I just completed my monthly account round up. I now have 840K coins. Unfortunately, the USD value of my coins keep dropping. Considering the fact that the value of US dollars is rapidly dropping my HIVE investment appears to be going backwards.
The biggest problem I face is that HIVE has thrown me into a deep writer's block.
Every month, I evaluate my HIVE account. I then set forth with a resolution to write a post a day; so that I could get an oversized share of those precious HIVE rewards.
I've always found that writing takes an emotional toll on me. Perhaps the problem is that I care more about truth than about popularity.
When I write posts I often find myself facing the choice between saying what I want to say and what I believe people want to hear.
I actually pride myself on examining issues from multiple perspectives. This leads to an unfortunate situation where I end up arguing against the crowd. When I am in a group of progressives, I end up talking about the evils of progressivism. When I am among conservatives, I end up arguing against the conservative stance and so on.
I do not intend to be contrarian. My conversations just end up that way because I want to see both sides of an issue.
The result of the way that I process ideas means that most people end up being mad at me. Many think that I am a smarty pants who always want to be right.
The truth is that I hate being right.
I would love to live in a world where all of our fantasies came true. But we live in a real physical world that behaves according to physical and economic principles. While I do not fault people for having fantasies. I think we need to study the real world in our efforts to improve our communities
HBD Interest
The issue of HBD interest put me in a funk. I was horrified last year when the witnesses raised HBD interest to 12%. The decision to raise it to 20% threw me into a state of panic.
HBD is a debt guaranteed by the price of HIVE. HIVE, of course, is an intangible asset. The HBD interest is an attempt to carve a tangible asset from an intangible one.
The algorithm guarantees the price of HBD on the price of HIVE.
No matter what algorithm we use, this game of trying to create a tangible asset from an intangible one is going to end poorly.
Fortunately, the ratio of the HBD to HIVE market value was quite low at the start of this experiment. Coins that were further along in this game collapsed this year.
APR v Interest
Before I go any further. I want to express my frustration with the way that people confuse the terms "interest" and "APR." The term "interest" refers to the charge for borrowing money. It is usually expressed as a percent. Interest often compounds at different rates. APR is an acronym that for "Annual Percentage Rate." It refers to the amount of interest paid during a year. People use the term because it provides an easy way to compare accounts that compound daily, monthly and yearly.
When interest compounds yearly, the APR and Interest rate are the same. HBD interest compounds every 30 days from the start of the loan. If the HBD interest is 20% and it compounds once a month, then the APR is something like 22%.
HIVE authors keep using the term APR and interest interchangeably. This faux pas shows a fundamental ignorance of financial terms.
Lets Look at Some Data
@geekgirl uses HIVESQL to produce monthly reports on HIVE interest. There are a few inaccuracies built into this set up, but it is good enough for this discussion.
Her May report says that HIVE paid 66,025 HBD in interest in May. This is up from 35,223 HBD in April. $65K interest a month results in $792K a year. Of course interest compounds. I suspect that we will start paying $100K interest a month in June or July.
@geekgirl also displays the interest received by the top 300 accounts. The really scary thing is that this report shows that the top 8 accounts received over half of the HBD interest.
The top 100 accounts received over 84% of the HBD interest. The high HBD interest benefits only a few accounts. This interest comes at a cost to the platform at large.
Many of the top HBD accounts are not active in the forum.
There are tens of thousands of active accounts on HIVE. Most active accounts prefer to hold HIVE POWER or the alt-coins on HIVE-Engine than HIVE.
Personally, I never held HBD because I wanted to power up all of my HIVE earnings as powering up HIVE benefits the accounts that I upvote. I am holding $58 in HBD right now as a protest.
HBD interest is a prime example of the 1 percent receiving a huge benefit at the cost of the 99%.
Isn't this the type of economic nonsense that crypto was supposed to avoid?
By voting for 20% interest, the witnesses have turned HIVE into a monstrosity that is even worse than the monster that crawled from Jekyll Island a century ago.
HBD Interest is a Cost to HIVE
The vaunted HIVE formula guarantees the price of HBD against the market value of HIVE. The "convert HBD" button sends the HBD to the @null account. It then creates a dollars worth of HIVE in its place. The system charges a 5% fee. It guarantees HIVE at 95% of the US dollar.
I should point out that investors and merchants do not like the high conversion rate. If I was a merchant, I would not accept HIVE as an alternative to US Dollars because of the high finance fee.
HBD Conversion Amplifies drops in the Price of HIVE
I've followed Hive since it was called SBD on STEEM.
The price of HBD and HIVE seem to move in unison. The price of HBD drops when HIVE drops; So, smart investors only use the HBD convert button when the price of HBD and HIVE are down.
I contend that the lion's share of the HBD interest will be converted to HIVE at some point. This conversion will take place at times when the price of HIVE is down.
Remember, the witnesses will be rolling out over a million in HBD interest in the near future.
IF one converts a 1 million HBD to HIVE at $0.50. Then we would see the creation of about two million HIVE.
If one converts a million HBD at $0.25; then we would see four million HIVE hitting the market at a time when the price is weak. If the price of HIVE was $0.2; then we would see the creation of five million HIVE. If HIVE dropped to $0.10. The conversion would drop 10 million HIVE on a weak market.
People who understand the difference between the terms "APR" and "Interest" know that this type of stuff is dangerous.
Debt Kills
I've watched a large number of companies fail because of debt. Debt seems to have a predictable pattern.
The first rounds of debt often lead to a brief appearance of prosperity. If the borrower is smart enough to pay off the debt, then this prosperity is sustainable.
When the borrower receives a positive return on the debt, things look bright.
For a variety of reasons, borrowers tend to become hooked on their debt. What one usually sees is that the amount of debt starts growing exponentially. As the debt grows, one is forced to buy a higher interest to maintain the debt.
Many once promising companies have been brought to their knees by incurring unsustainable debts.
The pattern of debt usually usually results in a bump in the price of an asset. Debt makes things look rosy. The cost of the debt appears in the long term.
HIVE should have seen a bump in the price of HIVE after raising the interest rate to 20%.
This did not happen. We saw a drop in the price of HIVE and a collapse in the value of coins on HE.
The long term cost of our increased debt load will come in the future.
Come on guys, at 20% interest we will soon be paying over a million dollars a year in interest!!!!
On the Bright Side
On the positive side of things. @geekgirl claims that some witnesses are re-evaluating their position on HBD.
We've been fortunate that HBD was never a popular coin. Most accounts automatically converted or traded their HBD for the much more enticing HIVE coin. As I recall, the HBD market value was under a percent of HIVE when the witnesses made their blunder.
We were also blessed that the 20% interest rollout coincided with the rollout of the polycub pHBD/HBD swap program. A lot of HBD moved into polycub and not as debt.
We were very lucky. It is still possible for the witnesses to lower the HBD debt and return the platform to sanity with only a minor impact on the long term prospects for the platform.
My last post on HBD looks at the way that the HBD interest rate undermined the coins on HIVE Engine.
I hate being right. The attempts to create the UST stable coin brought down LUNA. The quest to create "stable coins" has hurt other blockchains as well.
I really hope that the witnesses end this experiment that benefits the 1% at the cost of the 99% soon.
I will try to force myself to write a post a day this month. I probably won't get far because it is hard to write on a platform where people are willfully closing their eyes to historical truths. Yes it would be great if HBD was an awesome coin that was made awesome by charging junk bond rates.
The truth is that HBD was never that popular and that charging junk bond rates to get people to buy the unpopular coin just makes the whole platform look tacky.
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Say always what you think. Never what others expect you to say. This is the key for a community focused project like Hive. Sometimes this hurts, but it's good for everyone 😊
I think that none of us can always be right. But the synthesis of everyone's thoughts helps us find the right path!
Thank you
When converting from hive to hbd the chain takes 5%, but when converting hbd to hive there is only the 3.5 day wait and no fee.
I think we need more inflation over all.
400million hive is not that many, we need 8billion just for everybody to have one.
I like the hbd inflation because it takes the pressure off the rewards pool for greedy folks to get their fix.
We are not very familiar with Hive (yet) because we just discovered Leo and Hive a few weeks ago, but this post about the interest rate is pretty accurate and it does place a toll in the community, perhaps 20% is too high? At the same time, you mention polycub and the pHBD farm, which definitely takes some weight off HBD's interest rate shoulders.
You mentioned Polycub in your post, which caught our attention because we've been very involved with the Polycub ecosystem by adding all the farms and the xPolycub vault to our DeFi tracker, which allows users to track their positions with a lot of details regarding cost, value and profits earned. If you have any DeFi investments, we would appreciate if you check out our recently launched website app at https://defireturn.app
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Darn, I couldn't access defiretun.app when I tried loading it.
BTW, I think the best way to handle an app is to make the front page a static HTML page that is just always up. A page that is always up improves the SEO of the site.
One way of doing this is to point the www.defiretun.app subdomain to a static page that is always up and the defiretun.app subdomain to the dynamic page.
Regardless, I will check your site later.
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Thanks! And sorry the address is defireturn.app!
Posted Using LeoFinance Beta