Update On HBD And How A Major Use Case Emerged

in LeoFinance2 years ago

It is no secret that many believe the Hive Backed Dollar (HBD) is a gem for the entire Hive ecosystem. The potential that exists with the coin is amazing. We are still very early in the process yet there are many who are working push it even further ahead.

The witnesses made some news a number of months back with the decision to pay 20% interest on any HBD put into savings. Many were fearful that it would be a destabilizing force to Hive and could provide a point of vulnerability. It was also questioned whether it would be sustainable.

Since the decision to start paying interest took place a little over a year ago, we have amassed some data to see how things are progressing. As it turns out, there is a major use case for HBD which is presently being overlooked. This might not have been by designed but this is how evolution occurs. Sometimes it goes in directions not expected.

For the sake of this article, we will be using the numbers and images compiled by @daltz and posted in this article.

image.png

Removing The HBD Threat

Why is HBD a threat?

It is a debt instrument. Each time one is created, the blockchain has to back it with $1 worth of $HIVE. This means that, as more is generated, the market capitalization of $HIVE has to be greater. Of course, this is only an issue if the HBD is converted. If it remains as HBD, it poses no risk.

Here is where use case enters the picture. If we can deter people from converting HBD-to-$HIVE, we can provide additional defense of the ecosystem.

This can be done in a number of ways, some of what was detailed in other articles. However, one of the reasons for proposing the idea of on-chain time locked vaults is to keep the HBD out of circulation. It is how we see the threat removed since the HBD would be locked up and the community would know how much is due to hit the market, and when.

Nevertheless, this is forming without this feature. The HBD Stabilizer is providing the major HBD use case. As we can see from the chart, the tokenomics pertaining to the stablecoin is radically changing.

HBD: Funding Hive's Future Development

Let us take a look at the most recent numbers.

Here is the total supply of Hive coins as shows on Hiveblocks:

hbd.png

We will cross reference this with the Decentralized Hive Fund's wallet:

hbd.png

This means there is roughly 10 million HBD in circulation. For those who have not been paying attention, this is not a major change from earlier in the year. Thus, even though more HBD was created, it is not out on the market.

Here is a chart that captures it.

image.png

As we can see, the total HBD is up about 3 million while the circulating HBD is down by a similar amount.

Ergo, we can have the biggest use case for HBD up to this point.

Due to the efforts of the HBD Stabilizer, more HBD is being fed into the DAO. This is locked up, released over the course of a number of years. Evidently, the decision to pay interest on HBD in savings is resulting in Hive having more money for future development.

The HBD Stabilizer is:

It quickly becomes evident how this is a major use case going forward. Paying for development is essential. The data is revealing exactly what is taking place. The more HBD that is created, a growing portion is ending up in the DAO.

Fortunately, we have a chart that shows exactly how this is the case.

image.png

Another interesting twist is the fact that the more money in the DAO, the larger the daily funding of projects. Here again, since the HBD Stabilizer gets the lion's share of the payout, almost 185K each day, we see a continuous cycle emerging. As the daily HBD grows, the amount returned to the DAO follows the same path.

Ultimately, this means that we will have more money available to fund development tied to the Hive ecosystem. Of course, the goal here is to use this to grow the value of Hive overall, something that the market will eventually pick up on.

Expanding The Fixed Income Market On Hive

The next article is going to expand upon this idea. However, we are now seeing how Hive is offering a low-risk, powerful return at the base layer. The threat risk from the additional debt to the ecosystem is minimized by the locking up of the HBD.

About a week ago, we spelled out a major idea for The Hive Financial Network. Some of the infrastructure is already under construction which is a positive sign for Hive. However, as we will see tomorrow, there is another layer we can add to this.

For now, the key to understanding the power of a stablecoin is to grasp what we need to focus upon. To be successful we are going to need:

  • liquidity
  • depth
  • sophistication
  • infrastructure

None of this happens overnight and is a continual process. That said, to be a force in the world of currency, we have to place a great deal of attention on this.

At the same time, four major use cases emerge:

So far, Hive is excelling at the first one. By having more HBD in the DAO, we effectively are positioning ourselves to fund more development. That is an investment in Hive's future.

All of this is being done with the idea of security and defense foremost in our minds. We are using a combination of coding, game theory, and actual use case to expand HBD while also protecting the chain.

Now that we have some data to work with, we can move onto the next stage. That will be revealed in the next article.

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I have been meaning to suggest this to you for some time, but with the implementation of time locked vaults at the base layer coming at some point, now is a good time.

Instead of being coded as a single time lock vault time (e.g. 1 year), I propose that it should be coded as a witness voted on yield curve so users can select their own time frame (e.g. 30 days, 44 days, 90 days, 1000 days, etc). This approach is more complicated but I assume a single time lock vault option will not be enough for the Hive Financial Network in 10 years so in my opinion we might as well code it for the future now.

This approach would allow for maximal flexibility with a single base code development. This would be similar to the FED’s yield curve.

Thoughts?

An interesting idea.

I am not sure what the best approach is. Certainly I believe that multiple time vaults will be required at some point. How to be proceed is up to people above my pay grade. LOL

It is something that will have to be worked out. Having a sliding scale that the witnesses can alter is an interesting idea. They could change both the interest along with the time.

That would allow one vault set up. I wonder, once in place, how hard it is to add more. Can that be coded in and put live if the witnesses determine?

These are questions that the core devs might have to opine about.

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Exactly, the developers will have to decide the best way to implement these things.

The main point that needs to be highlighted in my opinion is the fact that a simple, single time lock vault, although cool and innovative, won’t ultimately accomplish what is needed. Instead of developing just a quickly outdated stepping stone, I would prefer that development focus on the end goal in mind, which our developers are awesome at but it doesn’t hurt to keep highlighting these things.

HBD ♦️ is the best thing on Hive these days. I am slowly converting all my Hive to HBD savings. Should have done it when Hive was $3 though ….

I am not sure it is the best thing on Hive but does have amazing potential.

We will see how it all is going to unfold. A lot of ideas floating around.

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What would you say is the best thing on Hive ?

HBD is getting stronger and we see a lot of it put into Savings. I feel safe doing that and I am riding the train of 20% APR. It simply provides a sure enough monthly revenue stream.

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Yes and we still only have 4 million in there. It is a nothing in terms of DeFi.

We are going to have to do a lot more work going forward.

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not major, but @gmfrens accepts HBD for NFTs on the WAX blockchain!

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That is a great thing to read. Having use cases is important. Payment systems is one of the four pillars we need to focus upon.

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Good timing :)

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Basically at this point HBD has an internal use case per your post above, but no external use case beyond collecting inflation. (it isn't used a currency often)

I'm not sure how sustainable that is, but as you noted the more the fund holds, the more it can buy, but it makes me nervous it is all an inside game with no real function outside of the Internal Hive economy. #moneygames

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I am not sure what you are referring to.

HBD has derivatives on both Polygon and BSC. They are part of a number of liquidity pools from Leofinance. People are able to get involved with them and earn a return, all while tying up HBD in the associated wallets on-chain.

Also, people simply look at it as a payment system. This is just one pillar and, most likely the smallest.

There is:

  • payment
  • funding and investing (which the DAO is doing)
  • derivatives (Leofinance already doing this)
  • collateralization

Plus we have a sink that will likely emerge in the next 6 months that will lock up HBD.

Do we need more options? Yes. But for something that was dead two years ago, HBD is making a ton of progress.

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Probably it would be hard and/or risky to start an offline business, which would accept the Hive Dollar (HBD) as a payment. And this varies from country to country, but the possibility is probably given. So theoretically this depends mostly on the users.

Some people are using it in Venezuela according to the CTT call yesterday.

So there are use cases emerging from offline businesses.

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Absolutely astounding, educational and positive. The Hive future looks brighter every day.

Thanks for this post.

Bradley

im adding my earnings in a 70/30 ratio 70 goes to saving

Not a bad approach.

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I’m putting 100% into HBD savings 🎁 … best investment ever.

Glad to be reading this post, I agree; HBD is still very early. The most known utility is to mint more HBD when locking it up or to convert it to Hive. The mechanism of how HBD is printed is pretty much in line with how our current employee-pay system works (monthly paychecks).

Imagine having the option to delegate Locked HBD in Savings to someone for X time. How difficult would this be to implement in our system?

If we scope in this just a tiny bit; As an employee, I have to guarantee to do my work, as well as my employer, who then needs to guarantee me that I have work. Having enough liquidity as an employer is one responsibility/requirement to be able to guarantee pay + work to an employee. Wouldn't this be a trustless 2-way agreement/contract? Read as; a massive utility opportunity for HBD?

If your monthly pay or a project budget is 1,000 HBD... Imagine the TVL of HBD in savings ($60K in HBD) required to mint 1K HBD per month, thus, lowering the selling pressure. As more user cases come for HBD, the more it should be used, and the more value that should be locked.

If 17 million people (The Netherlands) would get 1,000 HBD per month. TVL would be
$1.020.000.000.000 ($1.02 T), for the entire global population it would be 45x the size of the entire gold market.

It is certainly an idea I would like to explore more. But as I was thinking about it, I thought you might enjoy sharing your thoughts about it as well (and I think this post was the right moment to share). Of course, there are CONS that would be challenging, but I'm sure most of it will come down to accepting HBD as payment for people.

Cheers :))

LOL I am not sure HBD will be funding the entire global market but it is fun to think big.

Imagine having the option to delegate Locked HBD in Savings to someone for X time. How difficult would this be to implement in our system?

I have no idea of the coding that would be done but, more importantly, why would you delegate lock HBD? It has no impact upon voting.

That said, the idea of Hive Bonds is to provide liquidity AND collateralization ability to the locked HBD. It will be a layer 2 solution, something that can really alter the landscape of Hive Finance.

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Haha, yeah 🤣 was just pointing out that it is '45x' the size of the entire gold market.

why would you delegate lock HBD? It has no impact upon voting

For governance, people would have to stake and lock Hive.

Having the option to delegate locked HBD (someone else will receive minted HBD rewards) unlocks new innovative ways to think that bring more layer-1 utility for HBD.

If I lock 600 HBD for one month, I would mint 10 HBD for myself. I can spend that 10 HBD.
If I lock 600 HBD, and delegate that for 1 month to someone, that someone receives 10 HBD.

I can think of many use cases for wanting to do that. I mean, that 10 HBD is worth something to someone, right? Having the option to delegate a stable-coin that gives interest to the delegated to me is pretty mind-blowing. I could help someone, or pay someone without losing much value other than the inflation on HBD.

Let's say, for example, a Netflix kind of service provider is building on top of Hive, and accepts HBD. Instead of charging people 5 HBD per month, they could charge a 300 HBD delegation instead that is tied to an agreement (if delegation = 300HBD: then provide username access to, else, revoke access).

  • any subscription-based solutions (which then can scale further on layer-2)
  • short-term/long-term ongoing charity donations
  • hire people for projects/terms that accept HBD

Oh well... I don't want to waste your time and pollute your brain too much with someone that doesn't exist (yet). But it is fun indeed to think about it :)

Ultimately, this means that we will have more money available to fund development tied to the Hive ecosystem. Of course, the goal here is to use this to grow the value of Hive overall, something that the market will eventually pick up on.

Exactly we need to prepare for the bull run which is coming soon we need need to set our plans and project for the coming bull run.

Well this doesnt really have anything to do with market conditions. The developers are building regardless of market conditions. And the DHF distributes money to the approved projects each hour.

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For me, when it comes to HBD, we look at use-case wrong.

As an algorithmic stablecoin, HBD are nothing more than US dollars.

So whatever you can do with USD, you can do with HBD.

We worry so much about adding use-case, but it already has the exact same use-case as US dollars themselves.

The real differentiator comes in the form of the associated decentralised Hive network and the account they're stored in...

Thanks to HBD's relationship with Hive, nobody can freeze your assets or stop you from moving that USD value in and out of other assets.

Something you can't say about storing USD in a bank.

Truly permissionless money.

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It looks like HBD is working out quite well to fund the DAO but I wonder if we can get some more use cases for outside of the DAO.

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There's a lot of hype going on about HBD and after reading your post, I came to realize why. The effort you all are putting to make it 'something' is amazing and trustworthy.
I'm planning to put some into saving in the upcoming month. I hope the 20% APR will not be compromised in long run.