How Does 20% APR on HBD Sound?
If you haven't noticed, there is a move inside the top 20 and especially top 50 witnesses to boost the APR on HBD in savings from 12% as it is currently to 20%.
I believe that started with the post by @themarkymark signaling his change of the witness setting from 12% to 20% on HBD interest.
This does not automatically change the interest on HBD, as this is set by the consensus of witnesses. And so far there isn't consensus for 20%, but it might be, after a while.
I believe consensus has every chances of being reached before or right after the hard fork, where the haircut level will be increased from 10% to 30% (the most often vehiculated new level). The new level would allow the blockchain to print more debt (HBD) until the debt ratio reaches 30%. At that point HBD won't be printed anymore until the ratio drops below that level again.
20% APR for HBD would place our stable coin very high on the market for staking a stable coin on the first layer. Same as UST, but they are going to reduce this staking yield soon.
So HBD would become very attractive for its yield. Still not easy to get in or out from it, as it takes 3 days to take the HBD out of savings and 3.5 days to convert HIVE to HBD or vice versa (and that's the only way to move large amounts of HBD in or out right now).
But 20% APR at a very low risk, being staked on the first layer of a decentralized blockchain, likely untouchable, interest paid in-kind (directly as HBD, without going through a farm token), without impermanent loss, will make the offer very attractive to enough investors.
So, yes, I believe we will attract enough outside funds with such an APR for HBD, despite the complications to go in or out from it. And as they come in, they might become aware of other things Hive ecosystem has to offer. Many might not even know Splinterlands is on Hive before they come in.
In his post, Marky talks about the probability that some HIVE Power will be powered down to move to savings as HBD, if the latter has 20% APR.
That makes sense. At 8-9% curation rewards and 2.8% interest, HP seems competitive with 12% APR for HBD.
That is if we don't count a few things.
HBD is not a governance token, while HIVE Power is. You can't vote for witnesses or proposals with HBD, nor do you benefit of curation rewards. But you can with HP.
At the same time, when HP will be pulled to go to savings as HBD, there will be less HP curating, thus higher curation rewards for the remaining curators.
So there will be an equilibrium, because people will see opportunities in holding both of them. And the more HP or HBD is held, the more attractive the other might become.
I am really happy about this move and I hope it will be embraced by the consensus of witnesses maybe even before HF26. We have a debt ratio of 2% according to @dalz. Long way to go to 10%, and with the HF around the corner, 20% APR shouldn't be a problem.
As I said a number of times, we need way more HBD to be taken seriously. The only reasonable way I can think of to get more, but even that on a longer period of time, is to print more HBD to pay for a higher interest rate. Conversions can create HBD, but at the expense of HIVE. And vice versa.
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I have adored 12% APR, 20% will be absolutely loved lol!
That said, this morning I have read marky's taskmaster's, and your assessment on why raising the interest rate to 20% is a good thing (plus countless comments) and you all make some very valuable points. Plus, I feel like the whole HIVE ecosystem is incredibly undervalued, so actions which promote growth and attract people to the awesomeness that is our chain should be seriously considered.
Hope you are having a fantastic weekend!
Yes, Hive has a tremendous potential, but it has to be reached. And sometimes for that we need to be bold and swift, instead of taking our time and progressing little by little.
Thank you and enjoy your week-end as well!
I can imagine never having to move a muscle again, this is an empowerment, earn income while sleeping...
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Good post Adrian. I personally like the idea of 20% APR🙂
Seems that most people embrace it.
Seeing UST gain mass adoption and LUNA moon has made me really excited about the possibilities of HBD.
What we’re doing is creating the deepest liquidity pool for HBD on PolyCub.com.
The witnesses are raising fixed yield to 20% which makes it way more desirable. Combining the supply and demand is going to explode HBD usage and HIVE price. Just like terra.
This is making me bullish on everything HIVE and HBD
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Yes, I can feel it in my guts that this pool will attract arbitrage traders.
With that rolling out,and interest rates going up, it all adds up as inflation kicks in and standard of living takes a spike.
Makes me wonder, wen lambo?
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That's exactly where most of us saw the potential, seeing the trailblaze Terra created for the combination LUNA-UST which was in many ways similar to HIVE-HBD.
I'm glad our witnesses started to take action to move in a bigger league of algorithmic stable coins. With a 20% APR (if there will be consensus for it, but I tend to believe it will), and with deep liquidity for HBD like you're creating on PolyCub, HBD has a chance to shine and help the entire ecosystem grow to another level.
Thanks for dropping by Khal!
Leofinance Witness has it on 0%!!! Why?
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It's not set. But good question why it's not set, I guess. :) Other than Khal having a million things on his mind, I mean.
For sure he is one the busiest on HIVE
What took you so long? LOL
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Nice job!
!1UP
Thanks!
You post sums it all up!
Creating the investor incentive is very important, and like the last paragraph of this post has explained, it's very likely this creates some sort of demand for both tokens.
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I am pretty sure a 20% APR for HBD will create significant demand for both HBD and HIVE.
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Thanks for the info, it's very useful.
You're welcome.
Very exciting proposal. I will need to find a way to get more assets into the Hive ecosystem. I am sure that is something a lot of people will be thinking! :)
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Not a bad idea! I presume we will likely see an influx of new money in the ecosystem, which will likely move the price of HIVE to higher levels.
That would be attractive for investors and folks like me who are really casual hobbyists. As the concept of stablecoin becomes more familiar, it is a gateway for people after BTC, ETH, and whatever NFTs they think will make them rich. Lots of people are happy to earn single-digit % interest on USDT, USDC, etc through Celsius, BlockFi and other sites. Should be fairly attractive for people who are already at that point in their crypto education to move over to HBD. That's where I would pull my outside money from. Of course, I say this and I do not actually know how HBD tries to maintain its link to USD haha! :)
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There is a fee for creating HBD but not the other way around. It's like a 5% loss on the amount of Hive you want to convert into HBD. Either way, I wonder if we will start coming close to reaching the haircut line and getting Hive at some point.
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Yes there is a 5% fee when converting HIVE to HBD. But that's the only way currently for huge amounts. For small amounts there are other ways. I don't qualify for huge amounts, so I have other, quicker and generally less expensive ways too. :)
We are currently at 2%, which is a joke to have 2% debt in an exponentially growing industry. Haircut is at 10%, but will be increased to 30% (that's the most likely new level). Unless we will have many whales come buy HBD (or HIVE price dive deep), we won't have a problem with the haircut for a good while. And if things are likely to move in that direction, the interest can be lowered by the consensus until things are rebalanced. Or the haircut will go in effect and there will be no tragedy, it has been enough times in the past. But then interest won't be paid until the debt ratio drops below the threshold, since no more HBD will be printed. Haircut going into effect would resolve the situation almost immediately, actually, since people would withdraw HBD and exchange/convert it to HIVE, then either power it up or move it to another stable coin. Either way, the debt level would drop almost instantaneously (in a few days I mean).
I think most are in agreement with it. The witnesses have yet to adopt it so it might take some time.
Marky was getting a jump on everyone. We will see how many change in the next few days.
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I think the post was also a test to see how community reacts to the change, before everyone else moves ahead with it.
The APR showed now by PeakD is 15%, which means it's already started to take effect by increasing the average APR of consensus.
This looks like a good thing considering what lies ahead should we of course optimize of what Hive has to offer. But take my opinion with a grain of salt.
What else should we optimize next, iyo?
Hookers and blackjack, with as little blackjack as possible.
Don't forget lambos, lol.
Fantastic explanation. Thank you. Many will love it and need to read this. I will highlight your post in my post today.
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Thanks Bradley! Appreciate it.
My pleasure 😊
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Thank you Kimberly! :)
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Post read from listnerd.
Yes, HBD is not enough appreciated. As it isn't Hive, in general.
@0% certainly makes it more attractive. Thanks for sharing all the information.
@0% doesn't look very attractive. :)
Whichever way we turn it: exciting times ahead! I feel it in my bones!
Thanks for this post @gadrian, I wasn't aware of half of it :)
Yes, and it's even more exciting... Since this post, the APR became official: 20% on HBD held in savings, set by witness consensus. :) You can see it in PeakD too, in your wallet.