Hive Backed Dollar (HBD): Taking Things To The Next Level

1 yr
LeoFinance
7 Min Read
1405 words

Stablecoins are getting a lot of attention of late. It appears that, in the United States, those what are backed by companies (labs) will be regulated like banks. Thus companies such as Circle are facing a host of regulations it will have to adhere to.

One of the advantages to the Hive Backed Dollar (HBD) is that it is outside this. The token is backed by the code on the blockchain, with no single entity in control. It is an algorithm-driven stablecoin that is backed by $1 worth of Hive. Please note the one dollar is a unit of measure and not the backing asset. HBD is backed by HIVE, not USD.

In this article, we have a few major points to discuss:

  • The HBD-HIVE relationship
  • Interest paid/Haircut
  • Lack of liquidity/Peg

image.png
Source

HBD-HIVE relationship

HIVE and HBD are linked. This is a point that takes a bit of investigation to see. While most overlook HBD, it could play a vital role in the evolution of the Hive ecosystem.

HBD is a debt-based instrument that is meant to operate as a stablecoin. Unlike HIVE, which can have wide fluctuations in price, HBD is meant to be pegged near $1 worth of HIVE. This is much preferred for commerce since merchants will receive a payment mechanism sans the volatility associated with HIVE.

HIVE is a governance token. This is one of its main utilities. At the same time, we also have the Proof-of-Brain mechanism that is determined by the amount of Hive Power (HP) one has.

The Hive Backed Dollar, on the other hand, is designed to facilitate commercial transactions. Merchants require stability and HBD aims to deliver that.

Where we see the relationship enter the picture is in the conversion mechanism that is built into the Hive blockchain. Each token can be converted to the other, at any time. Thus, when HIVE is converted to HBD, more of the later is "printed". This will expand the amount of HBD that can be used for commercial purposes.

It also could have an impact on the price of HIVE. As more is converted and housed in HBD, there is less HIVE on the market. Of course, this can go both ways, which could unleash a great deal of HIVE being created.

For that reason, it is vital to build out the use cases, giving people incentive to keep value/utility in HBD.

Interest Paid/Haircut

@dalz put together a short post about raising the interest payment on HBD in savings to 20%.

Before we can get into that, we have to identify the fine line that we have to navigate. The goal of a stablecoin is for it to be used. In other words, we want commercial transactions taking place in HBD. This is the primary function, to exchange value.

Of course, savings is also part of the equation. In the world of DeFi, having an aggressive rate, especially on a stablecoin, could bring a great deal of interest.

Here is where some navigation is required. The rate paid at the core level must be high enough to garner attention and motivate people to hold the token. At the same time, it cannot be so high that people focus solely upon that and never want to part with their HBD. That is one of the problem in cryptocurrency. Because of the returns people get from HODLing, they refuse to utilize them for payments. Hence the explosion of stablecoins.

One of the features of the interest being paid on HBD is that it generates more HBD. Since we are dealing with a lack of liquidity, this is helpful. Raising the interest would help to facilitate this at a faster rate. Nevertheless, we need to be careful not to set it too high and sabotage the future use as a payment mechanism. As we know, while it is possible to lower it, that might not be the best course of action from an optics perspective.

Then we have the haircut rule. For those who are not familiar with this, the blockchain will stop producing HBD when the ratio of value gets to 10% of that to HIVE. What this means is that 50/50 payout will eliminate the HBD portion and payout in liquid HIVE. This continues until the rate drops below the threshold.

This point was brought up in the comment section of the above-linked post.

hbd.png

We do have some discussion of raising this level to 20% or even 30%. What this means is that a lot more HBD could be in existence. This is what is required if we are to have it operate as a true stablecoin. It cannot legitimately operate if there are only 25 million in existence (with a significant portion of locked in the DHF).

Lack of Liquidity

In short, this is creating a host of problems for HBD right now. Much of what ails it stems from this single point.

To be an effective stablecoin, a peg needs to be maintained. Since the introduction of the HBD Stabilizer, we see marked improvement. The wide swings on the token appear to be a thing of the past. Unfortunately, the range is still too wide.

Over the past couple months, we have been between .90-1.00 on the downside and 1.00-1.20 on the upside. For the most part, we held between .93 and 1.06. The range is tighter yet not tight enough.

One of the ways to resolve this is with liquidity. When any asset is scarce, it will tend to have a wide gap on the bid/ask. This creates more volatility than is desired. At the same time, people avoid arbitraging the situation due to the fact the lack of liquidity eats into their potential gains. That is what truly is needed to help keep the peg. In other words, HBD Stabilizer needs more help from the market.

This also shows up in the fact that one exchange can basically drive the price of HBD. Since few exchanges are carrying the token, it is difficult to acquire. Of course, without many in "print", it is hard to populate a ton of exchanges as it is.

It really becomes the chicken or the egg scenario.

Some Proposed Steps

  • Raise the haircut level to at least 20% (30% will be better)
  • After that, urge the witnesses to increase the interest to at least 15%, if not 20%
  • Applications on Hive should start to integrate HBD as a payment option
  • While HBD is scarce on exchanges, HIVE has a much better reach. Thus, people could focus upon buying HIVE, bringing it on-chain and using the internal exchange to turn it into HBD. There is no wait or conversion required.
  • Start promoting HBD as part of the outside social media engagement. Relate how there is a low-risk, 10% return on a core layer, blockchain-based token.

Hive Backed Dollar is a hidden gem for the ecosystem. With all the attacks that are taking place from regulators, Hive already offers a solution. We also can see how the growth in use of HBD could have a great deal of impact upon the overall value of HIVE.

Like everything else on Hive, we all have a part to play in this. It starts with the conversation and putting some focus upon HBD. Each of us can place a minimal amount in savings. Perhaps consider taking a few of your Hive payouts as 50/50 each week. That will help the system to organically create more HBD.

If you are a trader, look to assist the HBD Stabilizer by trading this pair when you see opportunities. Increasing the number of transactions, even on the internal exchange is a help.

When we step back, Hive is developing a nice package of offerings. There is a lot to what we are creating. We are bearing the point where we can leverage different aspects of the ecosystem against each other.

Hive Backed Dollar is just another piece in the arsenal. When we look at complimentary features, this is certainly one of them. The key is to integrate it into all the other things we are doing.

Start the process by letting us know what you think in the comment section below.


If you found this article informative, please give an upvote and rehive.

gif by @doze

screen_vision2025_1.png

logo by @st8z

Posted Using LeoFinance Beta


HBD is undervalued in every possible sense of the word

1
1 yr (edited)

We already accept and actually I would prefer payments in HBD on the https://hivelist.store as well as I accept it on https://weedcash.store. I am paying vendors out in HBD for sales on the Hivelist.store as well.

It can be a bit annoying with the price swings, but it works and yes has gotten allot better since the conversion mechanism, of which I use daily to pay my personal and business bills. I keep a round of 4 conversions going at a time, once daily. Currently up to 200 Hive a day which produces about 75-76HBD a day which I will split between savings and the rest gets traded out to where I need it for expenses and bills, etc. then the savings gets taken to pay big bills at the end of the month and what is left over goes back in the the Hive Wallet for either savings or exchange to Hive to build up the conversion pool.

To keep the Hive conversion pool growing, I am feeding it with HE token rewards sold back into Hive, and my Defi rewards from Cosmos and Cub.

It has built me up enough to have the freedom to do what I need and to let me work on my businesses and content full time!

In other words… Hive and HBD are my heroes lol

Posted Using LeoFinance Beta

5

In other words… Hive and HBD are my heroes lol

That is what we like to see.

Posted Using LeoFinance Beta

1
1 yr (edited)

https://twitter.com/Hivebull/status/1460980672181456898
https://twitter.com/taskmaster4450/status/1460980794340618247
The rewards earned on this comment will go directly to the person sharing the post on Twitter as long as they are registered with @poshtoken. Sign up at https://hiveposh.com.

0

And you know I had to come back with this account to give it a reblog for the https://coin-logic.com front page! Actually was going to talk about this on the Friday market update so I will use the article and tag you as a beneficiary!

Posted Using LeoFinance Beta

1

Much appreciated. It is an important topic.

Posted Using LeoFinance Beta

1

Amazing post my friend as always super informative.

Thanks for sharing

@taskmaster4450 have the best day.

thankyouonhive.png

0

%20-%30 interest rate for HBD is a big thing. I think much more HBD will move to savings.

1

I would think that would be something that we could take to twitter and other social media to promote. The challenge is that we cant do it until it is easy for people to get HBD.

Posted Using LeoFinance Beta

0
1 yr

It's been a long time since HBD hasn't moved as high as the Hive price, why does that happen, does HBD have a lower supply than the hive?

1

HBD has a much lower float as compared to HIVE.

The former is meant to be pegged to a dollar worth of HIVE. If HIVE is above a dollar, then it will be higher than HBD.

Unfortunately, the HBD is below the peg right now.

Posted Using LeoFinance Beta

0
1 yr

Is there a possibility in the future HBD will increase in price?

0

For this HBD, I'm not converting mine to Hive. I'm also investing on this HBD. I will not touch my own until 1 year. Thanks for the information.

Posted Using LeoFinance Beta

1

Even without a change, you get a nice 10%. Try finding that at a bank.

Posted Using LeoFinance Beta

0

Ok

Posted Using LeoFinance Beta

0
1 yr

I think back in the days when the value of HBD was so much higher than Hive it was hard to see it as a viable payment method. There was that unit bias at play for sure. Now, it seems much more realistic. Again, I know unit bias is coming into play there.

Posted Using LeoFinance Beta

1

It is vital that HBD becomes a stablecoin. It has a lot of attributes that could make it a major winner.

Posted Using LeoFinance Beta

1

i already sent my 300 HBD in my holding account,, wallet, and i will save more HBD in my holding account, so my target is to save at least 1000 HBD IN SAVING WALLET FOR NEXT 3 YEARS,,, YES,, 30% IS GREAT, BUT I WANT TO KNOW, I SAVED MY 300HBD TWO MONTH AGO, BUT I DID NOT GET INTEREST, IT WILL ADDED AUTO OR ON POST VOTE,,,, I DO NOT USE MY HOLDING ACCOUNT FOR POST

1

You need to manually claim. I usually do so through PeakD. In the picture below, the blue button should be like "claim now" or something like that and you will get your interest.

image.png

Posted Using LeoFinance Beta

1

Thank dear for this information , good i'll do 😍😍😍

1

To be an effective stablecoin, a peg needs to be maintained.

That's for sure and since you mentioned that users are mostly interested in staking it rather than spending, you should know I would be a happy spender, but how?

I never understood the meaning of HBD until reading this post. Hope to one day see HBD pegged. It's a "stable coin" of a different breed. Unregulated one, a matter of fact, as you pointed out, it can't even be regulated.

Posted Using LeoFinance Beta

2

It's a "stable coin" of a different breed. Unregulated one, a matter of fact, as you pointed out, it can't even be regulated.

This is an important point. We just need to keep the narrative going. We could see a really incredible piece of the Hive ecosystem making a lot of noise.

Posted Using LeoFinance Beta

0

This post has been manually curated by @bala41288 from Indiaunited community. Join us on our Discord Server.

Do you know that you can earn a passive income by delegating your Leo power to @india-leo account? We share 100 % of the curation rewards with the delegators.

Please contribute to the community by upvoting this comment and posts made by @indiaunited.

1

Hoping we can increase the haircut to at least 20% or more on the next hardfork, by the way, do you know when the next hf is expected?

1

I havent heard a date but I would guess it is going to happen after the new year. Maybe Late January or February.

Posted Using LeoFinance Beta

0
1 yr (edited)

It can’t happen soon enough, we need liquidity with HBD to make it a true stable coin.

0

I think increasing the haircut should be a priority and having a higher interest rate will garner more attention. However I think most of the top witnesses seem happy with the current rate.

Posted Using LeoFinance Beta

2

HBD is an amazing tool that we have here on hive. When hive goes up I buy HBD, when hive goes down I exchange hbd into hive. It's a great way to profit from market movements without needing to go out of the ecosystem and without any fees. I agree that having too high interest rates would have the effect that people would simply hold it. People keep the good money that gives a lot of interests and stability and they part with the bad money. HBD might become a hodler money and couldn't fullfil it's purpose for e-commerce.

If I understood the mechanismes correctly, if we have Hive at 10$, the number of HBD in circulation can grow 10x without the nee to change anything :-). That seems like the best solution lol

1

If I understood the mechanismes correctly, if we have Hive at 10$, the number of HBD in circulation can grow 10x without the nee to change anything :-). That seems like the best solution lol

From this point, yes that is correct. That would equate to 250 million HBD (roughly). That sounds like a lot until you realize there is 34.9 billion USDC in circulation according to their website.

Posted Using LeoFinance Beta

0

Thank you for your easy to understand explanations, all this time I never really knew what the haircut was for; I knew it was a thing, but I didn't know why. I agree if the goal is to make HBD as stable as possible, increasing that to 20 or 30% would probably be the most helpful thing!
Meanwhile I will keep plunking a few HBD into savings as I can. :)

1

Meanwhile I will keep plunking a few HBD into savings as I can. :)

That is a help. For every 10 you put in there, that produces another one over the next year. We are going to need a lot out there.

Posted Using LeoFinance Beta

1

Lol, I keep saying HBD is not a stable coin, otherwise it would behave like other peg coins and fluctuate no more than 1-2% max.

Anyway I think the lack of liquidity is down to the countless HBD (de)stabiliser posts anytime it goes to $1.30 or more. Any sane person who sees those who doesn't know the history of Hive just thinks, well I'll stay away from that one.
11
HBD's biggest chance of survival is its use and future use as an NFT buying token. Otherwise I see it as pointless.

Cg

1

The majority of my post reflect 50/50 HBD/Hive. I prefer to get paid in both. Once I receive payment, I power up my hive holding an amount for Hive Power Up Day, transfer some of it to HBD savings and convert some HBD to Hive for investing in various 2nd layer tokens or passive income tokens.
A higher rate on HBD savings would be nice but 20% may be a little high since that is greater than the amount you could get curating Hive. How important is the need for holders to power up Hive vs place the funds in HBD Savings to earn that %?

1

How important is the need for holders to power up Hive vs place the funds in HBD Savings to earn that %?

Interesting question. The fact you are taking a 50/50 and then selling it means you are creating new HBD from your post payouts. That puts it on the market when you sell it.

I tend to try to add to both personally. Is one more important than the other? I guess it depends upon what you place the biggest priority on.

Having more HP is never a bad idea in my view.

Posted Using LeoFinance Beta

2

On most exchanges, HBD is not as liquid as hive. If you look at Coinmarketcap, the volume of HBD traded across all exchanges in the last 24 hours was only $290,947.

Whereas the volume of Hive traded across all exchanges in the last 24 hours was $268,096,463.

HBD will struggle to get traction as a stablecoin unless volume and liquidity improve.

5

Hard to do that with only 25 million or whatever is out there. We need a lot more HBD plus use cases.

So we are truly in "the chicken or the egg" situation.

Posted Using LeoFinance Beta

0

The difference in trading volume is around 1000x though, when the difference in amount in circulation is more like 15x, and even less of a ratio when considering only liquid HIVE.

But I don't believe most reported crypto volumes anyway.

2

That is true. Trading volumes are even wider than the float out there.

Less exchanges have to impact that although, I would imagine, a lack of use cases is also feeding into it. Why would an outsider even jump into HBD?

At this point, we dont have the mechanisms in place to leverage what we truly have to offer.

Posted Using LeoFinance Beta