RE: UST: Just Another Centralized Stablecoin
(Edited)
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I was thinking I needed to do a deep dive on terra/luna...
but when I found out they were talking about using Bitcoin as collateral,
it became obvious that it was all complete bullshit.
There is no way to incorporate Bitcoin in a decentralized manner that makes any sense whatsoever.
All HBD is missing is liquidity; we are in a good spot.
Especially considering AMM provides near-infinite liquidity.
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Well actually the problem with HBD is not enough tokens out there. Hard to have liquidity when it doesnt exist. Even an AMM would have difficulty without the tokens to begin with. We need to see a major expansion of that.
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An AMM creates the liquidity instantly by exponentially accelerating demand for the HBD token, pushing the price past $1.05 and making Hive >> HBD conversions worth it. In fact, we have already seen what happens here: demand gets so high that price of HBD goes up to around $1.25 and whales and liquidity providers like Blocktrades bots will aggressively convert Hive into HBD to cash in on that free money.
Then all that HBD that got created goes into the AMM, creating permanent liquidity.
This is actually like really frustrating at this point because whales and other prominent individuals on Hive keep talking about how 12% interest rates on the savings accounts are awesome... and how we should implement bonding. But adding yield to savings accounts and bonds time-locks HBD and makes it even more illiquid. I truly do not understand the logic here.
The 1.05 threshold isn't set in stone. It was done that way at first to provide a wide safety margin on a new feature and recognizing that HBD was so prone to pumps that even 1.05 would be a huge improvement. The longer HBD stays much closer than $1.05 and the more confidence we have in the mechanism the more likely it is we can tighten the band.
Sure, the 5% gap is a little high, but my real concern is instant gratification and user experience as it pertains to acquiring large sums of HBD within seconds of pulling the trigger. If things keep going how they are going, orderbooks are not going to be a valid way to do business in 5-10 years. I'd prefer to get ahead of the curve on that front.
I'd actually be very interested to hear your thoughts on the 3.5 day moving average.
Realistically what's the shortest moving average that could be used?
I assume the answer to how much we can shorten it is: "not much".
I think for the purpose that the current operations exist, they don't need to be shortened, and it wouldn't be a good idea to shorten them much. They're not well designed to be used for instant liquidity. That should be addressed other ways.
The issue with the 5% fee is requiring the peg to break in order to increase supply. Making it tighter would improve that. Also, we don't see it now because there is little enough demand that the printing for post rewards mostly satisfies it, but $1-$1.05 peg would tend to float in the middle, not right at $1. So we'd tend to see overvalued HBD a lot, were it not for all the post rewards being dumped.