Hey Taraz,
First, I hope you'll come to KL for HiveFest 10 and we'll get to see each other again, 7 years after Krakow.
Second: you ARE missing something. Something BIG, probably the best chance we stand currently for a bull-bee on HIVE.
Let me try to add to the excellent explanations already offered by @meno and @ankapolo, this time from an economics perspective.
HIVE (the coin) is, from a banker's standpoint, a "virtual currency scheme". For the currency HIVE to function as such, it needs to be accepted by a community in exchange for goods and services. The matter at hand is the price of HIVE in fiat currencies such as the USD.
Simply put, for the desired bull-bee to start running, HIVE needs more people bringing USD in the (HIVE) currency scheme than people taking USD out of the (HIVE) currency scheme. When that happens, those promoting HIVE (us, the Hiveans) benefit because the net economic value brought into the Hive ecosystem is reflected into an increase of the price of HIVE.
As explained in an old theoretical report from the ECB (2012), there are two specific mechanisms to transfer value from the fiat economy to the Hive ecosystem:
- breakage - fiat which people use to buy and hold HIVE under any form - on an exchange, on the blockchain, or as HP
- float - the float is the time difference between the moment at which fiat is transferred into the system and the moment at which it is taken out of the system again. This mechanism is the most difficult to understand because we don't normally run into it every day. It is part and parcel of the business model of banks. You might know that banks do not actually have your money and that, if all the customers wanted to pull out their deposits, the bank would fail (the famous "bank run"). That is because banks use the "float" - the time between the moment you deposited money with them and the moment you actually use those money - to make more money.
Now let's look at this closer: we need more USD chasing for HIVE than HIVE wanting to be exchanged back to USD. That means that we need REASONS for people to want to buy HIVE and REASONS for people to want to remain invested in HIVE
I'll start with the latter. People remain invested in HIVE because of:
- the HP which provides two things:
-- more HIVE via inflation and delegation returns
-- participation in the governance - the HBD and its 15% APR on staking
- the hope that the price of HIVE in USD will appreciate and they'll be able to get more USD back at a latter time (the float again)
But what motivates people to buy HIVE in the first place? Especially when those buying cryptocurrencies in general notice that, while other cryptos appreciate, HIVE stagnates?
First, we HAVE to observe that HIVE is not needed in order to use the blogging platform. One can blog and comment without buying HIVE and of course everybody can read posts without buying HIVE.
This is both a blessing (for usability) and a curse (for the value of HIVE). Once you think deeply about this, you realise HIVE, the virtual currency scheme, can be very cool in social terms, creating and fostering a community of people attached to free speech, blogging and interacting. But it has a big weakness in economic terms - using the MAIN applications, those for blogging and vlogging provides no reason to actually exchange USD for HIVE.
Subsequently, if we want HIVE to appreciate, we need additional applications that leverage the same infrastructure (both IT infrastructure and economic infrastucture, meaning HIVE, HP, HBD and transfer facilities) and provide outside people with reasons to want to buy HIVE with dollars. Splinterlands and other games on Hive that sell NFTs for dollars are such applications.
SpendHBD and Distriator are another, newer reason for people to buy HIVE. We are currently pushing hard with Innopay to have more shops accepting HBD as means of payment for real goods and services in the real world. This creates demand for HBD which is translated in demand for HIVE. Our Innopay users (which we attract thanks to Distriator) are new HIVE users that:
- buy HIVE on Binance using euros
- withdraw their freshly acquired HIVE to their wallets
- swap their HIVE for HBD
- buy their food and drinks using that HBD
- HBD with ends up staked up for the 15% APR, and thus stays in the HIVE currency scheme
It's important to note that these new users that buy HIVE that remains in the ecosystem are often not interested at all in either blogging or reading articles.
To conclude: if we want to see a bull bee on HIVE, Distriator is probably the best application currently, as it gives people a reason to buy HIVE with fiat and that economic value brought in tends to be sticky and stay in the HIVE ecosystem thanks to HBD, its acceptance by real world shops and its 15% APR
Understand all of the above except this.
Where is their incentive? Why would I buy Hive on Binance to spend on something I could use dollars/euros for, instead of just doing it straight? So I get a discount? What happens when the discount ends? Can the discount cover my purchases? What happens if the 15% APR ends?
I show people that I pay, say, 29€ for a cheesburger and a large beer and I get 4€ back.
"What happens when the discount ends?" - actually the discount is the reason that I mention last. I explain other reasons first. They are detailed in these posts:
Some people are curious and want to try it out, learn, discover something new. They might load 20€, spend 5€ and then never use the 15€ again. That generates "breakage" revenue for HIVE.
Some people want to help the local economy because they care about the gentrification and desertification of inner cities due to high rents. Up to 4% of their margins are eaten up by card fees. Paying with HBD incurs no fees for merchants or for customers.
Some other people want to be in control of their money and also have a fallback solution when card payments don't work. Some people simply are sick of waiting for the waiter to come take their order and enjoy the possibility of ordering directly from a QR code when they feel like ordering.
But obviously some people will react like you do. There's no problem with that, we never thought we were going to bring 100% of the population to paying with HBD. But even 5% would make a HUGE difference for HIVE.
I'll finish with what is probably my favourite Satoshi quote:
Funily enough, he said that to no other than ... Dan Larimer, the architect of Steem :-)
The discounts only end when the downvotes start. apart from that, the discounts go on. Ideally we I want to see the APR on HBD lower so that we can give better, more compeitive rate loans to proven businesses using HBD, if the APR on HBD is 15%, we can only give loans to small businesses that have proven HBD revenue at 16% or above. the potential to flood the economy with HBD via commerce and legitimate businesses is far, far greater than the attraction of people staking for 15% APR on HBD, and so the lower the HBD base layer rate the better, the more we can out compete on loans to legitimate small businesses and provide much higher returns to creditors, while using the profits the businesses generate to pay back the creditors, and not HBD or Hive inflation
Can you walk me through the reason why giving out loans is a good idea? How do you deal with defaults? Do you have any means to enforce repayment?
Excellent explanation.
Where can I learn more about the interaction of HBD and Innopay when paying for goods and services of offline businesses?
Follow @ocln-content - you'll see we publish a lot of info about Innopay from that account
Don't hesitate to leave comments and ask questions
Wow this was super insightful! A question if I may, should we incentivize even more upvotes for shoppers who post about using HBD to buy goods (through apps like Distriator)? If they learn that they are earning something via blogging (on top of the discounts that they receive at the point of purchase) would that increase the chances of them becoming more active on Hive (the blogging platform), or at least make them want to attract more people to join Hive?
Thank you!
Seeing the psychology of people, I'd say that if anything, we should decrease the incentives. They are so high now that they look scammy! I know they are not but whenever I tell people "up to 40%" their first reaction is "that's a scam" - instead of attracting them, I chase them away ! :-)
Most Innopay / Distriator users I see are not interested in the blogging part at all - which honestly mirrors the general population. The Hive blockchain acts as a bank. There is a reason why in the real world there is no "blogger's bank": there simply aren't enough bloggers nor blog readers out there to be worth building a bank for them :-)
Unfortunately not. Too much of an investment for me currently.