Hive: Growth Versus Security
There is a quandary that arises. When we are looking at some of the potential growth areas with Hive, we see some issues. There appears to be a lot of things standing in the way of massive expansion. Many feel it is best simply to get rid of them.
The challenge with this idea is the fact that we often have to choose between growth versus security.
We all want Hive to grow rapidly. For this reason, proponents of this believe all barriers should be removed. However, when we look around the cryptocurrency industry, we see this might not be the most sensible approach.
In short, someone has to be minding the store. If we are not paying close attention to security, this could mean the end of our ecosystem. Attacks come in many different forms, including hacks. It is getting to the point where it is a weekly occurrence.
For Hive to truly excel, we still need to take the long-term approach.
The last few weeks are filled with news about the potential of the Hive Backed Dollar (HBD) and moves to push that into the forefront of the industry. We had the witnesses moving the interest to 20%. At the same time, a liquidity pool was established on Polycub. A number of articles were written about other projects that are being discussed.
Essentially, HBD could be the breakthrough that Hive is desperate for.
Of course, there is the issue with liquidity. Here we see a challenge if we are going to pull in hundreds of millions of dollars in investment. We have under 10 million HBD floating outside the Decentralized Hive Fund.
This should not be a problem since the correlation to HBD and HIVE is rather simple. Just convert HIVE to HBD. Many start to do this until they realize there is a 5% penalty fee on top of it. Thus, if the price of HBD is below $1.05, someone is taking a hit.
Why is this in place? Many feel this should be eliminated.
Here is where security versus growth enters. Sure it would make life a lot easier from a growth perspective if we didn't have that. It could, however, open up the door to price manipulation.
Here is where a challenge could enter. If someone was able to game the pricing, and acquired a large amount of new created HBD, that could be converted back to HIVE and used to gain control of the system.
Naturally, there is another barrier in place to help prevent that since it takes 30 days after power up for governance to take effect. That said, it still could hurt the price of HIVE, sending it plummeting, thus affecting other things such as the haircut rule.
Could the 5% fee on conversions of this manner be altered? It is worthy of discussion. Since that went into effect, the governance delay with power ups was implemented. Perhaps this added level of security will allow for the altering (if not elimination) of the fee. As a compromise, maybe it could be dropped to 1% or 2%.
The tendency, from observation, appears to be erring on the side of caution. This means a run up similar to TerraUSD and LUNA is unlikely. That system operates similar to Hive yet without some of the safeguards. It also has a great deal of Venture Capital funding. Hive is relegated to the community for its growth.
Another aspect that stifles the pace is the haircut rule for the creation of HBD. If the market cap of HBD reaches 10% of HIVE, then it stops printing that and payouts come in the form of liquid HIVE in addition to Hive Power.
This is being moves to 30% in the next hard fork. Some believe it could easily be 50% or even 100%. Again, erring on the side of caution.
As frustrating as it can be, the goal is to avoid the death spiral fears that USDN suffered. Here we had a situation where someone with a lot of WAVES was able to use DeFi to produce a lot of USDN and attack the system. Fortunately, for that ecosystem, it ended in reverting back to normal.
However, we have to be careful of vulnerabilities such as that. We know there are many instances where attackers will not stop until something is completely destroyed.
Resiliency Comes From HIVE
We often find ourselves in the chicken-or-the egg situation on Hive. We want to drive things higher but have to limit it due to security concerns. Many are focused about how to make Hive more resilient. After all, if something is going to be a player in the creation of a new financial system, it best be defensible because attack will come. For the moment, Hive is so far off the radar nobody is bothering to go after it.
This will not be the case as success is enjoyed. Hackers, governments, bankers, and scammers will all be at the door in full force.
The way Hive is designed, one of the big keys is HIVE. We need to make this as resilient as possible. For example, growing the market cap allows for a larger cap on HBD. How do can that be done? Chicken or the egg.
While technical developments can protect the infrastructure, money attacks have to be defended at another level. Here is where the major players seek to exploit if they want to take you down. At present, Hive is an easy target with a cap under $500 million. Chump change to those on Wall Street.
Attack vectors get more difficult with growth. Now we are back to the quandary. Growth becomes a form of security. However, there is a period where the growth can open up vulnerabilities which derail the entire process before that point is reached.
It seems, each time one problem is solved, a couple others show up. This is because of the balancing act. Do we eliminate some of the defense measure that were instilled? In some instances, it might be a smart move. This is especially true if others were implemented.
Ultimately, one of the best defenses in cryptocurrency is to have the native coin in as many Diamond Paws as possible. These people are the ones who are willing to stand up to attacks when they take place.
At times it is not easy to deal with but the issue of growth versus security is always in play. It is a trade-off, often an unappealing one. That said, nobody wants to wake up and find Hive, not only under attack, but crumbling.
It is for this reason that the equal attention is required on both factors. If growth becomes a threat to security, then it is not worth the cost.
Something we all should keep in mind.
What are your thoughts? Where are some areas that discussion is worthy regarding adaption to move forward.
Let us know in the comment section below.
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