Hive Backed Dollars (HBD): Market Based Currency

What is the future role of HBD? Many of us are optimistic about what it can evolve into. In the stablecoin world, we are seeing not only tremendous growth but a lot of changes.

This means that what is current might not be the case in a few years.

Technology evolves and it best keep in mind that cryptocurrency is, at its core, technology. There is no greater evidence of this than the stablecoin market.

What started out as a simply create a token and back with a USD is now evolving into something more advanced.

The idea of Hive Backed Dollars (HBD) as a stablecoin carries with it some powerful properties.

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Market-Based Currency

Bitcoin maximalists believe that Bitcoin will fill every role. They mistakenly believe there will be a global payment system based upon that cryptocurrency. To them, it is the answer to all our problems.

Their complaint is the idea that central banks can print endless amounts of money. Never mind that this is factually not true since the major central banks do not print the nation's currencies, there is another challenge. These individuals believe the solution is fixed money. Of course, this goes against free market conditions.

Throughout history, fixed money always led to tyranny. With that system, the golden rule enters. As the total amount of money cannot change in the long run, those with means can accumulate as much as they desire.

At the same time, it is impractical. To believe that economies operate in such a simple manner is mistaken. The idea is to have monetary distribution, where supple meets demand. This is the most basic of free market principles. This is known as money equilibrium.

The demand for money is not static. There are times when economies are growing at a terrific rate and more money is required. Of course, the opposite is also true. Hence, money needs to be elastic so as to expand and contract as required.

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Community Driven Currency

Our present system seeks to do this yet fails miserably since it is the commercial banking system that generates the currency. In a credit-based system, this is done through loans.

However, a major issue arises. Banks are always going to operate in their own self-interest. Therefore, when things get back, they are going to tighten lending, thus reducing the supply of money, not expanding it. For all the huffing and puffing the Fed does, it cannot force banks to lend. In other words, it is completely out of their control.

With the Hive Backed Dollar, there is no central entity that is making the decision about the money supply. Instead, this is completely up to the community. While we are in the early stages, we can see how this can grow into a powerful mechanism.

The fact anyone can generate HBD shows the market is in control. When the totality of people want more HBD, they will convert HIVE to expand the supply. Naturally, the reverse is true.

At the moment there is little demand for HBD since use cases are minimal. Nevertheless, if this expands over time, we could see the need for more HBD.

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Base Layer Currency

Most of the stablecoins that exist, especially the early ones, were established by centralized entities. There were companies, labs, or foundations that created the project. We also see how many of these reside on the second layer.

With HBD, we are seeing a token that resides at the base layer. This is crucial. That means the "control" comes down to the distribution of power across the blockchain. This is altering things greatly.

Whereas the regulators are looking to make companies like Circle come under the banking laws, the same does not hold for a blockchain. This is especially true when that does not have a foundation or company that is behind it.

Operating at the base layer creates a barrier of protection. Since there is no centralized entity, regulators are simply powerless. The token creation and distribution is based upon the code. This is accepted by the block validators, of which nobody controls. Anyone is free to not accept the code. However, if the consensus is to upgrade to it, that detractor is essentially outvoted and the update goes through.

HBD is an algorithmic stablecoin. This means that it is really operating based upon the protocol laid down by the development team. Here we see how it is truly a technology and not just a bit of financial wizardry. It is all run according to the blockchain software.

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How Much Money Is Needed?

This is a question that many try to answer. Unfortunately, it is impossible to get right. Anytime entities try to plan what the demand is going to be, they get it wrong.

The reality is there is no way to know. Economies are complex systems that go through different phases. There are good time as well as drawbacks. Recessions are a part of the economic cycle. The business cycle is what drives this. For all the think tanks and academia believing we can evolve around this, it is still in force.

Therefore, we need a monetary system that can expand and contract to meet the conditions set forth by the market. HBD can accomplish that.

When demand is high, more can be created to expand the supply. If demand weakens, which it inevitably will, the conversion out of HBD will contract the supply to meet that condition.

And all this is done without any meetings or minutes to report.

The Hive Backed Dollar (HBD) is very powerful tool in the creation of our online economy. Since the digital world expands at a rapid pace, it is best to have a currency that can help to feed that growth. The fact that money equilibrium can be set any time of the day is something the existing system is lacking.

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