What you are proposing is raising the upper peg of the HBD. The upper peg is more important to the chain than it might seem.
1 HBD is always $1 in the perception of the blockchain. So when HBD is trading for $1.25, Hive blockchain still prints HBD assuming the $1 rate. What does this result in? Overinflation of both HBD and HIVE by creating a fake haircut limit.
This fake market cap situation happened on Steem when the SBD price went up to $10-$15. The actual market cap of SBD was 10-15 times bigger than the internal market cap for SBD. When SBD hit the haircut limit at that point, it was too late. The excess SBD got converted into STEEM and printed 10x more coins than intended. As a result of the excess printing, STEEM and SBD both experienced a downward spiral that tanked the price of both tokens. SBD was under $1 for months and STEEM dropped to $0.1 during that time. It took 3 years to kinda recover from that. I would say HIVE price would be much higher if we didn't have that overinflation in our history.
We implemented HIVE to HBD conversion mechanism to help the upper peg and not have that shit show again hopefully.
Edit: I wrote this thinking the proposed fee is on hive => hbd conversion. This comment doesn't make sense otherwise.
Edit2: A fee on HBD to HIVE is meaningless. You are changing the peg from $1 to $0.75 essentially.
That is unaffected by what is mentioned here.
Posted Using LeoFinance Beta
Sorry. I thought you meant 25% fee on HIVE => HBD.
Got confused there. My bad.
This is much worse. It breaks the peg right away.
.
Yes but the 25% fee makes it less useful in that regard. It allows HBD to reach $1.25 without much resistance. Assume HIVE's market cap is $10 billion. The haircut rule won't print more than 3 billion HBD (considering the next hardfork). But HBD being $1.25 means 25% overprinting. $750 million more HIVE.I don't agree with this because there are other places that the peg applies, such as choosing between 50/50 and 100% HP payouts. If HBD gets too much below $1 posters will switch to 100% HP en masse and the supply of HBD will dry up.
A 25% fee would make the downside peg weaker but it isn't quite the same as moving it to 75.
Maybe in theory.
There is no practical peg without an actual conversion to the $1 value. There is no guarantee for the peg. Thus you lose the trust of investors and holders in the value of the coin. And the trust is your only hope of holding the peg anywhere near $1 in this case.
You have to consider that the HBD supply won't dry up as long as it's trading above $0.75. Because there are no conversions to burn it. You are just printing more HIVE with posts.
So the lower peg essentially becomes $0.75 because conversions won't take effect until HBD hits that price. And as we all experienced with UST, higher APR can't save your speculative peg.
UST had burning (conversion). That didn't save it either, so that's not a good argument.
With conversion at 75, that would be a hard-ish lower bound, but that isn't the same as a peg. This effectively forms a range (band), as we see with the upper conversion at 1.05. That doesn't mean HBD hits 1.05 and stays there. It usually trades in a range around 1.00 to 1.05 (can go a little above or below before market forces and conversions bring it back).
In terms of market forces, it would definitely make sense to buy at 75 because you're backstopped. And it could run to 1.05! What about buying at 76? Well, 1 cent risk, 29 cent upside, still not too bad, and until you get to 1.00, no new supply pushing it back down. So probably a pretty good bet. How about 77?
You're right though, it would work better if there were more sinks for HBD, beyond just not creating more. The only one right now is creating proposals for DHF, obviously that is very small.
Buying in hopes of a higher price is a speculative value. I can say there is nothing pushing the price above $0.75 other than that. But there are HBD coming from DHF and post rewards pushing the price below $1. So HBD tends to hit the lower bound more often than the upper bound.
You are not wrong though.
There's nothing pushing it down to 75 either. It's all speculative value within the band, and currently the band (according to conversions) is 1-1.05.
HBD hits the lower bound at $1 frequently because it keeps getting printed at a high rate as long as it is $1 or more, but if it stopped getting printed at $1, it wouldn't necessarily trade down to $0.75 regularly. There's nothing to push it down except speculation, and that can go either way.
DHF is a good point. That keeps getting paid out (essentially printed) even <$1 since there is no option on payout. That's much smaller than post payouts though (excluding stabilizer which returns it).
Anyway, I don't think the fee is the way to go.
I don't know what problem it is trying to solve by weakening the lower bound. In the case of UST, even if there was a 25% fee, it wouldn't matter. I would argue it would even make it worse. Without the fee at least there's a promise of $1 value that keeps the panic farther away.
We have $1 value promise as long as the haircut rule is not in effect and I would say that gives enough confidence in the HBD to not cause any sort of panic. Even if panic happens, we assume the HIVE market can absorb the debt because the debt is not that huge.
I think you could argue 25% fee is protection against the HIVE price going down. So we let HBD go down to not print more HIVE. But I don't think it's worth the trade-off.
Edit: The haircut rule is doing exactly that though. It keeps printing less and less HIVE per HBD when it's in effect. So you could say we already have this mechanism.
To be clear I don't think the 25% fee as presented here is a good idea. My only point is that doing so does not "move the peg" and make no difference, as has been claimed. There are multiple aspects to the peg, and moving only one of them is not the same as moving all of them.