RE: Some Thoughts On Hive Backed Dollar (HBD)
I present an example assuming that HBD fulfills its function of being a currency that trades at 1 dollar.
100 Hive at 1 dollar = 100 dollar of capitalization
10 HBD issued at most, would be 10 dollars
90 Hive and 10 HBD left
Moment 2 (Make it never happen again)
Hive price drops by 50%
90 Hive at 0.5 dollar = 45 dollars of capitalization
10 HBD issued would be 10 dollars.
Total sum of the two currencies 55 dollars but there should be 50 dollars
Until the price of Hive is appreciated again there are 5 HBD more.
When there is currency issued without backing, it generates inflation.
How the market tends to regulate itself
It would bring the total of Hive and HBD to $ 50, putting downward pressure on the price of Hive, since we assume that the price of HBD remains constant.
In other words, there is an over-emission of HBD that puts downward pressure on the price of Hive
And so on until Hive finds a floor price.
In correction cycles it can enhance the falls.
Imagine the risk of issuing more than 10% of the HBD coin.
Now read the previous comment I made to see if you understand what the problem is.
This explanation took me time to do, I hope it is understood and it has helped you.
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