RE: HBD Defense: The Nuclear Option
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25% Conversion Rate On HBD --> HIVE
You've missed a somewhat critical component of this issue.
- It doesn't matter matter what we peg HBD to.
- The value proposition of HBD is that it's stable.
- Reducing conversion rate on HBD >> HIVE 25% does nothing.
If we peg HBD to 75 cents worth of Hive... that's exactly the same thing as pegging it to $1. Nothing has changed.
On an incentives level, lowering the conversion rate to 75 cents completely kills HBD because all inflation will cease to exist. There's no reason to take a 25% pay cut on HBD payouts when we can just choose the 100% powerup reward for blog posts.
It's the spread.
Assuming that the 100% power up option is changed to be the exact same dollar value as 75 cent HBD, the real issue is the GAP between the HBD >> HIVE conversion and the HIVE >> HBD conversion. Currently that gap is 5%, which is already too high and will obviously be lowered soon™. 5% was just a good number to test since HIVE >> HBD conversions are new and need to be tested for vulnerability. The goal is to reduce that gap to something like 1% so that HBD becomes even more stable... which again, is the entire value proposition of HBD.
UST played it fast and loose, and they got burned.
HBD has a proven history of non-systemic failure over years.
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Although I agree you. Others will not see it that way. The prevailing view will be that HBD's proven history is simply the fact that it has such a low market cap that no one has bothered to aggressively test or attack it.
It's sort of like saying my house is secure because it's never been broken into. However, others will point out that there's not much in it worth stealing, thus it's never been broken into.
If we are going to use that metaphor we could say that the UST house was unlocked and had billions of dollars cash just sitting in the front room with the windows open, while HBD has gold bolted to the floor with an armed guard. The gold is heavy, and even if you get past the armed guard you have to unbolt gold bars individually and slowly make off with the loot and hope that other people don't show up to stop you. There are cameras everywhere and a community that's watching.
I mean clearly HBD has been aggressively tested an attacked because we've broken the peg for months to the downside. This created unintended inflation, but surprisingly most of that inflation was created because we broke to the upside and not the downside.
The hysterical irrational comparison of HBD to UST is absurd.
It is only happening because UST failed miserably (which was unavoidable and also predicted).
But now that it's actually happened people think they get to chime in and feed the FUD monster.
Like, it's cool... they don't get an opinion and the people that actually run this network know better.
Which is nice.
I love Hive and the fact that we aren't a democracy.
It's great, and political arguments like this one prove it.
I agree that the comparison does not hold true. However, that will not keep people (i.e. the general public) from making just that comparison.
We need to be eloquent in our speech (as you have been), able to clearly explain WHY the comparison does not hold. The battle for widespread acceptance of HBD has become even more of an uphill one, as a direct result of the LUNA/UST debacle. However, it might turn out serendipitous if we can consistently and eloquently explain the differences.
Personally I would just stick to the basics:
At the end of the day I don't think it matters what people think.
Dapps are going to build on top of HBD (for good reason).
People who want to use those dapps are going to need HBD.
Simple as that.
Creating demand for HBD has nothing to do with convincing newbies it's safe.
It's about essentially forcing people to hold our debt out of sheer necessity.
thanks for this example between UST and HBD, it helped me better understand the differences between the two stablecoins
That was the rationale for my 'locked long-term value' idea (which I briefly explained here) instead of the flat 25% fee.
The "B" in HBD stands for the fact that 1 HBD can be converted to $1 worth of HIVE, automatically, at any time, with zero third-party involvement. However, that also represents a vector for attack.
I agree with @taskmaster4450 that we need to take any such attack vector seriously. There are at least two ways to deal with that. One way is to exact a high fee for the conversion; however, as has been pointed out, that in effect just makes it a HIVE 3/4-backed Dollar instead of a HIVE Backed Dollar, which just adjusts the peg from $1 to $0.75.
My thought was: What if I can always get $1 back for every HBD, and that I can do that automatically, at any time, without a middleman (so that it remains a truly HIVE Backed Dollar) but that when I invoke that feature, it pushes a portion of my liquidity out into the future?
It shouldn't matter, from an invested-principal standpoint, as long as HBD remains stable. I will still earn interest on my suddenly-illiquid HBD, I just can't spend it until some future time (I initially suggested one year, but maybe 6 months or even 3 months would suffice).
The point there is that if my intent is to wreck the value of HIVE by attacking the automatic-conversion mechanism, I have to forfeit a large fraction of my principal to accomplish that. Make doing so painful enough that it won't be worth attempting (or at least much less so).