RE: Some Thoughts On Hive Backed Dollar (HBD)
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It all comes down to volatility of Hive price. Potential top of $2 HIVE price gives us around 70mln HBD possible in existence (with 10% haircut applied). Even half of these coins, aftet conversion during bear market while Hive is absolute low gives around 350mln of HIVE to one entity (exchange or potential bad actor willing to harm).
Even paying 20% surplus for these massive ammounts of HBD gives realtively cheap (less than $50mln) opportunity to compromise our security for potent player willing to destroy Hive. And this will happen without massive pump of $HIVE price, which would occur while buying assets on the free market.
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That is certainly possible. However does that happen in reality with different market dynamics in place.
There are a few assumptions like the idea that the market low will be the same in the future. It might but then it might not. Also, there is the idea that one person will be able to get a hold of a massive amount of HBD. Right now, without many use cases, that makes sense. However, if there is hundreds of millions of dollars in commerce taking place along with layer 2 options that use HBD for DeFi or whatever, is that still viable?
Also how does the need for Resource Credits, as the chain gets more active, affect the ability to convert Hive? Could this minimize the amount of HBD that is created, negating some of this discussion anyway? At the same time, does that put in a "floor" on the price of Hive dropping?
All things to consider when looking at this equation. Hard to tell where the vulnerabilities could crop up along with where they will.
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Yeah, there is a lot of IFs on the both sides of equation. I think it's important to avoid both extremes, hope for the best, prepare for the worst as they say.
It's easy to fall for instant gratification, we all are hungry for gains seen in the rest of the crypto world, this emotional factor also shouldn't be neglected. Working haircut gradually up, together with all metrics growing or even creating some sort of safety system which would consider many factors could do IMO.
Agreed. We fall into the trap of wanting things now without looking at the long term outlook.
We cant see how things will unfold (law of unintended consequences). I do concur that at the end of the day, it is vital to protect the chain from vulnerabilities.
Growth is vital and expansion needed. However, that must be tempered with an eye on security.
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The "HBD for commerce" is not going to happen before the rise in Hive impact rises its marketcap as well. Projecting percentages of the current marketcap is not realistic - it is the abovementioned "cap once Hive hits $2 kind of calculations" we should be making.
Personally, I doubt that is the ultimate goal.
The idea of Euro was great when you had to travel across Europe with several wallets (if done frequently) or having to spend/exchange the leftovers when leaving a country you are not going to visit soon again.
Today you have a card with access to reasonable conversion rates and the pressure is off. So is the beauty of Euro (for consumers).
Hive commerce does not need liquid HBD to be circled around. Liquid Hive and good price feeds are enough - you display USD prices but keep sending Hive around (without customers noticing).
Do the merchants feel the need to hedge their Hive holdings against USD price swings? They should. The instruments are there (the challenge is to include an easy access in the "run your commerce on Hive" package). As someone recently mentioned, even the spread of $1.00-$1.05 is uncomfortable (and I add that the common swings are going to be even outside this range as price volatility makes conversions risky at 0.99 or 1.06).
HBD as a savings asset for risk-averse entities is much more reasonable to be the primary goal. People care about investments keeping their value, they can accept a loss of value applied at the current content of the physical wallet (up to the extreme case of it being stolen). They should keep reasonable amount of Hive only (if they are uncomfortable with betting on its value going up). The HBD savings part greatly adds value to Hive experience without the need for huge supply as you target retail savers.
That being said, my shortterm play would be setting savings rate back down to allow a bit of a HBD selloff (and conversion back to Hive) to build up a cushion for the next HBD price pump ride without having to bet the extra security on the line.