Hive Backed Dollar (HBD): Taking Things To The Next Level

Stablecoins are getting a lot of attention of late. It appears that, in the United States, those what are backed by companies (labs) will be regulated like banks. Thus companies such as Circle are facing a host of regulations it will have to adhere to.

One of the advantages to the Hive Backed Dollar (HBD) is that it is outside this. The token is backed by the code on the blockchain, with no single entity in control. It is an algorithm-driven stablecoin that is backed by $1 worth of Hive. Please note the one dollar is a unit of measure and not the backing asset. HBD is backed by HIVE, not USD.

In this article, we have a few major points to discuss:

  • The HBD-HIVE relationship
  • Interest paid/Haircut
  • Lack of liquidity/Peg

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Source

HBD-HIVE relationship

HIVE and HBD are linked. This is a point that takes a bit of investigation to see. While most overlook HBD, it could play a vital role in the evolution of the Hive ecosystem.

HBD is a debt-based instrument that is meant to operate as a stablecoin. Unlike HIVE, which can have wide fluctuations in price, HBD is meant to be pegged near $1 worth of HIVE. This is much preferred for commerce since merchants will receive a payment mechanism sans the volatility associated with HIVE.

HIVE is a governance token. This is one of its main utilities. At the same time, we also have the Proof-of-Brain mechanism that is determined by the amount of Hive Power (HP) one has.

The Hive Backed Dollar, on the other hand, is designed to facilitate commercial transactions. Merchants require stability and HBD aims to deliver that.

Where we see the relationship enter the picture is in the conversion mechanism that is built into the Hive blockchain. Each token can be converted to the other, at any time. Thus, when HIVE is converted to HBD, more of the later is "printed". This will expand the amount of HBD that can be used for commercial purposes.

It also could have an impact on the price of HIVE. As more is converted and housed in HBD, there is less HIVE on the market. Of course, this can go both ways, which could unleash a great deal of HIVE being created.

For that reason, it is vital to build out the use cases, giving people incentive to keep value/utility in HBD.

Interest Paid/Haircut

@dalz put together a short post about raising the interest payment on HBD in savings to 20%.

Before we can get into that, we have to identify the fine line that we have to navigate. The goal of a stablecoin is for it to be used. In other words, we want commercial transactions taking place in HBD. This is the primary function, to exchange value.

Of course, savings is also part of the equation. In the world of DeFi, having an aggressive rate, especially on a stablecoin, could bring a great deal of interest.

Here is where some navigation is required. The rate paid at the core level must be high enough to garner attention and motivate people to hold the token. At the same time, it cannot be so high that people focus solely upon that and never want to part with their HBD. That is one of the problem in cryptocurrency. Because of the returns people get from HODLing, they refuse to utilize them for payments. Hence the explosion of stablecoins.

One of the features of the interest being paid on HBD is that it generates more HBD. Since we are dealing with a lack of liquidity, this is helpful. Raising the interest would help to facilitate this at a faster rate. Nevertheless, we need to be careful not to set it too high and sabotage the future use as a payment mechanism. As we know, while it is possible to lower it, that might not be the best course of action from an optics perspective.

Then we have the haircut rule. For those who are not familiar with this, the blockchain will stop producing HBD when the ratio of value gets to 10% of that to HIVE. What this means is that 50/50 payout will eliminate the HBD portion and payout in liquid HIVE. This continues until the rate drops below the threshold.

This point was brought up in the comment section of the above-linked post.

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We do have some discussion of raising this level to 20% or even 30%. What this means is that a lot more HBD could be in existence. This is what is required if we are to have it operate as a true stablecoin. It cannot legitimately operate if there are only 25 million in existence (with a significant portion of locked in the DHF).

Lack of Liquidity

In short, this is creating a host of problems for HBD right now. Much of what ails it stems from this single point.

To be an effective stablecoin, a peg needs to be maintained. Since the introduction of the HBD Stabilizer, we see marked improvement. The wide swings on the token appear to be a thing of the past. Unfortunately, the range is still too wide.

Over the past couple months, we have been between .90-1.00 on the downside and 1.00-1.20 on the upside. For the most part, we held between .93 and 1.06. The range is tighter yet not tight enough.

One of the ways to resolve this is with liquidity. When any asset is scarce, it will tend to have a wide gap on the bid/ask. This creates more volatility than is desired. At the same time, people avoid arbitraging the situation due to the fact the lack of liquidity eats into their potential gains. That is what truly is needed to help keep the peg. In other words, HBD Stabilizer needs more help from the market.

This also shows up in the fact that one exchange can basically drive the price of HBD. Since few exchanges are carrying the token, it is difficult to acquire. Of course, without many in "print", it is hard to populate a ton of exchanges as it is.

It really becomes the chicken or the egg scenario.

Some Proposed Steps

  • Raise the haircut level to at least 20% (30% will be better)
  • After that, urge the witnesses to increase the interest to at least 15%, if not 20%
  • Applications on Hive should start to integrate HBD as a payment option
  • While HBD is scarce on exchanges, HIVE has a much better reach. Thus, people could focus upon buying HIVE, bringing it on-chain and using the internal exchange to turn it into HBD. There is no wait or conversion required.
  • Start promoting HBD as part of the outside social media engagement. Relate how there is a low-risk, 10% return on a core layer, blockchain-based token.

Hive Backed Dollar is a hidden gem for the ecosystem. With all the attacks that are taking place from regulators, Hive already offers a solution. We also can see how the growth in use of HBD could have a great deal of impact upon the overall value of HIVE.

Like everything else on Hive, we all have a part to play in this. It starts with the conversation and putting some focus upon HBD. Each of us can place a minimal amount in savings. Perhaps consider taking a few of your Hive payouts as 50/50 each week. That will help the system to organically create more HBD.

If you are a trader, look to assist the HBD Stabilizer by trading this pair when you see opportunities. Increasing the number of transactions, even on the internal exchange is a help.

When we step back, Hive is developing a nice package of offerings. There is a lot to what we are creating. We are bearing the point where we can leverage different aspects of the ecosystem against each other.

Hive Backed Dollar is just another piece in the arsenal. When we look at complimentary features, this is certainly one of them. The key is to integrate it into all the other things we are doing.

Start the process by letting us know what you think in the comment section below.


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HBD is undervalued in every possible sense of the word

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(Edited)

We already accept and actually I would prefer payments in HBD on the https://hivelist.store as well as I accept it on https://weedcash.store. I am paying vendors out in HBD for sales on the Hivelist.store as well.

It can be a bit annoying with the price swings, but it works and yes has gotten allot better since the conversion mechanism, of which I use daily to pay my personal and business bills. I keep a round of 4 conversions going at a time, once daily. Currently up to 200 Hive a day which produces about 75-76HBD a day which I will split between savings and the rest gets traded out to where I need it for expenses and bills, etc. then the savings gets taken to pay big bills at the end of the month and what is left over goes back in the the Hive Wallet for either savings or exchange to Hive to build up the conversion pool.

To keep the Hive conversion pool growing, I am feeding it with HE token rewards sold back into Hive, and my Defi rewards from Cosmos and Cub.

It has built me up enough to have the freedom to do what I need and to let me work on my businesses and content full time!

In other words… Hive and HBD are my heroes lol

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%20-%30 interest rate for HBD is a big thing. I think much more HBD will move to savings.

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I would think that would be something that we could take to twitter and other social media to promote. The challenge is that we cant do it until it is easy for people to get HBD.

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It's been a long time since HBD hasn't moved as high as the Hive price, why does that happen, does HBD have a lower supply than the hive?

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HBD has a much lower float as compared to HIVE.

The former is meant to be pegged to a dollar worth of HIVE. If HIVE is above a dollar, then it will be higher than HBD.

Unfortunately, the HBD is below the peg right now.

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Is there a possibility in the future HBD will increase in price?

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I think back in the days when the value of HBD was so much higher than Hive it was hard to see it as a viable payment method. There was that unit bias at play for sure. Now, it seems much more realistic. Again, I know unit bias is coming into play there.

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i already sent my 300 HBD in my holding account,, wallet, and i will save more HBD in my holding account, so my target is to save at least 1000 HBD IN SAVING WALLET FOR NEXT 3 YEARS,,, YES,, 30% IS GREAT, BUT I WANT TO KNOW, I SAVED MY 300HBD TWO MONTH AGO, BUT I DID NOT GET INTEREST, IT WILL ADDED AUTO OR ON POST VOTE,,,, I DO NOT USE MY HOLDING ACCOUNT FOR POST

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You need to manually claim. I usually do so through PeakD. In the picture below, the blue button should be like "claim now" or something like that and you will get your interest.

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To be an effective stablecoin, a peg needs to be maintained.

That's for sure and since you mentioned that users are mostly interested in staking it rather than spending, you should know I would be a happy spender, but how?

I never understood the meaning of HBD until reading this post. Hope to one day see HBD pegged. It's a "stable coin" of a different breed. Unregulated one, a matter of fact, as you pointed out, it can't even be regulated.

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It's a "stable coin" of a different breed. Unregulated one, a matter of fact, as you pointed out, it can't even be regulated.

This is an important point. We just need to keep the narrative going. We could see a really incredible piece of the Hive ecosystem making a lot of noise.

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Hoping we can increase the haircut to at least 20% or more on the next hardfork, by the way, do you know when the next hf is expected?

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I havent heard a date but I would guess it is going to happen after the new year. Maybe Late January or February.

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(Edited)

It can’t happen soon enough, we need liquidity with HBD to make it a true stable coin.

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I think increasing the haircut should be a priority and having a higher interest rate will garner more attention. However I think most of the top witnesses seem happy with the current rate.

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HBD is an amazing tool that we have here on hive. When hive goes up I buy HBD, when hive goes down I exchange hbd into hive. It's a great way to profit from market movements without needing to go out of the ecosystem and without any fees. I agree that having too high interest rates would have the effect that people would simply hold it. People keep the good money that gives a lot of interests and stability and they part with the bad money. HBD might become a hodler money and couldn't fullfil it's purpose for e-commerce.

If I understood the mechanismes correctly, if we have Hive at 10$, the number of HBD in circulation can grow 10x without the nee to change anything :-). That seems like the best solution lol

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If I understood the mechanismes correctly, if we have Hive at 10$, the number of HBD in circulation can grow 10x without the nee to change anything :-). That seems like the best solution lol

From this point, yes that is correct. That would equate to 250 million HBD (roughly). That sounds like a lot until you realize there is 34.9 billion USDC in circulation according to their website.

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Thank you for your easy to understand explanations, all this time I never really knew what the haircut was for; I knew it was a thing, but I didn't know why. I agree if the goal is to make HBD as stable as possible, increasing that to 20 or 30% would probably be the most helpful thing!
Meanwhile I will keep plunking a few HBD into savings as I can. :)

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Meanwhile I will keep plunking a few HBD into savings as I can. :)

That is a help. For every 10 you put in there, that produces another one over the next year. We are going to need a lot out there.

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Lol, I keep saying HBD is not a stable coin, otherwise it would behave like other peg coins and fluctuate no more than 1-2% max.

Anyway I think the lack of liquidity is down to the countless HBD (de)stabiliser posts anytime it goes to $1.30 or more. Any sane person who sees those who doesn't know the history of Hive just thinks, well I'll stay away from that one.
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HBD's biggest chance of survival is its use and future use as an NFT buying token. Otherwise I see it as pointless.

Cg

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The majority of my post reflect 50/50 HBD/Hive. I prefer to get paid in both. Once I receive payment, I power up my hive holding an amount for Hive Power Up Day, transfer some of it to HBD savings and convert some HBD to Hive for investing in various 2nd layer tokens or passive income tokens.
A higher rate on HBD savings would be nice but 20% may be a little high since that is greater than the amount you could get curating Hive. How important is the need for holders to power up Hive vs place the funds in HBD Savings to earn that %?

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How important is the need for holders to power up Hive vs place the funds in HBD Savings to earn that %?

Interesting question. The fact you are taking a 50/50 and then selling it means you are creating new HBD from your post payouts. That puts it on the market when you sell it.

I tend to try to add to both personally. Is one more important than the other? I guess it depends upon what you place the biggest priority on.

Having more HP is never a bad idea in my view.

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On most exchanges, HBD is not as liquid as hive. If you look at Coinmarketcap, the volume of HBD traded across all exchanges in the last 24 hours was only $290,947.

Whereas the volume of Hive traded across all exchanges in the last 24 hours was $268,096,463.

HBD will struggle to get traction as a stablecoin unless volume and liquidity improve.

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Hard to do that with only 25 million or whatever is out there. We need a lot more HBD plus use cases.

So we are truly in "the chicken or the egg" situation.

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The difference in trading volume is around 1000x though, when the difference in amount in circulation is more like 15x, and even less of a ratio when considering only liquid HIVE.

But I don't believe most reported crypto volumes anyway.

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That is true. Trading volumes are even wider than the float out there.

Less exchanges have to impact that although, I would imagine, a lack of use cases is also feeding into it. Why would an outsider even jump into HBD?

At this point, we dont have the mechanisms in place to leverage what we truly have to offer.

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interesting, i had no idea the intention of hive backed dollar was for commerce transactions, i thought it was just a store of value, thanks for the info!

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It is meant to be a stablecoin.

We only started to focus upon it in this calendar year. There were great strides made but more is required. Hopefully, if we keep focusing upon it, people will start to get involved in trying to push the idea.

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Hive Backed Dollars (HBD) - Underrated

Hive Backed Dollars are honestly the most underrated part of the Hive ecosystem.

Dalz' look at the total stablecoin market cap today was a real eye-opener for me.

Seeing just how big the stablecoin market is, and just how insignificant we are, is sad.

Hive Backed Dollars are one of the best, untouchable algorithmic stablecoins in existence and we NEED to be doing more to promote this fact.

I have to get my head around the tokenomics of the haircut level, but if we can sustainably somehow offer 20% interest on HBD in savings, then it is a no-brainer.

We would then match Anchor Protocol's interest rate on staked UST and immediately put Hive Backed Dollars in the news.

Is there any discussion about this on-chain from our witnesses?

I'd love to read some proposals and hopefully throw my support behind those taking action on bettering HBD.

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There have been a few articles about the haircut level and increasing it. Blocktrades and others made their feelings known in some of the comments.

He is the one who started the idea of 20% or 30%.

Hive Backed Dollars are honestly the most underrated part of the Hive ecosystem.

I would agree with this statement. We have a lot to offer. For me, I think it starts with people focusing upon it and trying to get a lot more out there. This is something that starts with each of us saving some.

Plus, the relationship between HBD and HIVE will likely have an impact on the price of the later.

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(Edited)

If the Hive-Hbd price relation was adjusted automatically by an algorithm like Terra-Luna and Tusd, there would be less fluctuations. In Terra-Luna case, total value of the coin is used to adjust the Tusd price. Luna is built for the stable coin issuance, I don't know if it is easy to mimic their mechanism.

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one thing i had been thinking about was if there was a "longer term super savings" that could pay more than 10% but maybe it would have to be locked up for longer than the 3 days. this would provide more protection in addition to the higher interest rate, which would encourage people to use that feature. just something i had been thinking of

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it would also be useful to free conversion fees in the internal market.

A free rate would be useful, the 3.5 day conversion isn't always advantageous

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There are conversion fees but none for swapping on the exchange.

In short, there is a price for creating money. Is this the proper path? Not sure but it does help to offset some looking to game the system.

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I'm confused. Explain all the same, what will be useful now for the HBD, not to convert it to Hive? Or not?

I really want to participate in the development of Hive, but I'm a beginner, many things are not intuitively clear yet...

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I would suggest not worrying about it too much at this time. Hive is the governance/POB token while HBD is designed to be a stablecoin.

There is a lot to learn if you are new to Hive and leaving comments like this is a great starting point. We are dealing with some advanced stuff when discussing HBD and HIVE conversion, can be overwhelming as a newcomer to the platform.

Stick around, stay active, and you will find yourself learning more about things.

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Thanks! Yes, a lot has already become clear on Hive this month. I love this community and the people here!

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Welcome @stdd.

Keep engaging and doing what you are. That will really help to make yourself standout. You will see that, over time, it benefits you in so many different ways.

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Me gusta ese comentario de qur las personas pasan a ser arbitros de au economia . porque realmente si estamos inmersos dentro de esta plataforma tenemos que saber cuando hay deficit de una moneda u otra . y entender que todo lo que hagamos tiene que ser en beneficio de esta blockchain , ya que si esta avanza lo hacemos todos

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Excellent explanation of what HBD is as well as great suggestions for improving its stability.

Start promoting HBD as part of the outside social media engagement. Relate how there is a low-risk, 10% return on a core layer, blockchain-based token.

I will be sharing the knowledge you presented here with my following on Twitch.tv. I am not a super celebrity, but of late I have been letting the Splinterlands folks know about the importance of the HIVE economy in their Splinterlands asset accumulation.

By the way, @bluefinstudios shared your post on Pimp Your Post Thursday (PYPT) earlier today! You have been pimped.

Long time since I have chatted with you. I hope all is going well. Have some !PIZZA. It is doing well, so for such a great post you are deserving!

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@shadowspub shared your post with me. Great helpful post about HBD, and HIVE and even someone like me, on platform for over 4 years, can learn something new.

I enjoyed it enough that it was important to share on @shadowspub's PYPT (Pimp Your Post Thursday) Discord show. I hope all the newbies on #DreemPort and the experienced platform folk enjoy the post as well!

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@taskmaster4450 always puts out great content. Sadly I have missed a great many of his posts and videos as I have been involved in other pursuits. I am glad that you shared his post on PYPT!

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I wonder what would happen to our HBD if suddenly the US dollar failed or crashed hard?

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