Posts

Haircut Rule and what we don't refer to

avatar of @bgmoha
25
MHD
@bgmoha
·
0 views
·
2 min read

The haircut rule is the fact that when the debt ratio is higher than predefined thresholds, the blockchain will slow down or even stop printing new HBDs for some of its HBD creation mechanisms.

The debt limit has no direct influence on the price, but only on the printing of new HBD. The price is driven by market forces, not by the blockchain. The HBD might lose its peg, which is very likely, but it might not.

There are 5 mechanisms involved in the creation of HBD:

  • payout of author rewards
  • conversion from HIVE to HBD
  • interest payment on HBD stored in savings
  • allocation of part of the inflation to DHF
  • conversion from the ninja-mined HIVE

If the debt ratio reaches 20%, the blockchain will start to slow down HBD printing as defined in the blockchain code (database.cpp / line 5370). Authors will be paid with both HBD and HIVE. It's when the debt ratio reached 30% that the payouts will be HIVE only. If this were not the case, there would be no point in having two thresholds.

The haircut rule has no influence on the payment of DHF proposals for the simple reason that it is not at that time that new HBDs are printed.

It is the provisioning of the DHF which is the source of creation of these new HBDs. Even when no proposal would be supported by the community, meaning no proposal payouts, the blockchain would continue to create new HBDs and add them to the overall budget. There is no way stakeholders can influence this dynamically.

It should also be noted that the DHF payouts are not part of the HBD supply. They are just HBD transfers from @hive.fund to the proposal recipients.

Posted Using LeoFinance Beta