Understanding Delegation, a financial tool for passive income.

Delegation

The short explanation

While the most common way to make Hive is through content creation (author rewards) or content consumption and upvoting (curation rewards), there is a third way of earning the cryptocurrency Hive called Delegation. When you earn Hive through delegation, you don’t create content and you don’t upvote content. You invest money in Hive, you Power-up your Hive to Hive Power and then you loan Hive Power to other people or businesses on the Hive blockchain, through a loan process called delegation. The people or businesses you delegate your Hive to, make money and give you a percentage.

The Long version: Delegation explained

To understand delegation you need to understand that unlike many other cryptocurrency blockchains which have one coin, the Hive blockchain has three called Hive, Hive Power and Hive Backed Dollars. Influence on the Hive platform depends on how much Hive you have “Powered Up” or converted to Hive Power. Hive Power determines how much your vote is worth on the platform. Because it’s our Hive Power and not our Hive which determines the value of our vote, we can delegate or loan our Hive Power through a special loan process called delegation.

Delegation is safe

I have loaned people money before and it is always risky because once you give someone your money. There is a risk of them not returning your money or the business fails and you lose all your money. The wonderful thing about delegation is that you when you delegate Hive Power you still control it. So you can take it back anytime you want by Un-Delegating it. You don’t have to ask permission to take it back and you don’t have to wait for someone to give it back to you. You just Un-delegate it.   

Examples of Delegation

You can delegate your Hive Power to a new account, a project or a business on the Hive blockchain. You can delegate for free to help new people get started or you can earn passive income when delegating to a business or curator.

Delegation is a Passive Investment

The other great thing about delegation is that it is passive. You delegate to a project and then you earn Hive if the project earns Hive. Now you don’t have to do anything else.  

How to Delegate

You can delegate using the drop down menu in your wallet page on Peakd.com, hive blog.com or inside your wallet on hive-engine. Leofinance user interface of the wallet page also allows you to delegate there also.

Un-Delegating

When you want to take your delegation back you use the same sites to undelegate, replacing the number of powered up units with zero. It usually 3-4 days to get your delegation back.

Additional things about Delegation that you should also know.

You can only delegate HivePower you own. So you can’t delegate HivePower you leased or HivePower someone delegated to you.  Once you undelegate HivePower the project or business you delegated it to loses that Power immediately and can no longer use it. However you won’t be able to use it for 4 days. This is a safety feature to protect the blockchain from people who would abuse this delegation system.

Last Words..

Now while this is a short and simplified version of the process, I feel it hits the important points you need to understand about delegation. It’s very important to understand these things if you want to “onboard” new people or if you invite your friend to Hive and they haven’t bought any Hive, just delegate them 15 Hivepower or HP and so they can post, and vote on posts.

✍🏼 by @shortsegments

About @shortsegments

Shortsegments is a writer focused on cryptocurrency, the blockchain, non-fungible digital tokens or NFTs, and decentralized finance. He has been a community member for more then three years.

He is also a builder, with two current projects:

The first is the No Loss lottery, a prize linked savings account here on Hive, which awards more the 100 Leo in prizes weekly, and which recent surpassed 1000 tickets sold. @nolosslottery

His second project is Easy DeFi, which creates a community investment pool allowing community members not yet confident enough to invest on their own, a chance to easily invest in yield-farming and staking on Cubfinance. @easydefi

Yield Farming
Cubfinance is the Hive communities home grown Yield Farm and is audited by CertiK, a third party which certifies DeFi projects on Ethereum, Binance and polygon ecosystems.

Read more of shortsegments articles here: https://leofinance.io/@shortsegments

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