HBD Partial Insurance with BTC - Proposal to Print 1M USD of Hive

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(Edited)
Authored by @starkerz

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We are intrigued by the idea of using a pool of BTC, purchased using the Hive DAO DHF, as a partial insurance for the HBD stable coin, should the HBD fall below a certain USD level. We wanted to use this blog as a public forum to get feedback from the community and formulate a practical way that this might work.

This would bring a lot of attention to the Hive ecosystem and a lot of credibility to HBD. Our view is that Hive ultimately, is pristine collateral and will be used as such in the future, however a partial insurance backing of our stable coin with BTC, at least for now, will help to bring about that status for Hive quicker, than without.

The potential for the BTC community to use Hive as a side chain is beginning to look realistic especially with @BrianOfLondon's #V4V lightening donation payment system for content SEE HERE, which will be implemented into all threespeak front ends, and we hope on other front ends in the Hive eco system. This will make it very easy to donate or tip content on Hive using the BTC Lightening network. The interesting thing about this is that the content creator (the Hive account holder) receives this donation in Hive paid to their Hive account!

This combined with partial BTC backed insurance for HBD have the change to bring a lot of eyes to Hive


We see the potential for the HBD eco-system to develop as follows in the medium term:

1) HBD partial BTC insurance backing

2) Layer I Hive bonds with high APR returns

4) HBD as pristine collateral used to create a secure loan market worth billions of USD.


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What did Luna do?

Luna has had huge success with their algorithmic stable coin UST. Let’s take a look at what they have done:

  • They set a highly, expansionary APR return on their algo stable coin, which works similarly to what is already in place with Hive Backed Dollars and Hive.

  • If their stable coin peg breaks they pay out with Bitcoin and other alt coins they hold. The BTC account would be replenished over time with dollar cost average purchases (DCA) once the peg returns

  • Recently, Luna has had to reduce its stable coin APR rate, as with almost all DeFi stable coin initiatives, such a high rate of return was not sustainable.

  • They have also recently announced that they are insuring their stable coin with a partial BTC backing such that if their stable coin peg goes below a certain price and breaks the peg, users will receive a partial pay out in BTC from their multi sig BTC account. We would propose a similar model for HBD insurance being partially backed with BTC.

Hive has the opportunity to create a serious, truly decentralised competitor to this.


How Hive Could Improve and Truly Decentralise Stable Coin Insurance Backing?

  1. Decentralised Multi Sig Luna’s Multi sig BTC account is controlled by the creator of Luna and only a few investors. They were self- appointed. Luna says that their stable coin insurance backing is "Partially centralised" which means it is actually centralised. On Hive the community elected, consensus witnesses could be the guardians of the BTC multi sig account, making it actually decentralised.
  2. Sustainable APR rate Luna’s high APR return is paid from a finite, private fund, which was funded by their treasury. It is effectively a fixed, limited amount and not protocol driven, inflation based like the Hive DAO is. This means that the HBD APR pay out would be far more sustainable and long term than that which Luna provides and that the insurance fund could more easily be topped up on Hive if needed.
  3. Difficult to Regulate The Luna team sold Luna to buy $1.7Bn of BTC at current value. Since this purchase was made using Luna which is an ICO token, it is likely to eventually be regulated as a security. Voting for a proposal on the Hive DAO DHF using a decentralised vote to create the funds required to purchase the BTC and holding the BTC in a multi sig wallet is far more difficult to regulate as a security.
  4. Only Decentralised Backing Used Additionally, the LUNA team have insurance backed their stable coin with other alt coins. We propose Hive only to use a partial BTC backed insurance, without other alt coins, since BTC is actually decentralised and therefore, more difficult to regulate as opposed to other alt coins.
  5. Room to expand HBD expansion is starting from a much smaller market cap meaning the long term growth of the token is significantly more sustainable and offers a much greater, longer term return than Luna. HBD is starting off at a market cap of approximately $24Mn and UST market cap is now $17Bn. This is 700x the market cap of HBD. This means that there is a market for this stuff!
  6. BTC - HBD Direct Swap Liquidity It could be possible to send BTC to the insurance multi sig wallet in exhange for HBD directly from the Hive protocol in an autonomous way. Luna also do this, however their BTC mutlisig account is centralsied and the UST stable coin is issued to the investor in a centralised way for this transaction. This would create an additional supply of liquidity to assist investors accumumating HBD.

Result - Actual Decentralised Insurance Backing for HBD!!
Luna backed their stable coin with BTC and the crypto community loved it! There is no reason the same cannot be true for Hive, using actual decentralisation to achieve a similar partial BTC insurance backing of its stable coin HBD without the risk of regulation.

BTC Multi Sig

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How would we be able to safely execute the multi sig account on BTC? We would like feedback from the community on this. We would propose that it might include the multi sig being controlled by the elected consensus witnesses somehow, however, we are happy to entertain other ideas from you in the comments.

We think that it is possible for the BTC multi sig would be controlled by the Hive consensus witnesses with the tried and tested Hive blockchain consensus rules for holding keys to multi sig accounts and super majority voted governance decisions. A similar scenario is in place already with the DHF account for example.

HBD Insurance Partial BTC Backing Proposal

This is an initial exploratory proposal only, and we would like to further explore the best technical option in the comments below. This is subject to change based on input from the community. However, this is just to give you an idea of how the system might look:

credit to @smooth who helped us clarifysome of the ideas in this section

  • A proposal would be created to purchase, for example 1 million USD worth of BTC on a DCA basis over a 6 month period and put this BTC into the multi sig wallet.
  • As time goes on, the community could re-submit the proposal to top up this insurance BTC backing or even increase it. Should the HBD market cap increase significantly, it may be that the community wishes to increase the rate of purchase of BTC for insurance backing at this point as well.
  • It is important to note that if the HBD / USD peg is never broken the BTC in the multi sig account is never touched. BTC is used only when the HBD / USD peg drops below a certain threshold such as 0.98 for example, at which point, HBD being changed into Hive would be supplemented with a BTC payment to make up all or part of the difference.
  • The threshold below which BTC will be used to partially back HBD – Hive conversions should be set by the elected Hive witnesses.
  • Should the HBD/USD peg break the threshold (0.98 HBD/USD for example), the rate at which HBD is paid out using BTC insurance should be set at a lower exchange rate so that it is uneconomical to carry out large sized dumps of HBD for BTC and deplete the pool of BTC without first buying the hive off the open market and pushing the hive price up.
    An example would be that should HBD trade below the peg of 0.98 to 0.93 USD, 1 HBD could be changed to Hive at 0.93 USD worth of Hive. Approximately 0.05 USD worth of BTC would be paid out from the BTC multisig account.
    The remaining 0.02 USD would represent a profit that could be captured and paid back into the DHF.
    At 1:1 BTC to HBD exchange rate, a lot of BTC may be redeemed, but at a threshold of 0.98 and a conversion rate of 0.98 USD it is not a great spread and so should limit the orders to small sized orders only unless there is a lot of sell side pressure on Hive or HBD.
  • If the HBD / USD peg is broken, HBD received to the multi sig account in exchange for BTC insurance pay-outs should then be used to regularly DCA purchase new BTC to top up the BTC Multi sig account using all or some of the profits sent to the DHF.
  • A system could be set up where BTC is sent to the insurance multi sig account and the Hive protocol creates and sends HBD to the sender, in an autonomous way.
  • We would also recommend including $20K or so in the proposal for marketing budget to get the word out about what the HBD eco system is becoming in terms of high APR, BTC insurance backing, bonds and pristine collateral for collateralised loans.

Moving Towards HBD Being Known as Pristine Collateral
As mentioned above, this will help the crypto world more easily see HBD as pristine collateral. And over time, we envisage that the BTC insurance backing of HBD will not be required. However, this medium term insurance will build trust in HBD more quickly than without as it progresses on its way to the status of PRISTINE COLLATERAL!

Other Phases of HBD Progression Required
There are two other phases for HBD to go through to help it become seen and used as pristine collateral. Hive Bonds and progression to bonds as collateral backed lending. Let’s now look at Hive Bonds.

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Hive Bonds & HBD as Pristine Collateral for Lending

There has always been talk about Steem and Hive Bonds in the eco system, where Hive or HBD could be staked and locked in for longer periods and rewarded with a higher inflation.

In the medium term, we believe that the community has a great opportunity to organise and build a long term HBD staking system with which to back HBD inflation and market cap expansion. This would look something like the following (should be set by the consensus witnesses):

  • 7% APR with 3Day liquidation
  • 30% APR 365 day lock in
  • 10% of total bond, paid to other existing bond holders for early liquidation of 365 day lock in bond (rewards Hive bond HODLers)

Layer II NFT Bond Tokens

We would like to give some credit to @taskmaster4450 for bringing up and supporting some of the ideas below. SEE SUCH CONTENT HERE

The bond staking system could be built into layer I, however there is an opportunity to build a layer II platform which gives the investor an NFT when locking in HBD long term. The buying and selling of this NFT would represent buying and selling of bonds on a typical bond market. These bonds would always mature at 1 USD worth of Hive per HBD in the bond.

Layer II smart contracts could be built to auto return the bond NFTs that represent a collateralised Hive bond, meaning the lender would no longer have to trust a third party about the return of their collateralised loans.

Future Hive bond holders will be able to lend out their bonds and collect a fee, on top of collecting their HBD APR’s, without having to trust a third party risk intermediary.

We can now start to see how HBD can become truly the first actual decentralised pristine collateral system.

HBD APR Regulation and Hive Inflation Foresight
Such a bond market in HBD allows the community to see exactly how much locked HBD is coming due (bond maturity) in the future, and with this information, the community can plan ahead to ensure that a sound monetary policy is in place to meet the obligations without putting Hive at inflationary risk should excessive amounts of HBD be liquidated for newly created Hive tokens.

Outperforming BTC as Pristine Collateral & Maximum Stability
This sounds almost the same as what the US bond and treasury markets do today, and they are considered pristine collateral because they can always guarantee their USD payouts to their bond holders. With such a bond system, it looks like Hive will be able to do this too.

Furthermore, this outperforms a BTC backed bond system, since the value of BTC fluctuates so much. An HBD backed bond system, would always mature at 1 USD worth of Hive per HBD held in the bond.

Hive Backed Flexibility Additionally, the Hive eco system can adapt to issuing Hive Backed Rubles or Hive Backed Yuan. It does not have to stick to Hive backed Dollars, should the USD become an unstable or devalued currency.

Penalty for Early Unstakers to reward Bond HODLers
We also envisage a feature where, should the investor need to take their money out of the locked HBD bond earlier than the lock in period, they would pay a withdrawal fee which would be shared amongst the other stakers and the DHF for example. This principle is already employed on the HEX blockchain for example.

What Backs Hive Bonds and Stability?
In addition to the partial BTC insurance described above, the network effect of Hive, demand for resource credits and the locked in HBD in Hive bonds would form the backing of the liquid HBD token as collateral.

We believe this would create strong confidence in the stability of the HBD stable coin when combined with all of the existing stabilisation mechanisms such as the HBD stabiliser, the HBD:HIVE market cap limit (Hair cut) and the price differential in the internal swap market.

The high APR DeFi liquidity provided by the great work from @LeoFinance and loan collateralisation market (described in this blog) will stablisie the HBD token and create deep market liquidity.

Benefits of Bonds
This is a great summary for why holding bonds are good for everyone from @muratkbesiroglu:
https://hive.blog/hive-167922/@muratkbesiroglu/re-taskmaster4450-rae0ur

I liked the HBD Bond concept. It creates obvious advantages.

  • The benefit of a bond to its issuer: Since the maturity of the bond is certain, future liquidity obligations become definite. Thus, Hive can adjust its investments, bond issuances and returns according to its future liquidity needs. It is worth paying an additional premium for it. And as the HBD was obtained by Hive conversion, the value stands within the Hive ecosystem.
  • Benefits of a bond for the buyer: Buyers earn a higher return on the purchase of a financial product for which they have given up liquidity for a certain period of time. In fact, they did not give up liquidity since they bought a financial product that can be sold on the second-hand market. And they can use that bond as collateral.
  • Benefit of the bond for the second-hand buyer: They can speculate on the price of that bond. They will probably obtain a premium. They can also use it as collateral.

I really like the idea of selling bonds as NFTs. In Uniswap v3, LPs are represented via NFTs. The concept can be tested by issuing bonds with small volumes and attractive returns at the outset. It would be beneficial to create alternatives with different maturities to address various preferences. Issuing short-term bonds can make selling easier until people get used to the idea.

HBD as Pristine Collateral
Should the HBD partial BTC insurance backing and Hive bond system be built out, HBD will be in a position to form the basis of a pristine collateral lending, rehypothication and Repo loans market.

After discussing this with @taskmaster4450 at length, we believe that the HBD bond layer, means Hive, as pristine collateral, can, in a decentralised way replace centralised activities in the overnight repo and interbank lending markets.

This represents a vast improvement to and brings necessary transparency to the activites executed in the current shadow banking system in traditional finance.

The existing market for this is currently valued in the trillions of USD.

BTC is starting to be perceived as pristine collateral. There is a good chance that it will become the world’s preferred store of value and is already being used as collateral for certain types of low interest loans.

With the bond and collateralisation system described above and in more detail by @Taskmaster4450 HERE, the Hive eco system will ALWAYS pay out its bond holders in a sustainable way, as long as the code is written into the protocol, the community can guarantee on-going, current, promised APR rates on Hive bonds, and then self-regulate the APR rates of the new rounds of bonds.

Managed correctly, HBD will, with time, even be able to move away from partial BTC backing and establish itself as a rare, and true pristine collateral layer, as the USD has done and as BTC is currently doing.

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Our witness Set to 20% APR – Temporarily…

We have set our 3 day liquidation HBD APR to 20% on our witness @threespeak temporarily - not permanently, since we will change it based on the economic health of our stable coin eco system. For now it is an excellent time to attempt to vastly expand the market cap of HBD, in a responsible way and one way this can be done is to temporarily increase the APR for HBD to 20%.

@dalz’s analysis will give us a great initial perspective on whether or not the APR settings for HBD are too high. So far we think HBD APR could increase far beyond 20% on a temporary basis and as long as the amount of HBD we think is coming due to be converted into Hive will not significantly affect Hive inflation, we are comfortable 20% APR on HBD for a 3 day liquidation for the short – medium term.

We have made this move with the anticipation (hopeful expectation) that the HBD bond staking system that @taskmaster4450 is advocating gets built into Hive, at which point we will reduce our 3 day liquidation in to something like 7%

A Window of Opportunity for HBD

We are presented with a window of opportunity to attract significant investment into Hive as the highest yielding, sustainable, truly decentralised stable coin.

If we can get the HBD bond system built before a possible scenario occurs where witnesses or the community decide to reduce the 3 day liquidation APR on HBD down, investors willing to stake their HBD would be able to move their current HBD lock ins across to long term bond staking and maintain their high yields into the future in a sustainable way. This would be quite the classy move from Hive if we pull it off since so far every other chain that has tried high yielding stable coins is either centralised, or has not managed to maintain the high yield APR rate into the long term that HBD can.

On Hive, we really can do it.


Some stable coins have a market cap of over 1 billion USD. With the mechanisms mentioned above, Hive really can become the first long term, truly decentralised stable coin with a sustainable, long term, high yield return for holders.


If you like these ideas consider voting for @threespeak witness:



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I do like the idea of backing HBD with some other core assets and bitcoin seems like one of the most solid. Especially after what we have seen with LUNA. It opens up some real possibilities of being noticed and wealth flowing into hive.

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In our view, BTC is the only digital asset that should be used in the insurance backing of HBD, since it is the only one that has no VC, no seed round, no ICO, no company and no CEO behind it. Making it actually decentralised, and therefore outside of the reach of regulators. HBD has the opportunity to hold this status too and so we think only digital assets outside of the purview of regulators should be used in its insurance backing. this is one of the things that sets it completely apart from existing stable coins.

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BTC is the only digital asset that should be used in the insurance backing of HBD, since it is the only one that has no VC, no seed round, no ICO, no company and no CEO behind it.

This speaks to so many different levels of the industry and screams about the opportunity that is being presented here.

It is one of the reasons when I formulate my thoughts, I try to envision some of what you guys are building (along with DLUX). Starting with that mindset from the ground up is vital.

Certain things have to be in a single wallet or within the control of a few but we should strive to spread things out as much as possible.

One aspect of what I am toying with will require a bit of application centralization but can be negated by the software being open source and other "front ends" being opened.

Things like that can have people playing whack-a-mole when tied to a decentralized back end.

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Here's my quick idea tapped out on my phone but needing more work.

This is indicative of my thinking on how to decentralise what I'm doing with @v4vapp.

Bitcoin multi sig contracts are very limited. They form the basis of the entire lightning network so I've come to understand them.

I agree with comments elsewhere that trying to use 20 witnesses to one wallet would be a nightmare and as they go in and out of consensus you can't change their keys.

I rather see a growing collection of wallets with a manageable numbet of custodians.

This spreads risk and means we can have multiple custodians.

A lightning node is basically a Bitcoin account with shared ownership of multiple multisig wallets. But there's no way to run a lightning node without 100% power over it.

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The only thing I can say about that is we are dealing way above my knowledge level. I have not the slightest idea of how to make it secure if this path is chosen. Fortunately there are those around here who grasp this stuff fully.

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So part of the challenge is to insure HBD in the most decentalized way as possible. Decentralize the insurance with a decentralized asset; decentralize the approvals; decentralize the verifications; etc. This is how I'm understanding the proposal.

While HBD could be partially insured by ETH or BNB (the other top-ranked cryptocurrencies), both are centralized to a high degree. If HBD is going to be partially insured, BTC is pretty much the only asset to use.

Whatever centralization we encounter will be done at the lowest level possible, and it will be minimal. This may not be avoiadable, but it would be worse if an asset that is not BTC is used t partially insure HBD.

This is definitely an ambitious undertaking, to partially insure a decentralized stablecoin such as HBD with the decentralized asset that BTC is known to be (at least relative to altcoins). If we can prove that this can be done in a decentralized manner, this would truly be ground-breaking.

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It’s really great seeing all the development on Hive and how HBD is being given more attention recently.

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Yes, we are super excited about the potential of HBD and Hive if this type of path is followed in a RESPONSIBLE monetary policy way

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Hard to believe the HBD stabilizer is about a year old. Before that HBD got no attention. Smooth did a great thing rolling that out. It got everything started in this area which, down the road, will show how it completely altered Hive.

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It moves 10% most days. This artificial stabilization method will fail us. I don’t want it to buy it’s just simple math. We should grow Hive and end this HBD dream.

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It’s a huge mistake to focus on HBD instead of Hive itself. I just don’t get it. This won’t end well

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I believe the both of them are being given attention, no one is getting ignored. HBD is just getting more attention than it used to have. Increasing HBD attention doesn’t reduce Hive’s. They can both co-exist.

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(Edited)

Not when HBD stabilizer needs to artificially keep price at a buck and it’s moving 10% a day randomly. It’s going to hurt our reputation if something goes wrong. I think it’s going to end badly.
I’d love to be wrong but I don’t think I am. Well I guess nobody thinks there wrong but I know what I mean. I just think the ideas here of backing HBD are gonna end so badly.

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Well, you can never tell what the future holds, time will tell. But for now I trust the process and I don’t see anything wrong with it. But like you said, I might be wrong. Let’s just keep our fingers crossed and see how it goes.

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This is really awesome experiencing this new features happening in the blockchain especially with the progress of the HBD moving in a positive state is really encouraging and am excited to witness all this happen

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(Edited)

Yes, really excited, as long as the expansion of HBD is done responsibly, this really can be a winner. we can use @dalz HBD supply analyses to keep track of how HBD conversion to Hive might affect the Hive inflation and keep on top of current HBD APR that way, such that we maintain responsible monetary policy and do not cause Hive to inflate unnecessarily. should we achieve that, HBD will become the first decentralized, pristine collateral

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Do you still feel same way now? To me it’s a fail. Hive should be focus not HBD. Most days it’s moved 10% I just see this hurting Hive and I don’t think it ends well if we continue to push this dream of HBD.

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How is it moving in a positive way? HBD moves 10% most days and it’s artificially moved back toward a dollar. It’s going to hurt Hive Itself.

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(Edited)

IMO at the current scale of Hive, witnesses doing multisig is likely to be unwieldy. The witness set changes, which means the multisig would need to be updated. And getting ahold of witnesses to sign off on spending the BTC during rapidly changing market conditions (which is probably when you want it) is likely to be challenging. Some of this could be improved with software, but developing and auditing software on a limited budget (and a larger budget is unlikely to make much sense for a $1 million fund) is likely to be more risky than just doing it some other way.

I would just recruit 3-5 trusted community members for the proposal.

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I would just recruit 3-5 trusted community members for the proposal.

This actually makes a lot of sense. Sure it is always nice to try and devise every layer as decentralized. However, there are certain aspects that, for practicality reasons, require some form of centralized management.

A handful of trustworthy vested members handling this is not a vulnerability or too much of a threat.

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how is this better then luna? cause it is people we trust not people they trust?

if the btc is really going to cause that much of an issue. multisig seems to be a mess on btc. i'd rather have a solution without it if it isn't solvable.

Taproot (soft fork) maybe the solution here but i haven't done enough research into it yet to be sure.

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Could those 3 to 5 people be rotated through the witness list autonomously?
Once 5 or more have signed the transaction it processes?

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If you want to replace signers of a Bitcoin multisig you need to move the coins (potentially $1 million worth in this case) to a new address with a new multisig. To automate this requires some sort of hot wallet software, and which all of the signers would need to have online. This is not trivial and presents significant risk. It would need to be very carefully developed and audited.

Also trading between BTC and HIVE/HBD has to be done somehow, probably through an exchange (which means someone probably has to KYC and interface with the exchange) or perhaps DeFi (adding additional issues, probably including more signers/wallets, and the fact that all Hive DeFi solutions involve a centralized custodian afaik, so further trust required).

If this is a theoretical discussion all sorts of things "could" be done, but if the goal is to actually accomplish something, grasping at challenging decentralization problems when you can get by with something reasonable to accomplish the function is just a huge blocker.

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Seems needlessly complicated.

I'm not sure that we can attract enough investment to make it worthwhile.
If we burn half the hive, 200m, hive's price would have to moonshot to get us anywhere near the amounts being discussed, and absent an immediate moonshot we are limited in what we can expect to actually create in hbd.

I'd like to see some projected curves.
The more converted before the price appreciation, the less total hbd we end up with?

Wouldn't burning half the hive also halve what the witnesses and the pool gets?

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Wouldn't burning half the hive also halve what the witnesses and the pool gets?

In HIVE it would but not in value if the price of HIVE went up.

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Can you explain to me what sense it makes to back a stable coin with an unstable asset, particularly an emergency fund?

There is no math behind it that makes sense.

Price goes down, HBD amount the same, value from asset down. Sense?

Price goes up, HBD is the same, and Bitcoin has a higher value. Also no direct relationship between.

Besides marketing a stupid idea and copy and paste luna. A coin that will become unstable the next time for sure...

A pool with 1M in Bitcoin and 1M in HBD woulr be way more interesting and smarter. And also can generate revenue for the chain.

Some fee for trading.

Bitcoin price goes up = people adding more HBD to the pool because of cheap Bitcoin.

Price goes down = vice versa.

liquidity owned by multi sig, pool onchain.

With Bitcoin version on hive that represents the token, people are likely to trade and stabilize HBD massive.

It's a "backed by bitcoin" that could really work.

If HBD is cheaper than 1$, I can buy bitcoin on a discount.

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I think the math that makes it work (somewhat) is that HIVE and BTC aren't perfectly correlated. So backing with some HIVE and some BTC is probably more stable under a variety of conditions than HIVE alone. Sometimes they will move together and it is pointless, but not other times.

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That's the positive case.

The negative if prices fall? I mean it is to stabilize HBD and not hive. So I don't get it.

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(Edited)

If both fall, no benefit. If one falls and the other doesn't (or less), there would be a benefit. So there might be a benefit as long as they aren't perfectly correlated.

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but would it be not smarter to buy another stablecoin to back it?

For example 500k usdc and 500k busd ( or other, but not algo).

I mean that would really stabilize HBD and the funds could be used at some time to add liquidity on a pool.

No upside potential, but no downside. We dont need to stabilize HBD in an uptrend to hold 1$ value.

Is more if market crush and hive is worth nothing again and HBD starts to struggle again too.

IMO would be more word as a "emergency fund".

My understanding of " emergency fund" is something we can use in bad times.

But maybe I'm wrong, who knows.

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There are comments from others on why they don't like using another stable coin, especially the centralized one (even DAI has a lot of its collateral in centralized stablecoins, though I think it's less than it was at one point). Seems a debatable point to me.

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I mean only from points of logic i would prefer a stablecoin.

because the emergency fund is not needed if bitcoin goes moon.

If bitcoin goes moon, likely everything moons ( a bit more or less). Also we have same amount of HBD and profit 0 from it. And since we don't trade it, what's the point?

In a bear bitcoin will loss massive value, I know people think this time is different, but why then emergency fund? :D

Just in case bitcoin goes to 10k again, the emergency fund loss 75%. LOL

a fund for an emergency. I men because Kwon and friends from luna are stupid, doesn't mean we need it to be too.

It IMO a leverage for more panic that cost the network 1 Million to have a potential 250k emergency fund. And yes emergency for bad times.

In real world, not crypto, nobody would purchase such a product as an emergency fund. Only for Info.

Some sidenote:

All recent ideas on hive a copy and paste. I remember the save moon tax idea. Now the emergency fund. Instant power down tax and so on.

I see last time 0 innovation on ideas ( not speaking on scaling tech). And a lot more of those ideas...

The only part on hive that really unique is the freedom of speech part and social.

I know we don't talk about bear and bad times, but it goes in the corner of "red queen theory".

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(Edited)

I men because Kwon and friends from luna are stupid, doesn't mean we need it to be too.

Even if they are stupid (or something else not so great), doesn't mean all their ideas are all bad. We can adopt and adapt, but we should also be selective, and have our own ideas too. I think we do all of this.

I remember the save moon tax idea

What is that, I don't recognize it.

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I remember the save moon tax idea

cant tell you the exact rules that were for the idea. But something like every time you power down you get taxed by x% and the faster the powerdown the more tax.

I mean Hive is not the most investor-friendly chain, but pay to sell? :D

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U were spot on and it’s been proven the past weeks.

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Thank you!

But it was IMO pretty clear :P

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Agreed, but so many still don’t see the issues. It’s nice to see a understanding take. I just wish the focus would be growing Hive not HBD. To me this makes no sense at all.

Have a good day weekend
Cheers 🍻

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untitled.gif

Have a nice weekend too buddy!

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I don’t think we even need HBD. This all seems like a waste of time. Better spent focusing on Hive token and use any intermediate stable coin people want instead. HBD in my humble opinion isn’t needed and it’s proving to be more work then it’s worth.

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At this point I would rather us fork and get rid of HBD all together. Give all holding it a set amount of hive tokens. This just doesn’t make much sense anymore. Just my opinion

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Respectfully
This certainly didn’t age well.

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Fair, although the details matter. It's certainly correct history that Terra didn't work out with the BTC reserve, but it probably wouldn't have worked out without the BTC reserve either. I'd say the BTC probably helped, for the reason stated in my comment, but didn't help enough to save it.

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It's exciting to see how Hive has progressed and how HBD has recently received more notice.

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It's amezing, this is on of the best way to expand HBD to its limits.

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I love reading the comments on important posts like these. Some of the most intelligent people pop up to drop their opinion.

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The collective knowledge on Hive is amazing. This is something that is overlooked.

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I feel smart just trying to understand the basics of these ideas. Nevermind the intricasies!! The Hive Community is an amazing thing!! 1000% Go Hive Things!!!!

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They are not easy to understand since there are many layers. However, it is well worth the time invested to learn different aspects of what is going on. Expanding our financial knowledge and abilities can really pay off. Most o the world is financially ignorant and that is what makes them vulnerable.

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I see the work there for HBD, I guess it's sustainability will depend on a whole lot. So much going on for Hive, you all are doing a great job.

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if we can get together and built insurance backing with btc, bonds, collateral loan platform and leo finance can execute on BTC liquidity pools, we have a seriously good shot to change the world forever with a truly decentralised stable coin!

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There is a lot of effort going into HBD. This is a situation that is going to really help push the entire Hive ecosystem forward.

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I think it's really interesting, and at the same time will bring more eyes on Hive and their dapps. $HBD also will increase his value at market. I think is win-win.

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One of the main attributes of collateral is trust. At the moment, we have to do what we can to establish that for HBD. It was overlooked for so long that people either didnt know what it was or didnt care to. It was not that long ago that many were saying to just get rid of it.

Following hot trends is not a bad idea. The idea behind a great deal of what I am formulating and experimenting with different models revolves around us creating our own collateral. We dont back what we develop with collateral, we are that. However, in the meantime, we should do what helps to provide trust and confidence.

It is going to have to be a multi-pronged approach. Believe it or not, a lot of the stability, overall, from HBD will come from making HIVE a great deal more attractive.

Many fret the conversion of HBD being a threat to the stability of Hive. Actually, the way I envision things unfolding is for there to be little conversion in that direction. HBD is what will be desired/needed.

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This all sounds amazing, although, truth be told, a little over my head. I follow along really well until we start talking about bonding and time-locks and all of the other things that go along with it and how they would affect everything.

Two questions:

How many moving parts are going to have to be involved with this? I love the picture being painted about pristine collateral and what it could mean, but I am a little leery about getting too far ahead of our skis and having 60 different things that have to be coded perfectly and work together seamlessly. I'm not a coder so it may be much ado about nothing, but I would definitely want to see a very concise plan of the steps needed to make this all work. Not that I'd understand it. But I trust people I trust would and could make sure it's going to work.

My other question is what do you think the impact of this would be on HIVE itself? I get that the amount of money flowing into the ecosystem could be massive, but how much of an impact would that have on the Hive token itself? Would it just benefit from name recognition and spillover? Or would there be a financial incentive for people using the HBD stablecoin to own the Hive token as well?

I started to recognize the amazing power and opportunity HBD brings to the HIVE community a few months ago when the HAF started to get talked about and @taskmaster4450 started writing about it and HBD. This feels like it could be the perfect time to really go for this and bring HIVE to the masses. You guys are the brains behind this stuff. If you think it will work, I'm all in.

PS. I'm not one of those "intelligent" people that drop in with opinions, but I do try to follow along whenever possible. :-)

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This is a long read but also exciting. I can see where the ball is rolling and I am happy for the hive ecosystem. If this pans out as planned then we should see massive growth in the hive ecosystem.

Reading the comments, I noticed that there might be some challenges with the BTC mutlisig. I understand the concerns raised by smooth but I think if we can figure a way to make things more decentralized that would be great. We should have a better selling point than a platform like luna.

Also, I hope the marketing budget is used appropriately and more funds are allocated to it over time because it is the sure way of getting the word out there and we need that to ensure this is successful

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Thank you for the article. I learned alot, some I'm ashamed to admit lmao as I've put alot of money into crypto, almost 90% into hive. I've started actually saving hbd in the last month since apr has gone up but it benefits everyone to keep more than I need powered up/in savings too. Great read!

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Last night I found this great blog in twitter as our community leaders were retweeting this awesome bonding between BTC and HBD. 30% annual profits sounds really great and we hivers are encouraged by this great update.

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(Edited)

First it is a great thing to see initiative like this.

Next I just want to debate a bit over BTC as asset for backing HBD. It is very interesting idea for a dao to hold btc. In the long run it will most likely appreciate even more, helping the whole ecosystem. Buying btc is also with crypto ethos.
But btc is also volatile and when hbd will need it, it is most likely that it will drop in price, at least for the time being. Should we consider maybe backing up hbd with other stablecoins instead of btc? The pros here is that when the crypto market drops stablecoins are great hedge. The cons of this would be wich ones to choose, if they are centralized, not a lot of crypto ethos around it, and there is no possibility for appreciation over time.

Another thing I would mention here is can we tell from now, what will be the market where the buying of hbd will be done? The internal dex?

P.S. about the comparison with UST ... to my understanding they don't have debt limit and a haircut. This is very important mechanics to prevent death spiral. They have some form of taxes/fees to use if UST deppegs, but not a debt limit.
HBD might loose its peg under the current situation, happened twice in a 6 years history, but it will never implode to zero, mainly because of the debt limit and the haircut rule. Raizing the debt limit to 30%, maybe even 50% in the future is also important.

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100%

I also think backing with bitcoin in only good for marketing. That's it. Luna is also to young to see what happens if prices crush.

Other stablecoin pairs would be IMO better. could be solved instead of wasting 1 Million in apr.

We want 10 Million in liquidity between stablecoins? Simple pay some apr.

The fee goes not to the LP´s, it goes to the pool, bam after some time the chain itself owns a lot of stablecoins to back HBD.

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As we learned Luna was a huge fail. I hope people here see this and we don’t make this mistake.

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Sounds perfect. Looks like the pegging mechanism of HBD works better than UST's. Maybe we can back HBD with a combination of BTC, Stablecoins, and other cryptocurrencies we think are best suited to the crypto culture we promote and support on Hive. Diversifying the insurance portfolio instead of relying on just one coin makes much more sense to me.

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Sounds perfect. Looks like the pegging mechanism of HBD works better than UST's

There are some added features in place that are helping the peg. We also have security features in place that UST/LUNA doesnt have.

Maybe we can back HBD with a combination of BTC, Stablecoins, and other cryptocurrencies we think are best suited to the crypto culture we promote and support on Hive

Build out the use cases of HBD and there is no need to back up HBD with collateral. The goal has to be to make the collateral, not to use other things as that source. It starts with making HIVE as strong as we can.

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Thanks for the clarification Task. I think LUNA guys will learn how HBD is creating the stablecoins of stablecoins. :))

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This will fail just like Luna did. I hope we focus of growing hive itself instead of the his HBD dream of 20% interest and being stable. This mathematically won’t work. HBD being kept artificially around a dollar won’t work long term.

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Another piece to the puzzle that is being missed, from what I can see, the use cases for UST are not there. Yes due to their popularity it is on every exchange and the pair in a ton of DeFi pools. That is great progress. However, is it actually being developed in a payment system?

This is something we havent discussed with HBD as of yet because, obviously, there are other issues first. That said, at some point the focus has to be upon accepting HBD as payment, not HIVE. One of the major values for HBD is commerce. That is something not discussed so far.

Here is where the stability of the token is a big asset.

I agree having the BTC in the DAO is a great idea. Also, as a marketing piece, buying $1 million BTC seems like a no-brainer. It could get Hive some attention and, over time, the price of BTC will likely appreciate.

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I understand your point and it's a pertinent one. I wanted to quote that from one of 3Speak's replies:

In our view, BTC is the only digital asset that should be used in the insurance backing of HBD, since it is the only one that has no VC, no seed round, no ICO, no company and no CEO behind it. Making it actually decentralised, and therefore outside of the reach of regulators. HBD has the opportunity to hold this status too and so we think only digital assets outside of the purview of regulators should be used in its insurance backing. this is one of the things that sets it completely apart from existing stable coins.

So, when they thought of bitcoin, the main consideration wasn't how stable the backing asset will be, but if it will become a point of vulnerability where Hive could be targeted.

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(Edited)

That list of points showing how Hive could improve and truly decentralise stablecoin insurance backing (when compared to UST) is GOLD.

That alone should be the sponsored press release that we're sending to crypto media outlets.

EDIT: I had a crack at using that section of content for a standalone piece:

(With a link back to this blog and encouragement to vote your witness.)

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This blog and the comments made me understand why LUNA went down this path and why almost everyone is supporting the move.

Great to see this discussion on how Hive can do it even better.

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I am very excited about all the attention being given to HBD. I see a great marketing move backing HBD with BTC. It would definitely attract a lot of eyeballs.

I worry about how much BTC would be bought if HBD were to grow like the other stablecoins. A billion cap HBD how much would you need in BTC, wouldn't this empty the DHF with BTC buying, after buying 1 million in BTC, would more be bought? I don't feel very comfortable using the DHF to buy other cryptocurrencies; I say this if it would have to become constant with new proposals.

Translated with www.DeepL.com/Translator (free version)

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Yes big point is the new global collateral and any serious project needs to be backed with bitcoin.

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I agree on the Tokenomics and I really like these expansion idea. Besides, aside from LUNA ecosystem I really see more sustainability here.

I am up to help with the development of the flow if needed. I have some experience in Tokenomics and business development and I am ready to share also my experience for our shared greater good!

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I think the idea of ​​using a pool of BTC bought using Hive DAO DHF as partial insurance for HBD stable coin if HBD falls below a certain USD level is a great idea. It is a great assurance for the investor to have insurance for the money you receive. an idea that will attract investors to the ecosystem. Having low risk and high return is a sought-after feature in investment. congratulations.

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I really like the idea of 20% APY, but I find it hard to believe it's possible to actually do in in the long run. Time will tell.
Thanks for the post!

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Beyond the technical challenges of doing this in a way that is low trust, I think this is just a terrible idea in general. The Hive and HBD ecosystem should be trying to reduce its exposure to BTC, not increase it, and especially we should not be looking to have committees of trusted custodians holding crypto assets on our behalf.

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I can relate to the techincal issues and the trust. But it the DHF funds it, then that is the process that we have for making decissions around here.

What would be the argument for reducing hive/hbd exposure to btc?

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BTC is a high risk asset which already dominates the market, making Hive and HBD already highly exposed to BTC related risks. HBD already tends to break its peg at times when BTC price is crashing.

Also, Bitcoin is a ponzi scheme by proxy with minimal real utility compared to the market price.

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Wow ... such a low score for btc :)
But the fact is that like it or not, the whole crypto market is impacted by btc... at least for now :)

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wow quite an idea... I think we should try it, but there are obviously still the details to be discussed

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Hmm yeah, it requires too much 'trust' in humans for me. Make it fully trustless, with no humans involved and I'd like to see how this works out.

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Yeah. We should probably hire a raft of otters and maybe a few ducks to handle this.

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Lmao, a good algorithm being fully automated would probably do. If we are to trust the witnesses, I'm not in favor. If that's the only way(trusting witnesses) and users approve this, I hope it doesn't happen until the Steemit witness votes decay, at the very least.

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I think that was the point Smooth was making, to develop something without human involvement or in a fully decentralized manner was an order of magnitude more difficult (if not near impossible) for the benefit.

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this idea is absolutely revolutionary, I agree that it could practically increase all the prestige of the blockchain and the HIVE ecosystem. I also think that taking a cue from the developers of TERRA is not a bad idea, I don't know them, but it really seems like one of the best teams around right now when it comes to the blockchain sector

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I think this is the way forward for hive community. Hive has everything to be successful we just have to get everything right.

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Following the evolution of BTC, which today places it as the fully decentralized crypto active, it is undoubtedly something that the people of Terra (LUNA) are taking advantage of. It is clear that they want to maintain that status as a reliable stablecoin and they certainly came up with a great idea. Its Achilles heel is the notorious centralization.

HBD with the guarantee and support of Hive as a blockchain has shown its great strength to take on the challenges of web3 based on decentralization. You should not overlook this initiative for the UST. I think that the great challenge is the implementation of the multi-sig account so that the decentralized spirit that characterizes us is manifested in its management. He trusted that surely the best of Hive's development work would find the best way.

This excites me and will undoubtedly open up the Hive expansion even more. I will keep an eye on the news. Greetings.

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This would be very difficult from a technology and trust perspective to manage.

Someone would also likely end up with the tax and regulation burden due to the need for centralized exchanges.

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also from law points. It could be interpreted as a financial service/ custodial service. In worst cast money laundering if buy the wrong coins to wrong time?

Neutral holding + neutral rules must be in place ( code).

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With this percentage in HBD, is going to help to increase the HBD market Cap. Alot of people are now trying to have More HBD.

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Great progress of the HBD, very illustrative and educational publication. Thank you

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I'm currently sitting on the fence about how I feel about the benefits. As smooth mentioned, it can work out when there is bifurcation between BTC and HIVE, and given BTC's lower beta, would likely be less impacted by market wide drawdowns. Essentially, the delta between the two would be the surplus we would be able to capture and sometimes this can be quite large. On the other hand, given the proposed 1 million worth (a rather small amount compared to the market cap of HIVE), a market wide drawdown would still mean an overall larger drop in the market cap of HIVE backing the HBD, and only a tiny extra bit of buoyancy from the BTC reserve to help out.

I would also like to ask, if there are any discussions around adjusting the 5% fee for conversions from HIVE to HBD. I don't know the specifics and couldn't find the exact information, but I am under the impression that LUNA to UST does not incur the same kind of fee, nor the opportunity cost of 3 days time. I feel that this could be a deal breaker for many who want to deploy larger sums. I know that I would personally feel more comfortable and willing to buy more HIVE to convert to HBD if the conversion fee was more plateable but it remains an obstacle I'm currently unwilling to cross. I am aware that the 3 days is to mitigate potential manipulation and price volatility, but I am also quite certain that arbitrage via conversions in highly volatile environments is something larger players would be interested in, myself included.

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All valid points.
I think the 5% fee is a bit to much, also there is no logic to have a fee only in one direction, why not in both, and maybe just a 1% (0.99 to 1.01).

About the 3.5 days, the one thing I find this useful is the price feed.
If you take a look at the t20 witnesses you will see that some updated their price, once per hour, others once per 5 hours, sometimes some do it once per day.

The 3.5 days basically allows better price oracle and security, and this is not to be undermined. I would like to see faster conversions but also better price oracles.

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I'm not sold on the T20 witnesses operating this way being an effective way to deliver a responsive, and yet decentralised price feed. Understandably, the purpose of Luna is entirely stablecoins (which is ironically being undermined more and more by it's BTC holdings) and so our considerations are a little more complicated than just being ultra responsive. Perhaps if we had a greater number of participants, and several orders magnitude more participants / liquidity, then the 3.5 days can be reduced a bit.

In the same way that missing blocks has financial consequences, price feed updates probably should too. It is obviously a critical component of everything that is being discussed here, and currently gives no leeway to shorter conversion times for the simple argument that some witnesses update too infrequently. I'm not talking by the minute, or by the block updates.. something like every 8 hours minimum so that we can have 3 periods within a day to form the 3 moving average.

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t is obviously a critical component of everything that is being discussed here, and currently gives no leeway to shorter conversion times for the simple argument that some witnesses update too infrequently.

I feel like the price feed has not been discussed enough around here neither the rules around it. As it is now it is completely arbitrary. Any witness can set whatever price he wants at whatever timeframe. I feel like at least there should be some timeframe defined for witnesses to follow.

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Luna has sure done well for itself, and from the look of things the Hive will excel greatly I can feel it.

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I'm surprised this hasn't been downvoted by people throwing tantrums. I mentioned something similar in a video and got an angry whale downvote. lol.

I think it's a great idea.

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Yes this sounds gimmicky and speaks to the unsustainability i spoke about was inevitable for the hbd. hbd value should be backed by the network and confidence of the community period. However as you all aren't attracting enough people and value as you're not producing development and technology people really need. You have to use the success of something else but seeing that you making things this centralized.

Why not just use the same trusted witnesses as you say to back the hbd by actual gold. Since you going to trust them this far in such a centralized manner. When i talked about backing ideas like bitcoin myk and supporting it under the citizens dividend and getting a billion people on the network then using the billions of people to back the value of hbd etc., you all thought it was a dumb idea.

so now you all gotta come up with even dumber ideas like trying to back hbd against btc which may just do a complete crash tomorrow. You'd be better off backing it against the usd if you're being that wreckless and letting the american government hold you up.. you know you'd have some stability even if it's fake. you not going to have any actual idea of stability in bitcoin.

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The information presented in relation to Luna is not entirely correct and the funds owned to safeguard the peg are help by Luna Foundation Guard which is a not for profit organisation. It is important to note that in South Korea what Luna is doing is legal and regulated so things need accountability.

Furthermore, if the proposal is to be similar to what Luna is doing to safeguard their peg then I would highly recommend reading my blog today that shows HOW it is doing so. Avalanche Acquisition and Breaking Luna News

It isn't going to be used as a pump it has a completely separate model that I think would work really well but you also need to address Hive's barriers being the lack of SMTs and the inability for us to be interconnected with other blockchains.

To do what Luna is doing and successfully would require a hard fork and one I think Witnesses should be looking into. We need to open Hive's door.

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But yes, I would be in favour of a number of pools being established for people to swap hive into the pools instead of dumping on exchanges and lowering prices.

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My main thought on this topic is that during the controversy over USDT's reserves, which they claimed to be fully stocked with 'real' fiat currency (USD), it emerged that they actually had 'diversified' into holding BTC and other crypto as well to make up their reserves. Since the demand for BTC and it's price volatility are tied in closely to demand on the supply of USDT, it makes sense that many people considered tether's 'backing' of USDT with BTC to be risky.

When BTC goes down in price, so do the prices of a large % of the other coin markets. When this happens, people tend to buy up the stablecoins. So I am wondering what mechanism exists to guarantee that in volatile periods, the system wouldn't run at at loss. This is quite a complicated system and I definitely don't have a clear workflow for it in my mind's eye.

Also, it seems that this whole idea is dependent on using the DHF fund to buy the BTC, which means that the level to which it can scale in that way is limited and might also limit the scope for Hive to fund worker projects.

Ultimately, any idea like this is going to be an experiment, as long as it can be undone at a later date then maybe it's worth a go.

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The big picture idea behind this thin-air-to-HBD conversion initiative (via high interest rates) is to attract the ignorant masses who would use the network without owning (too much) HIVE, allowing the core Hiveans (HIVE holders) scoop as much value as possible out of the network growth.

One day, the BTC is going to sneeze when we are close to the haircut threshold and not only HIVE gets the cold. HBD does as well (surprise to many). Having a BTC insurance fund solves nothing at that point. Its mission was to create an illusion of safety to get people onboard, not to help them out of trouble.

Everyone loses some money, and the market recovers sooner or later. The blockchain is not going to break because of that. All that happens is that the HBD holders who made 30% APR along the way (while HIVE holders were making 50-500%) feel cheated as they should have been protected against the crash. Well, no. They should have known better.

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Hey @3speak ! Sorry for being out of context - but I am struggling to connect my hive account to my 3speak account! I have lots of guitar videos to share, but just wondering if anyone can help me? Many thanks :)

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“ The potential for the BTC community to use Hive as a side chain is beginning to look realistic“

I don’t see this at all. I’m a huge Hive supporter but side chain for bitcoin? This isn’t happening.

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This did not age well. The Luna comparisons speak for itself. HBD isn’t helping Hive it’s going to hurt it. We should fork and eliminate HBD all together. It’s going to fail and will not keep 20% ARP and stay stable. We should focus 100% on growing Hive token, not this bogus attempt to keep HBD Floating artificially.

833ED012-D8C0-43EE-8B23-77E454512C6A.jpeg

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