The HIVE is converted to HBD slowly over time, like water dripping. This is to prevent the inflation rate from going through the roof and the market being flooded with tokens. All proposals on the DAO are paid out in HBD, thus providing a consistent stream of funding. This is coded in meaning it requires a fork to change it.
How does that process of transforming HIVE into HBD work for the DAO how much is transforming daily 😕? I thought the DAO only receives (& distributes) HBD.
I’m not sure of the exact rate, although someone mentioned 1,000 HBD a day which could be right. But I believe you’re correct that the DAO is set up to only distribute HBD. So that’s the whole reason for the slow “drip” conversion of the 83 million Hive into HBD.
For one, the blockchain is set up to see HBD as debt. If there is too much debt on the system wonky things happen. So with Hive starting life around .20, it doesn’t make sense to instantly convert it all to 16 million + HBD and crush the blockchain in “debt.” That also would deprive the DAO of any benefit of future price increase. If Hive is .25 and the “drip” pulls in 1000 HBD a day, then it’ll be pulling 4,000 Hive from the reserved tokens daily. If Hive climbs to .50, then it’ll only pull 2,000 tokens to fill the same rate. It could take a loooooong time to deplete that 83 million reserve depending on conditions! I’m not 100% sure of the drip rate or it’s mechanism, but I’m sure the debt load and price fluctuation are crucial to slowly introducing the Hive tokens into the HBD structured DAO.
as far as I understand, the HIVE in the balance is then slowly converted into HBD (which complements the 10% funding rate that the DAO receives from the total yearly inflation).
Thanks for taking your time to answer :)