Like Hive People Are Starting To Talk About Crypto Economies
How long have we been talking about the Hive economy? This is something we jumped on a while back. It is fundamental to the idea of the network state yet most seemed to miss it.
That is starting to change. As we will see in this article, the concept is starting to spread. Perhaps this will bode well for Hive in the future as we keep building.
Before getting into that, it is important to note that Hive offers two coins at the base layer. The Hive Backed Dollar (HBD) is an algorithmic stablecoin at can be converted to $1 worth of the value capture coin, $HIVE. This is a powerful combination that is unrivaled elsewhere due to the decentralization that is present with this ecosystem.
Viewing an ecosystem such as Hive, or any other blockchain, moves the focus to an entirely different level. Most simply look at playing with the tokenomics in an effort to make the price go up. That is the sole concern for most of cryptocurrency.
Suddenly, when the idea of an economy is introduced, now things such as growth are important. This extends to more than the user base, which often relates to the price of the coin. Instead, we start to concentrate on use cases, businesses, funding, and a host of other features that an economy needs.
Raoul Pal Sees The Economy
Most who are involved with cryptocurrency are familiar with Raoul Pal. He is a former Goldman Sachs money manager who was an early entrant into Bitcoin. His background is as a macro-economist, a fact enhanced by his managing money. At least he can take a non-theoretical look at things.
Here is what he had to say:
He sees the Ethereum economy as the fastest-growing economy on earth, offering many opportunities for investors. However, Pal emphasizes the significance of investing time to find the best options, dollar cost averaging, and diversifying to avoid potential losses.
There is no doubt he is a borderline Ethereum maximalist so no surprise his focus is upon that. At the same time, he is a money manager by training, so looking at things from that perspective is logical. The key point is that he sees Ethereum as an economy and the growth rate that is taking place.
He further adds:
Pal compares the Bitcoin economy to the Catholic church or the gold bug community, which fiercely protects the integrity of its protocol and is resistant to innovation. The Ethereum economy is compared to the U.S. economy, with a central bank that follows the rules of responsible monetary policy to ensure value is upheld.
This is quite a shift since Pal was a big time Bitcoin supporter. Nevertheless, it is an interesting way of looking at things. We might dispute his views yet must respect the way he is framing things. This is more helpful than simply looking at prices and market cap.
He is also apt to run off the rails a bit.
Pal also notes that ETH has a deflationary supply, which makes it attractive to investors seeking yield.
It is obvious he cannot leave his market movement mindset. While Ethereum does have some elasticity, to make an economy grow, money is required. This is often dictated by the business cycle, which causes the expansion and contraction of money supplies. Sadly, this is often overlooked.
Hive As An Economy
Hive actually does a better job than Ethereum in this regard. If we are making the comparison to a central bank, we see how Hive offers a market based (community) driven elasticity of the money supply.
Harkening back to the two coins, Hive has the ability for one coin to be deflationary while capturing the value in the other. If people are converting $HIVE to HBD, the value does not disappear. As more features are added, both at the base and layer 2, we can see how this will still provide the value to the ecosystem. It is not destroyed like happens with a burn.
When constructing an economy, there needs to be a means of funding new venture. In other words, expansion is required. This often means taking what is present and leveraging it for greater growth.
Many take exception to this which is ironic since they mostly do it. Here is where beliefs do not align with the actions taken.
Do you own your home? If you do, there is a 90% chance you fall into this category. Since the overwhelming majority of homes are purchased via mortgages, we see economic expansion. The debt is issued against the existing value of the home. This expands the money supply generating more economic productivity.
From the sale of the home, real estate agents get a commission. The broker makes some money also. People usually do things like buy new appliances or replace the carpeting. If a new resident, construction companies and subcontractors are paid. This means more trucks, electrical wiring, and other tools of the trade.
Therefore, the idea of burning value doesn't make a lot of sense. One could claim that the market will capture the value by raising the price as supply decreases. This might be the case but we have to keep in mind that markets are terrible at sizing up value.
Hive does not fall victim to this. The adjustment of the circulating supply between HBD and $HIVE through the conversion mechanism is simply transferring value from one coin to the other. Both are resident at the base layer and reflective of what is going on with the ecosystem (at least to some degree).
Shift In Thinking
It is time for most on Hive to shift their thinking. We are to the point where the focus has to be on economy building, not simply price action. There is a bit of correlation between the two but it is minor.
Growth rate in other areas is vital. On-chain activity is one example. Transactions can be loosely equated to trade. Hence, the more that are taking place reflects strength in our economy. Of course, we also have to take into account the value of the average transaction, something that is impossible to quantify. Nevertheless, the combination of social media and finance means we have value even in a single upvote.
How many projects are focusing upon the number of active users on their application? Do we see those behind these promoting the idea of growth? How much quantifying of commercial activity do we see taking place? Aren't these numbers that businesses, at least publicly traded, regularly put out?
We often promote the idea of thinking of ourselves as a business. Here is where the growth focus comes in. Concentrating upon a particular aspect of what we are doing and seeking to exceed it aligns with the concept of economic growth. While there might not be a direct monetary correlation, it is all part of a larger process that is unfolding.
From now on, people are going to start summarizing it as "economy". Raoul Pal is understanding this, something that we started to talk about with Hive a while back.
This instantly affects the focus of what we are doing. A change in mindset is a good thing.
If you found this article informative, please give an upvote and rehive.
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