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RE: HBD Defense: The Nuclear Option

in LeoFinance5 months ago (edited)

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).

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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.