Hive Has Both A Transaction And Value Capture Token
We tend to lump all cryptocurrency in together. This is unfortunate because it ends up causing a multitude of problems. Simply because something has the word currency in it does not mean it carries the same properties as everything else.
When it comes to cryptocurrency, people seem to think that it all should mirror what we are accustomed to. How do you add value to a token? Most feel that the best way to do this is to establish things that can be purchased with it. Payments are the things that most focus upon.
Certainly this was part of Satoshi's main vision. The challenge is that the history of the industry is things turned out differently. This makes sense when we understand the various functions that currencies can serve.
In this article we will break down the difference between currencies that are suited for transacting as compared to those which capture value.
Fortunately, for those who are on Hive, we have both at the base layer, a feature that is rather unique.
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Transactions Require Stability
Stablecoins became a hot property over the last few years. The evolution of this aspect of the industry should get people's attention. When we analyze what is taking place, it becomes evident that stablecoins have a major role to play.
The assets serve two main purposes. When fostering transactions, it is obviously a medium of exchange. Value is transferred from one wallet to another.
We also find that stablecoins can be utilized as a "parking spot". This is often done when one sells a financial asset and holds the value in a stablecoin. It is where the store of value enters the picture.
Obviously, a great deal of this is derived from the fact that most stablecoins have a peg. Since they have to developed the value in themselves, they use the tie to another asset. The most common items used is the USD. For many stablecoins, this is actually the asset backing the token. However, there are algorithmic coins where the USD is only a unit of account (or measurement).
The key as it pertains to this is the fact that stability is required. If one is investing and decides to take risk off, he or she does not want to enter into something that is going to be extremely volatile. The same is true for merchants. An online retailer does not want to make a sale and find there was a 15% less since the value of the coin plummeted overnight.
On Hive, we have the Hive Backed Dollar. This is a stablecoin that is backed by $1 worth of $HIVE. Since it operates at the base layer, the only counterparty risk, something that is becoming more important, is the blockchain.
That means that Hive has the vehicle to both transact and offer a store of value to the user base. It also provides the Internal Exchange which is a base layer DEX. This allows for swapping between the two coins.
We also see the ability to serve two aspects of the finance. Here we have the fixed income market covered by the ability to stake and earn yield. At the same time, the volatility of $HIVE enables those to speculation on the future pricing.
Value Capture
The tokenization of everything is bringing us into a new era. This enables us to apply market values to most anything in the digital world. Over time, we are going to see this extend into the physical also.
A big part of this transition is the understanding what a token does and how it reflects upon what is taking place.
Most cryptocurrency falls into this category. Activity is crucial. Here we see business concepts applied. A project that is tokenized, and growing, will see the value of the token appreciate. The two are correlated.
Of course, this applies to more than just transactions. There are a host of layers that can provide an entity value. One of the main things is community, what many are calling social tokens. Consider a company like Disney. What is the value of the customer base? Certainly we can look at profits and losses to size up the entity. However, with so many viewers, this has a great deal more value than as company like Zoom.
Transferring this concept to the cryptocurrency world, the most noticeable is at the blockchain level. Coins that are tied to an ecosystem are going to capture the value of all that is tied to that chain. As more is built out, greater value is generated.
Here is where we have to mention the proverbial price versus value. Market offer price which may, or may not, properly reflect the value created. Here is where inefficiencies operate and people can purchase what they believe to be mispriced by the market.
When we look at a coin like $HIVE, what does it pertain to? The analysis starts with the utility.
The coin is what allows access to the blockchain. Anyone who wants to write to it must have it stakes, also known as Hive Power. This is the most basic function of the coin.
Then we have governance. Those who power up are able to vote on witnesses and proposals for funding from the Decentralized Hive Fund (DHF). This helps to navigate the future of the chain by each person putting forth their opinion based upon the stake held.
Finally the coin is tied to all that is occurring within the ecosystem. It is here where we see $HIVE reflecting the entire ecosystem. Markets obviously make this an inaccurate science. Nevertheless, those who grasp this concept can see the greater potential down the road.
In short, the more Hive advances, the greater the value that is created.
Short Cuts
Everyone wants to take a short cut. This is no different in the cryptocurrency industry. Since there is the financial component, the focus tends to be on "price go up". Unfortunately, this leads to nothing more than hype.
By framing our view of these coins and tokens as value capture devices, we can size up different assets. What is truly taking place with the ecosystem? What is being built? Where will future users come from and what will they use?
Serving a need in the marketplace is vital. Does Hive do that? How important is an immutable text database that is truly decentralized? What does the combining of finance and social media do? Where does this give Hive a leg up versus all else?
Layer 2 suffers from the same mindset. How often do we see projects trying to add utility to their token instead of building value? It appears that when people enter cryptocurrency, they toss all business principles out the window. Sadly, this is likely reflective of the fact that most lack these since they were reared in an economic system which stressed obedience over anything else.
Personally, this is the lens I feel everyone should apply to different coins and tokens. This is not financial advice yet it does appear much effort is spent in the industry trying to do things with one's cryptocurrency project that is not the way things are evolving.
What would a project look like without the coin or token? This is the mindset people have. Too many focus solely upon the monetary aspect, trying to enhance that. It is why this article started off with stablecoins.
Do you think Hive is building value? If so, then it will be reflected in the $HIVE coin.
And this is where community enters the picture. We all have a role to play in advancing the ecosystem. Each wallet that has $HIVE (or HP) in it has a vested financial interest in what is taking place.
If you found this article informative, please give an upvote and rehive.
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