Tornado Cash: Another Call For HBD
By now most are aware of the United States Treasury’s Office of Foreign Assets Control (OFAC) move to ban Tornado Cash in the United States. This is something that is splitting cryptocurrency community. Some believe it is a good step to take while the rest feel it is more evidence that decentralization is needed.
For months we discussed Hive and what it offers. The fact that it is outside the reach of any government or central bank makes its coins very valuable. As of now, few realize that.
Hence, we get another example of what is needed. Of course, while many are scurrying around looking for a solution, those on Hive can say "we have it".
Here is a tweet in response to the action taken yesterday.
Welcome to the Hive Backed Dollar (HBD)
With HBD, we are dealing with a stablecoin that is not backed by any centralized entity. Thus, it is not located in any particular country. We now see how a coin that exists on a global blockchain is has nodes all over the world is very powerful. This is something that is only going to be come obvious over the next 24 months.
HBD is backed by $1 worth of HIVE. This means that we have the situation where the backing agent is not tied to any centralized entity. The second coin operates like the first, it is controlled by the blockchain.
Of course, many misunderstand. Where HBD is different is the fact that it is an algorithmic stablecoin, not one backed by USD. The $1 is simply a unit of account. The events yesterday bring out more confusion.
Once again, people not grasping what gives a currency value.
Either way, HBD solves all of it. The coin is backed by another decentralized coin controlled by a blockchain.
Derivatives As A Defense
We discussed the idea of derivatives of HBD providing it value. Here we an example of why derivatives are vital.
When we take a currency and change its form, and repeat this action many times over, what is the government to do? If we think about currency like water, we then understand what derivatives can offer.
Water can exist in three states: solid, liquid, or gas. In the end, even when it is ice or steam, it is still water.
HBD can be the same way. At present we have pHBD and bHBD. These are derivatives of the coin. Obviously, they operate on different blockchains, meaning that three actions are require to stop the movement of the coin or tokens.
Now, what if we added bonds to the process? Instead of operating as a coin, it was another financial instrument. In the end, a bond based upon HBD (or the derivatives) is like freezing water.
Let us now take this thought process even further. What if we dropped a version of HBD on EOS, CARDANO, and Thorchain in addition to the EVM chains? Next, add in bonds, futures, and options tied to all them, each being able to transfer value between wallets.
What do you think that looks like?
Ultimately, once we are 10-15 products deep, it becomes a while goose chase. Of course, there is no reason why there has to be a limitation of one on a chain. Why not create polHBD or bHBD2?
What effectively happens is that a ban on one, like HBD, means people simply swap out to another form of the coin, on a completely different chain.
Even If You Agree With This Ban
The problem with this entire situation is not this ban per se. Few would defend hacks and probably less the North Koreans. However, the concern is always the next one.
As we all know, governments, i.e. politicians and bureaucrats, will politicize anything. These days, get on the wrong side of the agenda, even by mistake, and you will find issues.
When it comes to freedom, until caught, criminals enjoy it in totality. If one does not care about adherence to laws, then they do not matter. The individuals who suffer, of course, are the law abiding citizens. History is filled with examples of where these were the people stepped upon.
One of our major focuses with HBD should be expansion simply as a defense mechanism. Through the use of other chains, we can see how the attack vectors diminish. If we get 25 or 30 deep with HBD derivatives, stopping it becomes very difficult.
Even if one gets banned, another one could be spun up.
And one final note: at that point utility for the coin skyrockets.
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So does it mean that the SEC or any USA financial watchdog can ban HBD, or something like outlaw it in their territory and also elsewhere?
sure they can. Hit exchanges with sanctions and blacklist it.
And its gone.
So it means crypto is 100% decentralized then.
no, it has centralized points of failure.
IF witnesses for example on hive would fear jail in US, most of them would turn off service.
And that’s why it is important that they are spread all over the world
I think this is a good point and seems more witnesses from many countries should be welcome to the chain. Maybe this might help.
Sorry I wanted to say that if the USA can stop any currency on this platform, then crypto is not 100% decentralized, though I am not wishing this to ever happen in the case of HIVE anyway. But all these latest development gives much concern.
It is likely that most of them do not have their servers running in the US. If that is the case, hard for the US to take jurisdiction.
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risk/reward. If someone dox a witness and those fears Sanctions around the world ( swift for example) it could be big pain.
What is needed is anon funds + anon witness server ( semi anon).
Like the election goes to multi-hand ( like proxy) or hides some % of votes.
Not important today. But maybe in the next years to be a real uncensorable web3 foundation.
And it could only work with "possible" anonymity. Even if not used.
If witnesses shut off, new witnesses would get voted in. There would have to be no one in the entire world caring about HIVE or willing to run witnesses to "run out" of witnesses.
sure that's theory.
But think about some really sensitive shit comes to hive. For everyone readable.
Maybe something politicians hate and they see it is impossible to censor because of XYZ frontends.
So the witnesses would be IMO the easiest target to hit.
Will it be successful? Most likely not.
You're kind of arguing that nobody at all would want to be a witness, which I find very doubtful. No doubt some current witnesses would drop out even if not directly targeted.
Considering the possibility that we could end up with more anon/random witnesses, we ought to be taking a look at some of the security assumptions currently being made that depend on witnesses getting voted in on reputation and not wanting to misbehave because they could get voted out. That would be weaker if witnesses are anon, but maybe not entirely gone as long as witness rewards are high enough.
I agree,
It is a very difficult topic.
I expect for now all witnesses ( maybe 90%) can be doxed by exchange with real names ( because of KYC). If big brother asks, they will answer IMO.
And if the first should get heavy problems, it becomes not super likely the next wave of people step instant in. Maybe some, but that's not cool for a web3 experience.
That's in theory a problem if hive has a lot of success and gets targeted. It could also be retarded argued it is security because those people run the chain. Not true but enough to add some pressure.
to change this, anon memes by default. Not perfect but most likely exchanges accept the default. Solves not the core problem, but particular.
Voting is really really difficult because of reputation and trust.
Maybe a witness becomes only the executing part. Like the witness, server does not receive the votes in the first place.
Votes go to the witness (proxy) and the witness can vote the server (witness).
Why? because it could adapt fast. But it's not a perfect solution for other security reasons.
Another idea could be a DAO witness server. Ran by elected people ( for the tech side with multi-sig). Doesn't need to be top 20. But would be an uncensorable backup. With 10 of them, it could work with shared access to some elected community people.
Then it becomes IMO more difficult because another layer is there that's more robust about pressure against singles.
Also not perfect, but the best thing I could imagine that could work in real.
I don't think hive would face anytime soon those problems, but it is most likely too late to react.
It's all theory and we will only see what happens if "the mad man" actions has for consequences.
Because ETH will most likely get the first hit and then Hive can adapt.
The next wave will just be more careful anons. The cost of running the witness server itself is not very high (helped a lot by optimizations since the Hive fork). Even if there isn't an easy way to cash out people will still do it to accumulate stake.
I don't think it needs to be instant. If there is a bit of downtime or slow block production due to missing witness slots, that's okay, the chain will still work/recover.
Good point!
Sure that wave will most likely never use the hive wallet. Any maybe runs by the same witnesses particular :D The question is, how will be the voting work?
"I'm here to save the chain" as an electing/voting plot can work, in a short term. But in a long run some kind of "reputation" in an anon way is needed :D
"Known Team" meets "trustful anon" :D
Btw, ETH merge will be a very interesting "project", because to be honest, the difference between centralized software and a blockchain becomes smaller and smaller :D
If the first transactions get rejected on a "blockchain" basis, the demand for uncensorable can become dramatic :)
What do you think about it? The transformation was obvious, but remember me every "ownership proof" on eth will be nothing more than an "ingame item" on a game that can be deleted anytime soon.
Or just make it matter less who the witnesses are. All that is really needed is to pack transactions and sign blocks (this is problematic right now because there is no incentive to actually include transactions in blocks). Voting on hard forks can be modified to work on the basis of direct stake voting, or in a manner better suited to anon witnesses (for example, witness can only change vote once per day, which means stakeholders can vote for a witness without needing to trust the witness to vote in a certain way).
The price feed is potentially problematic. I don't think that is really solvable without reputation.
Good point! And overall good ideas!
Price feed could maybe work with a cluster of connections to other witness price feeds that only allow xyz % difference. Otherwise, price feed becomes invalid.
like "get price" + " compare price".
If a block has an invalid price, it becomes the price (calculation) from the block after ( or before).
I mean that could work as long not all anons go full retard :D
gone on CEXs, but that's about it. Plenty of ways to get the value to other chains and then back to CEXs. But of course just leaving out CEXs out of the equation would be the best way of handling this
Yes and can flip HBD to another coin to pass through CEX.
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Centralized exchanges aren't that useful for HBD anyway. The most useful exchanges are the internal and the pools. They could ban HIVE on centralized exchanges, but banning HBD wouldn't matter.
baning hive is in some way the same :)
The SEC cant ban anything. They can only sue for violations of securities laws.
As for the USG banning, they can ban anything; the question is how effective. The coin are not resident in the United States, so that is a problem.
The regulation of something in the digital world shows how governments are suited to handle it.
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Thanks for the clarity. Even though the SEC regulatory procedure and so called HOWEY test looks manipulative to me (because have read paper severally but seems not to understand what they consider a security offering), I'm not sure hive chain goes against their rule.
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HBD needs to be anon coin shielded. Otherwise, hive assets will face the same problem if it gets attacked.
And it would be possible. Smooth told me that was the plan for steem in the past.
That would be innovative.
Anything else is the same in green.
Anon is an interesting idea and certainly something that should be looked into. Nothing wrong with adding a privacy layer to all this.
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Exactly. Could mean hive becomes delisted on some exchanges. But that would be a worthy price ( if dex infrastructure is 100% working at the time with decent volume).
Maybe no delist because anon funds would be optional?
Who knows. In a long game that's the way how web3 should work. Also, there would be less "simping" around whales.
Less of the feeling " its a matter of money". If anon everyone is equal.
And people can choose, would make it even better IMO :)
Was even partially implemented
https://github.com/steemit/steem/issues/568
https://github.com/steemit/steem/commit/9c5b957c9e1fa376c7c4df2204fc7a0fe1961457
OMG! you are a hero!
Can we do something about it to make it a thing?
@taskmaster4450le post about it! If I do nobody reads it :)
No way that code would be usable, I don't even think it was finished. Would need development resources to create usable code and stakeholder consensus.
even better!!! :)
Decentralization is fundamental but we have to be aware of the challenges we face and be flexible so that we can adapt.
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Apart from politicizing everything by different politicians and groups of powerful people,the ban is not needed. Thank you for this post.
Another year or two from now we will be looking at a stronger HBD as we take not of the attacks on centralized stablecoins happening before us, the advantage of being under the radar is we learn from mistakes and loopholes of others and strengthen our defense.
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The key is to keep spreading things out in every direction. That is why I mentioned derivatives. It keeps things moving.
Harder to hit a moving target.
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I believe Thorchain is still on Khal's radar, which means we would have derivatives there. Cosmos and its massive ecosystem could be a solution for a derivative too.
There are plenty of options and I believe we will see HBD, or some version, on Thorchain. That will add more resiliency to the coin.
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Makes me kind of glad that I have been putting as much into HBD as I can afford. There is definitely a lot of potential there and hopefully the masses will see it eventually.
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I believe there is a lot of potential. With the proper infrastructure and build out, we could see a masive step froward.
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First it's good to see a HIVE in coinbase) It will be huge. Community is strong) why not?
The way hive is designed is very powerful and this powerful hbd is, I think the rest of the world still don't know what they are missing. I'm so bullish on hive
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Best to fly under the radar and to give time for infrastructure to be build. This will be something that is vital going forward.
We need to get more decentralized infrastructure.
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Absolutely amazing education I got from you again today. I hope the world is listening.
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I just wish we had a better privacy layer for transactions. Not the private memos, but actual private transactions, but that’s why we also have Monero, lol.
I feel a little happy while looking at the price of HBD. In spite of the huge market fluctuation and red market, HBD is still very strong and has stayed stable.
The same thing happened in the previous bear market as well. Many people thought that this was the bull market but the market is holding strong.
HBD is a good stable coin that is already being used for good tradings and exchanges against Hive. In spite of that HBD also got popular recently after the APR percentage was increased from 12% to 20 percent.
I don't agree with the bans and I agree we need a decentralized stable coin. When specific people can dictate who can use the crypto or not, it won't be a good thing for anyone.
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We have centralized API servers too. People can run their own node to support services, but most don't (my services do run on my own node and keep going even when the main API servers are down or overloaded).