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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