A Little HIVE goes a Long Way

Damn it.

I have things to do, but went down a more interesting rabbit hole instead!

Thanks @acidyo!

Prick.

Warning: this is more of an exploratory post and unlike 99% of what I say in all the other posts, I "may" be wrong on some points.

Hive Inflation

Similar to Bitcoin, Hive is deflationary, meaning that there is less inflation coming out every year. This is reduced by a small fraction every 250,000 blocks (if I remember correctly) and sits around 6.5% at the moment. That means with 395M HIVE in the world, about 25.6M will be printed in the next year. And then the following year at 6% inflation and 420M HIVE in existence, 25.2M will be printed - and it keeps dropping. By about 2035, there will be around 650M HIVE in existence and the inflation rate will be 0.95% and about 6.5M HIVE will come out. At that point the inflation rate will be static, so every year a little more than 6.5M Hive will be generated, the following year, a little more again, because it is based on the total supply.

However, this isn't quite a straight line, because there are other dynamics in play, namely HBD. The total HIVE supply (as seen in Hiveblocks and coinmarketcap is calculated as if the HBD has been converted to HIVE. That is why it appears like this:

But, as you know, that conversion rate is going to be affected by various dynamics too, namely the price of HIVE. So, currently the ~30M HBD convert into ~75M HIVE, because the price of Hive (on the blockchain with a 3.5 day moving average based on the markets) is $0.40. However, if HIVE with all other things remaining equal, if HIVE was currently sitting at $4.00 (10x dreams!), that HBD would convert into 7.5M HIVE, a tenth of the amount, bringing the total to ~403M HIVE.

But, unlike Hive's predecessor Steem, there is another dynamic in play through the conversion HBD Stabilizer mechanism created by @smooth that trades overpriced HBD for HIVE, then buys it back underprice and converts and does some magic after fairy dust is sprinkled on it and unicorns… (someone can clarify)

You can see the latest continuation proposal here: You can see it at work through the wallet here:

The HBD stabilizer is both taking HIVE out of circulation and funding the Hive DAO in a clever little process that stabilizes HBD at around the dollar mark algorithmically. It is not perfect and HBD is still prone to getting pumped, but when it does, the stabilizer uses the opportunity to reduce Hive inflation and secure more funding, as it works to bring the price back to near parity.

What the fuck does all this mean?

No idea.

Okay, I have somewhat of an idea, but there are some interesting things that a lot of people don't consider in regards to their earnings, which is all people tend to care about. So, how does it affect earnings?

Well obviously, this is a stake based platform where the inflation is distributed based on stake, at least for authors on chain (there is also the HDF funding and witnesses, as well as interest payments etc that are not stake based). This means that while it is 65% of the inflation, as that inflation amount drops every 250,000 blocks, the pool of HIVE decreases. So, for example, when there is 20M created in the year for voting rewards, it is split between author and curator, each group getting 10M. When there is 10M in the pool for rewards, those groups will get 5M each. This means that in order to maintain equivalent value, the price of Hive would have to double between those years and hopefully, it will increase far more than that.

But, if you haven't worked this out yet, as this mechanism runs its course and less HIVE is being created through the growing inflation pool, it gets harder to earn stake. This means that new authors will have more difficult times earning stake to earn through curation. However, it also makes what people are earning now more valuable, which is normal in a first mover advantage investment scenario, which this is.

But using the scenario above, selling 1000 HIVE stake earned when the inflation was 20M, will require twice as much staked voting to earn the same 1000 again when the inflation amount is 10M. This is why the people who understand these mechanisms believe that earning now and staking is more valuable than earning later, not only because of the requiring double, but also because there is less competition on the platform.

For example, everyone (except people on Blurt) want Hive to be successful, but if it was to build up popularity and the value of the token as well as posting values were to increase significantly, the competition for attention increases a lot. And, as the interest rate decreases and less HIVE is being created, there will be more people competing for a shrinking amount of HIVE in the pool. So, what are the chances of doubling the amount of stake voting on a particular author, especially if the value of HIVE is significantly more than today?

And then, there is another dynamic to consider.

That is all the vested HIVE on the platform, which means there is about 230M unvested (liquid) HIVE sitting out there.

Who cares!?

Only vested HIVE can vote and 100% of the HIVE it has access to will get distributed. So, to visualize this, let's say that the distribution available is 100 HIVE and there are 10 voters of equal size and all voting at maximum rate. This means that they will distribute 10 HIVE each. If there were 20 voters of equal size, they would distribute 5 HIVE each. The value of the HIVE doesn't matter, it can be 40 cents or 40 dollars.

Now, if all HIVE was powered up and started voting, the 100% would still be distributed, but no more HIVE is created. Instead, all voters will distribute their stake amount wherever they do. This means that currently, with over half the available Hive not staked and therefore not voting, the rate of return for those who are staking and voting is higher, as is the amount of Hive that authors are getting. This last point is because if there were far more voters, the probability is that they will spread their votes differently than what is happening now. This makes getting attention more difficult, but for those that manage it, they will likely do well.

Similarly to Bitcoin, the less that is printed, the more scarce HIVE becomes and the theory is that this will increase the value of the token. Combine this with demand on earning it as well as a return for staking and using it for governance in a world with a collapsing economy, banking system and a desire for online earnings in a gig-economy, and there might actually be a perfect enough storm to drive those prices.

While I am not going to speculate on what those prices might be, it is good to consider that with a few million users of demand to create and a few more million consuming, the value could easily push into the 25x range. That would put the value of HIVE at 10 dollars and the value of the blockchain (in terms of HIVE value) at around 4 billion. Couple this with the likes of Splinterlands value and demand as well as an increasing amount of applications and interfaces serving different purposes like Leo Finance and Wresting Organization online, and things might be very interesting indeed.

But, because this is all speculation and there are no guarantees about the future in any respect other than we are all going to die one day, most of us don't consider, let alone invest for potential conditions down the track, which means that when they arrive, we have missed the greatest part of the opportunity to take advantage. We are risk averse by nature, but we apply this to all aspects of our life, as if our lives depend on all aspects and any loss is our death.

TL:DR?

That is okay.

Most of my posts are too long and people don't read them, but those who do might actually get something out of them that helps them change a slice of their mindset that will hopefully benefit them, now or in the future. There are people thinking about these things here and other places, but it really is up to us to decide whether we are going to be active members of the global economy or passive victims of it. If we are unwilling to even spend a few minutes reading about things that might affect us heavily, but use that time to consume what has no positive impact on us at all, we deserve to be treated like cattle, milked for our value and slaughtered when not producing enough.

Anyway, as said, this was a bit of a rabbit hole and accuracy is not present, but the general ideas are, so use it as you do, research where you want and fill in the blanks in the comments, if you have questions or can bring in some clarity.

But if you only remember one point. In terms of earning Hive,

it will never again be easier than it is to earn, than it is to earn today.

Taraz [ Gen1: Hive ]