someone who builds an app on Ethereum may find that their model is completely broken after network fees skyrocket by x10.
On Hive this isn't a problem assuming the agent in question powered up enough Hive to keep the lights on five years down the line. Again, this allows users to buy in today knowing they'll be taken care of later. The tradeoff is that scrappy newcomers may have a very difficult time entering late to the party, even if they are bringing more value to the network than the old players.
Conclusion
This is something I've spoken to many times, but users still don't quite seem to grasp it. Repetition is key to learning anyway. I should know. I feel like half the time I'm writing this blog just to reinforce my own knowledge of the topics and help myself remember them and keep them organized.
The bottom line is that the resource credit system on Hive is just a secondary token used to outsource the ledger on our bandwidth. It's a very unique system when we actually study it. We still don't know how it's all going to play out, but there's plenty of things to speculate on.
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I had something similar happen with a new user a month or two ago. Their #introduceyourself post finally paid out and I assumed they would have enough to start posting again finally. Instead he was hitting me up saying he kept getting errors, I was amazed that 20-30 HP wasn’t enough to post. Of course the problem was solved with a quick delegation, but still. It’s wild to think that many new users will try to use what we have here and then hit a brick wall that makes them feel like quitting. Luckily my guy was intuitive and determined, so he started seeking help from a more experienced user. Not all people have that same drive, we both know that for certain.
SO RIP Hive mass onboarding? Or could we have a RC pool delegated to all newcomers?
the solution is a system of debt where new users get a WEB2 experience for "free" just like they do on other WEB2 platforms. the apps that onboard them give them delegations to post on chain and they are charged hidden fees without even knowing they are being charged. They'll even get email/password logins and account recovery via email. no keys required for WEB2.
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right, lite accounts like LEO is implementing. So the dapps/communities instead of the newcomers will basically be "charged" for giving out the RCs. But still, that's assuming the dapp/community is wiling to do that. Maybe they will spend all of that Hive and not get a return to cover the costs?
also BTC in free fall, time to panic? :)
Not anymore 😅
yep, we are probably in a bear rally for now
BYE BYE BYE!!!
scale with tech is the solution.
10 years ago computers was huge trash compared to today.
10 years from now, i see no reason why 1 hive can not be 100x more powerful in terms of transactions.
0,1 hive = enough for avg user
Nobody wants to come online and work for a landlord. Sure there's potential profit sitting there on the table but capitalizing on that creates a model that eats itself to death.
Very similar to bidbots, the moment it becomes as successful as it possibly can is also the exact moment it fucks itself. With bidbots, sure a handful of people could buy votes leading to purchasing a slot for 'x' amount of time. If 1000 people all jumped in trying to get that top slot all at once, they'd buy two seconds worth of time to shine before someone else bumps them down, or someone buys a metric shit-ton meaning they're king of the castle but now there's no one to compete against because it's out of reach.
You called it, when whales start selling rc's minnows are the ones that will suffer.
I, for one, will be happy when bonds and loans get developed to take the pressure off the rewards pool because the math is the same there.
When whales vote, everybody else's vote value goes down.
Whenever the curation gang dole out their 'benevolence' it comes from all the pockets except the curation gang's and the lucky author.
IF the top 20 curators stopped sucking up 50% of the pool each day everybody's rewards and vote values double.
(Not exactly, but near enough for arguments sake. Probably the top 100 would have to exit the pool to get a much wider distribution of the inflation allotted, as the next 20 would just pick up where the current 20 left off.)
This is just a fact in the math that is counter-intuitive to most newbs.
Whale voting takes away from everybody else.
I think you sum up the value proposition for Hive pretty well.
It's the bandwidth stupid.
Exactly. How much is the ability to store text immutably and uncensorably ultimately worth? This is Hive's core utility.
Ethereum is going the route of moving users to Layer 2 chains for certain functions. It seems like the same could occur with Hive if transactions become to expensive.
What is this layer 2 you speak of?
EVM clones?
That's actually not layer 2.
Those are just different networks/tokens.
I have seen zero layer 2 implementations.
Perhaps you have a better example.
As far as I know they've been stuck transitioning to proof of stake this entire time.
But you're not wrong, Hive has already done this.
A good example was Splinterlands taking operations off chain.
The next Hive Hardfork is going to make second-layer apps much easier to create.
Hive is way ahead of the game.
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Perhaps i am using the wrong terminology but the concept being that certain data and transactions could be happening off the main chain. Agreed that Splinterlands is a good example.
My main point being that expensive transactions will incentivize devs and go getters to create solutions.
Let’s hope it is manageable and some good solutions are found!
RC and it their dynamics is still something I don’t fully grasp. It are indeed articles like these that slowly help us see what it all means in practice!
Thanks!
(Luckily I had enough RC to comment and like your post 😁)
There’s a curse (originally in Yiddish I think), that goes something to the effect of May you inherit a boatload of gold, and may it not be enough to pay your medical bills.
sounds about right
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That’s a very different way to look at Hive from that point of view. I never realised that RC’s could become so scarce. Pretty amazing and a bottle neck at the same time. Let’s hope we can find the golden middle way!
So you are saying that in a worst case scenario rent seeking behavior for RCs will choke the blockchain? And it could happen quite fast?
Also when you say that Hive is going to skyrocket because RC delegation will put a more noticeable price tag on chain interaction couldn't this be mitigated by the fact that users could just stop using the chain? I could see many users prefer to stop using the chain or limiting their interaction with it rather than buying more Hive. But I suppose you are referring mostly to dapps as they use the most bandwidth?
Here is an update to the moon bitcoin connection:
https://peakd.com/hive-167922/@tobetada/crypto-analysis-or-update-on-the-bitcoin-moon-cycle
185% profit since late 2020
Okay so we should make sure not to get too much adoption because then we will lose adoption? We need to keep adoption low so that adoption will be higher.
This comment really showcases how big the issue is and how there's no way for me to explain it all in a single post.
Users on Hive are going to be taking their RCs and using those RCs to create more value than the cost of the RCs. When I write a blog or comment I'm taking my RCs and trading them for something that has infinitely more value.
If I have to spend $1 worth of RCs to post a blog, that fee isn't going to stop me if the blog ends up paying out $1000. If I have to spend 5 cents worth of RCs to mint an NFT in a play-to-earn game, I will gladly pay that cost, assuming the NFT is worth far more than 5 cents.
And of course just because I'm spending $X worth of RCs, I'm not actually paying for RCs, because I have plenty of Hive. The real question is: do I want to sit back and earn passive income by delegating my RCs to others, or do I want to earn active income by spending my RCs myself? Probably a bit of both, as I have a ton of RCs.
Watch me write a 5 paragraph essay in response to your comment, and I still have barely scratched the surface of the answers you're looking for.
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thanks for the reply, I guess I haven't quite wrapped my mind around it yet fully
But isn't that assuming I will make a profit? Isn't it just as likely the reward will be under $1?
Only if we assume that every time we convert RCs to other forms of value that there will be a subjective payout. With second layer tokens, play-to-earn-gaming, get-paid-to-______ dapps, etc, the reward may be fully objective and calculable.
Even in the case of subjective rewards it is impossible for my blog to earn less than $1. Even at these low levels I'm averaging $50 and my own upvote is higher than the $1 fee. Not everyone will be so lucky. Some people would have to stop posting. The real issue with fees that high would be all comments costing $1 as well. But the reason the cost is $1 is because there is a market where people are paying $1, so it's the fair market price by definition that thousands of users are already paying.
You nailed it. It is the economic value of getting the text stored that determines the value of RCs and ultimately that of HIVE. Apps buy Hive Power in order to be able to give it to users who in turn pay various types of fees like beneficiary rewards to cover the cost.
Hm, isn´t something with RC delegation planned for the new hardfork? Not too much info around this, unfortunately.
It sounds like the same thing that happened to WAX when it started to get busy. I had to stake a ton more WAX to get enough CPU to pay for free transactions.
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STOPTo support your work, I also upvoted your post!
To me , Resource credits are a form of currency you spend to enact or perform transactions on this platform. It’s like the car you drive, it’s an under the hood activity.
Although transactions on Hive are always described as Fast and Free, that’s only a surface and superficial look and the majority of users don’t know that you actually utilize something called Resource Credits to carry out transactions on the Hive blockchain.
So, any advice to act on this? If scalability is not addressable in the foreseeable future... What can we, the middle-pleb user do now?
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As you said, there is a lot to explain and not enough people grasping the idea. There are so many possible solutions though. making Resource credits non renewable and only acquired through voting and creating a 'posting coin' that requires resource credits to be able to post, or even limit the amount of posts or actions a user can input on hive per day.
But the real goal here is to not make a 'stop gap' solution that will work for a few years, but to actually figure out the answer to this problem that is a permanent addition and have every community member work towards it for the betterment of the Blockchain.
This was an interesting post to read. I am glad you are thinking about the future of Hive, not just yourself but everybody! Thank you.
Noice information
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People with low Rc understand how useful and important the resource credit is have been there and as at that time I hardly make a single post in a day,their alot of people out there facing similar problems please help me help a friend with your deligation she's getting tired of the platform maybe anyone can help in mentorship or support in anyway she go by the name @shollywilcy
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