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Should We Reduce The Hive.Fund Holdings To Further Improve Decentralization Via A Long Term Airdrop To Hive Holders?

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@dalz
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Ok so this might be a bit controversial topic, but I think its something worth looking and brainstorming about.

Hive takes pride in its level of decentralization and the community around it. After all it made one of the most successful hardforks getting rid of a central entity and continued evolving and developing mostly as a community project.

The thing is the stake of the central entity wasn’t destroyed or burned, but was put in the DAO/DHF. While this reduces the centralization a lot, it still makes the DAO/DHF (Decentralized Hive Fund) a major stakeholder. Putting this stake in the @hive.fund is not bad idea, because the community can later on decide what to do with it.

@hive.fund holdings

As said above Hive takes pride in its decentralization with the top stakeholder @freedom owning around 3% of the HIVE supply (13M out of 382M).

If we take a look at the current holding of the @hive.fund we have this:

- 71.4M HIVE out of 382M or 18.6% if the supply - 5.1M HBD out of 12.7M or 40% of the HBD supply

If we combine the marketcap of HIVE and HBD and the total share of the @hive.fund we get around 20% share.

Holding a 20% of the total supply is bad on paper for the decentralized look of the token even if the holder is a DAO and it is an attack vector, no matter how small the chances are. In defense of the DHF, only 1% of the holdings can be pooled out per day, so if anyone want to take advantage of the funds it will really need to take over the whole chain, and by then the DHF funds will be the least of a worry.

Funding Development

What about the budget for all the development that the DHF is funding right now?
Those should absolutely continue and even increase. See if even one of the projects makes a success, it will return the funds multiple times, so those funding's are great and should continue even increase to funding hundreds of projects per year.

In the last year there was around 1M HBD spent funding projects from the DHF.

This number can vary, but for now the yearly budget seems to be around that number. The @hive.fund receives around 1.5M HBD per year from inflation only. This number depends on the price of HIVE and can change. What the numbers above shows is that the development is self sustainable from inflation only, as long as the HIVE price is above 0.25 ish. Plus the DHF now has a 5M HBD in reserves, meaning at the current spending around 5 years buffer.

HIVE In The DHF Is Slowly Converted To HBD

The DHF uses HBD to pay for proposals. Since the October 2020 Hardfork, the HIVE in the DHF is slowly converted to HBD at a rate of 0.05% per day. It will take approximately 5.5 years for all the conversion to finish. This slow conversion was put in place to avoid risks from price volatility. Around 36k HIVE per day are now converted to HBD, equivalent to 17k HBD per day at these prices for 0.45$ HIVE. When the conversions started there was around 83M HIVE in the DHF and now that number is around 71M.

How much more funds will be added from conversions depends on a lot from the HIVE price, but if today all the HIVE was converted to HBD it will be an equivalent of around 32M HBD. Plus, the already 5M existent or 37M in total.

How much funds the @hive.fund needs? As already mentioned for a 1M HBD yearly budget, the DHF is self sustainable as long as the price of HIVE is above 0.25 ish. But yes, it will be great if there are some reserves, plus the @hbdstabilizer need some funds now to balance out the HBD price. Also there might be some new projects in the future worth supporting that can increase the spending of the DHF. Ultimately the amount of funds in the DHF depends of the HIVE price.

This not an easy question to answer, but lowering the @hive.fund holdings bellow 10% of the supply, preferably around 5% would be a balanced out distribution. At 10% of the supply the DHF fund will hold around 18M HBD, and at 5% it will be around 9M HBD. For the sake of simplification let’s say 10M HBD holding target the DHF. Remember at the current prices the DHF has around 37M HBD holdings, so an “excess” 27M HBD (60M HIVE).

Long Term Airdrop

Why not just burn the tokens instead of an airdrop? Putting funds back in stakeholders hands is much better solution than just burning tokens. Why burn the tokens, when it can provide higher value if you redistribute them. Also it is good for the marketcap.

Why long term airdrop? Well as for the long term conversions, so for the airdrop to avoid price volatility. How long? A year for a start, maybe even more, two, three? Who will receive the airdrop? First thought will be the Hive Power holders, avoiding exchanges.
How much will this airdrop worth? Somewhere around 50M to 60M HIVE maybe. At the current rate of 142M HP, this will be 35% to 40% APR on top, if the airdrop is performed in a year time, or less if its more long term. If more HIVE is powered up, the APR will also be less.

A hardfork will be probably be needed for this type of operation.


Ok I’ll finish with this funny math here 😊.
The overall idea here is to improve distribution, lowering down the DHF holding to bellow 10%, while providing a long term value for the community and for the once that are staked. At the same time the DHF should have enough funds to function for years to come. It will most likely impact the HIVE price in a positive way as well.

Will be interested to hear your thoughts. What do you think about this?

All the best
@dalz

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