Why Hive Can Be A Player In The Fixed Income Market

3 mo
LeoFinance
7 Min Read
1372 words

Hive has a tremendous opportunity to be a player in the fixed income market. This is a drum that we will keep beating until the proverbial cows come home.

Over the last year we saw a lot of attention being paid to the Hive Backed Dollar (HBD). For an asset that was overlooked for so long, it is now turning into one of the strong points of the Hive ecosystem. Ironic that so many were ready to toss it aside.

If you didn't notice, the range of the token has tightened a great deal. This is due to the use of the HBD Stabilizer. Here we see a bot that goes in and buys/sells HBD based upon the price relative to the peg.

As an aside, there is a new proposal put forth by @smooth to increase the funding. Keep in mind this is an activity that actually returns money to the Decentralized Hive Fund.

A recent estimate from @dalz was that the HBD stabilizer had generated a profit of well over $1 million, adding funding for the DHF, helping to stabilize HBD, and, on net, removing many millions of HIVE from circulation.

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By having the price of HBD float closer to the peg, this increases the value as a stablecoin. After all, a highly volatile stablecoin is counter to what its intended purpose.

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Algorithmic Stablecoin

Most are aware of this but for those who are not, HBD is an algorithmic stablecoin. These are becoming popular these days with UST being probably the best example of this.

It is a coin that is created entirely by the community. There is a possibility of money equilibrium since supply can be expanded or contracted as demand necessitates. Through the conversion mechanism, individuals are able to create more HBD from HIVE or reverse the process. This is how the amount of HBD is, at least in part, determined.

We also have the choice of getting rewards in 50/50 as opposed to 100% HP. This is the second method to generate it. Finally, people can put their HBD in the savings account which earns 12% annually. This payout comes from new HBD created.

Thus, we can see how there is a correlation between HBD and HIVE. If the community wants to generate more HBD, HIVE can be converted, reducing the outstanding supply. This could positively affect the price of HIVE in USD terms.

The key to understand is that HBD is worth $1 of HIVE. There is no USD involved. It is HIVE that is actually backing each HBD token.

All of this is coded into the blockchain.

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The Fixed Income Market

In the wild world of cryptocurrency, the fixed income market seems boring and bland. Even compared to stocks, it is not exciting. Yet, it is a powerful mechanism for wealth creation. Understanding this market, especially as compared to speculators, is vital.

To start, we have to consider the is a market that is worth well over $100 trillion. Globally, it is the most common form of investing. Whereas crypto people like to set their hair on fire and buy something they hope is going to 1000x, fixed income buyers operate on a different principle.

One of the important criteria is the known return. We see this with the Hive savings program. When one puts in 100 HBD, he or she knows exactly how much will be paid out over the 12 months. In this instance, there will be 12 HBD claimed (we will ignore the compounding each month for simplicity).

That is how fixed income investors think. How much will be received if X amount is put in?

The important factor here is yield. Investors in this market are forever seeking a return in light of the risk accepted. Some prefer more safety, opting for Treasury bonds. These are very safe but the yield tends to be low. If one is willing to increase the risk parameter, higher returns can be achieved in junk bonds. However, the trade-off for the return is more risk.

Ultimately, the safest is a simply placement of one's money in a savings account with a bank. In the United States, this is insured against loss. Of course, the return is near zero in this environment.

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Why Hive Is Ideally Suited For This Market

Hive can truly be of impact in the fixed income market because it has the HBD token at the base layer. This can result in the construction of different fixed income options tied directly to the blockchain.

The big benefit to this is the removal of any third party risk. No application or company needs to be trusted. One simply does not exist.

It is said in cryptocurrency, not your keys, not your coins. Often when people get involved with DeFi projects, their tokens are staked on a platform (application). This removes them from their wallets. At the same time, payouts are in another token which adds another risk factor.

For example, staking Bitcoin in a yield farming project to get a payout in ABC token might be a good idea. However, not only does one have the risk associated with Bitcoin but also the second token. Obviously a lot opt for this but it does added another element to the equation.

What we can build on Hive eliminates this. We can see base layer operations which keep in line with this motto. All is accessed by the individual through his or her wallet. The tokens are always in the possession of the owner. The only trust requires is in the blockchain itself, not a company or any third party.

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Attracting In Millions Of Dollars

By now, anyone who is around cryptocurrency a short period of time realizes there are insane amounts of money tied to Decentralized Finance (DeFi). Recently the total value locked in DeFi crossed $200 billion again. This is a lot of money that is funneling in.

Many of the projects contain the risk just described. At the same time, many are questioning some of the stablecoins that are being used. Circle and Tether are both coming under scrutiny for their claims of backing their coins with USD. Are they really holding that many? Does Tether have $90 billion worth of USD on hand? Since they are unaudited, nobody knows. Of course, regulation will require audits which could pose a problem if the truth is different from what is claimed.

Here is where Hive differs. There is no questioning the amount of HBD available or what it is backed by. We have full transparency since it is all posted to the blockchain. Anyone can see how much is outstanding and simply look up the market cap. As long as the $1 worth of HIVE is available for each HBD, the backing is there.

There is the opportunity to build a suite of products, offering different types of returns. This can be done at the base layer. In addition, these assets could then be taken and tied to second layer projects that generate more options. For example, holdings at the base layer could be collateralized at the second layer for further expansion.

Having this options could pull in millions of dollars from outside the ecosystem. We are watching the industry transition. If cryptocurrency is going to evolve, it must start to address the risk-averse investor. This means fixed income with virtually no-risk. Hive can offer this since it eliminates the third party counter-risk.

There are trillions of dollars in the fixed income world that can be tapped into. Even within cryptocurrency, we are seeing tens of billions of dollars. It seems even the stablecoin market is now over $100 billion.

We can see how big this can become. Hive is rather unique because of the fact that HBD is at the base layer and is tied to HIVE. It is something the ecosystem can leverage a large amount of growth.

For this reason, Hive can stand out from a lot of what is operating out there.


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I'm looking forward to further development of longer term, higher interest HBD Saving opportunities !

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1

It would be nice for Hive to have a basket of different products that people could choose from.

This would really enhance the position Hive could occupy. The fact this would all be base layer stuff is powerful. From there, projects could innovate on second layer stuff encompassing what is at the base level.

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1
3 mo

it's amazing to see that we have fixed apy on hbd with can be like a stable income

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1

The stability of the token is really a big step forward. The HBD Stabilizer was a fantastic move.

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3 mo

agree

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Your point of views on HBD is perfect. Most of the time I convert HBD to hive, because I wanted to power up. And I'm really very confuse what to do, your blogs shows the right path.

1

Well it depends upon your account and what your goals are. If growing your influence on Hive is what you want, then powering up Hive is the smart move. However, if seeking a stable return, then HBD in savings is the approach.

The bottom line is we have choices and that is powerful.

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Ok thank you once again 😊

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Thanks for the post. I believe decentralization is a valid solution to central banks who are counterfeiting their own currency (creating new units without corresponding value to back those units - just like criminals who print $20 bills in their basements). The Hive approach seems sound.

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Except most central banks do not print their currency. It is a complete fallacy that the Fed prints USD. It is the commercial banking system that creates dollars, not the Fed.

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permission to reblog my friend.

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You dont need permission to reblog.

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I go on transferring HBD I recieved from author rewards into Saving Account. I hope the interest rate will be increased to draw much more attention.

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3 mo (edited)

I heard that a few witnesses are voting for 15% interest. That would be 3% interest increase from the current (12%) interest rate. We will see. I also hope that there will be some kind of interest increase in the near futute. I am saving money to be able to buy and live in an SUV from the next winter, which will be in eight or nine months.

3

That's great.

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Time will tell what happens with the fixed income offerings on Hive. We need to get a Hive Savings Bong going. Either way, 12% is still a strong return when you look at what is taking place around the world.

Good idea to keep pouring a bit of money in there.

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Indeed it is...

I am always on a constant hunt for 10%+ yields, in crypto, and the non crypto world too. Real life 10%+ yields are really hard to find... most stuff cleverly disguises 'ponzi' with lots of smoke and mirrors. Nothing new there... ponzi schemes are as old as schemes themselves.

Solid, capital preserving, mostly passive, practical yields above 10%... are REALLY REALLY hard to find, and mostly non existent without huge investment.

The HBD 'savings account' is a 'hidden gem'. HBD Savings bonds are a brilliant idea. The balancing mechanisms between HIVE and HBD are the best I've seen in the crypto world... In my humble opinion, this balancing mechanism is what sets HIVE apart from all the 'money grabs' out there and gives homage to sound economic principals.

Thanks for your your work TM, your a content beast!!!

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Great clarification upon the fact that HBD is worth $1 of HIVE and not $1 of its own. This algorithmic relation embedded at the base layer should ensure the stability and sustainability of both HIVE and HBD. And as you've said we need to see more implementations at the base layer that make use of these assets in order to open the door for bigger investors.

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I think the idea of Hive Savings Bond would really appeal to a certain class of investor. Start with a 1 year 25% return and see how that works. It would likely garner some attention.

From there, more levels could be added over time. We could end up with a complete offering being developed.

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3 mo

I really appreciate the last part of this post where you talked about how closely tied together Hive and HBD are. The fact that HBD isn't really pegged to the USD, but $1 worth of HIVE is really important distinction. I never really understood that concept before until now.

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Nobody is holding or bringing USD to the table. It is not in the equation.

Instead, it is Hive backed as the title states. So many overlook this point.

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Like LBI. Backed by LEO. USD doesn't matter, just the price of LEO.

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3 mo (edited)

Hive can become a frontrunner and a disrupter in this market by simply providing better returns than any other banking scheme (low-interest rate) or stablecoin DeFi that is prone to hacks!

What about the Hive Savings Bond, are we going to see them coming anytime soon?

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What about the Hive Savings Bond, are we going to see them coming anytime soon?

Time will tell. That has to be coded and I am not sure there is someone who can take it up and meet the next hard fork. I hope it makes it in but have not gotten word if it is being coded.

The HF is already closing in on 10 months since the last one by the time it is released. Sooner or later, they just need to get it out.

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Not a problem. I understand that it's not an easy thing to do and to be done at the base level. Looking forward to though. ✌️

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I haven't used HBD so far as a fixed income tool, but I am planning to do that once I cash out some profits on my long term portfolio. I see no point in sitting on a pile of cash that doesn't do nothing until I find the next buying opportunity

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That is what the savings account is ideal for. At this point, it is a parking spot. However, if we build out more, it can be a destination.

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I think if Hive does something like what binance guys do with the "earn" program that would be a good thing. Though there is already HBD interest going on. Having the stock or the mutual fund type of stuff like how binance is planning would be a good direction. I mean people will literally turn up for hive if such fund house of crypto type stuff comes into the market.

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Having the stock or the mutual fund type of stuff like how binance is planning would be a good direction.

Anything like that would have to be second layer stuff. That is not going to be at the base layer. It is an option if someone starts to implement that.

However, the market I am targeting is the simple fixed income, put in HBD and get a return. From there, second layer apps can be built incorporating what takes place at the base layer.

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I have been telling or trying to tell people about HBD savings, Even short term its a great place to put funds.

With more uses to pick HBD up the better

1

It is a great parking spot. Hopefully we will see more options evolve.

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I support and publicize HBD as something people should consider holding. It offers a very good yield on a token which charts show has been very stable the last few months. Look at the 3 Month (3M) chart: https://coinmarketcap.com/currencies/hive-dollar/

I like the 12% interest rate which is 12.68% if you collect the interest monthly and keep it in your HBD Savings. This is 4% higher than US Inflation currently around 8%, This is about 12% higher than bank interest rates which are close to 0.

I would like to look into why the majority of Hive Witnesses decided on 12%. You can see that several Witnesses are indicating 15% on the Witness page: https://peakd.com/me/witnesses

If anyone knows of an article where Witnesses talk about why they chose what they did for HBD interest, I'd love to read it. 12% is great and I would think 15% is greater, but there must be counter-arguments for why the majority is content at 12%.

2

I have no idea why that is the case in terms of the number. It started lower and was raised a couple times.

My guess is it will go up after the next hard fork and the haircut limit is raised.

Hopefully we see the emergence of Hive Savings Bond and a time locked, higher yield option.

But 12% is still aggressive if people think about it.

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12% puts curation on par with passive investing.

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All very true and HBD become more and more important as the years roll on. Having a fixed income whether passive or bigger is huge for peace of mind but just knowing it is stable.

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HBD has an incredible yield and nothing will happen unless Hive goes to zero. As you said, everyone is chasing yields because banks have horrible interest rates. I think the only other chain really giving you higher interest rates would be Terra.

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I will continue saving my Hbd because I know that the interest rate will be high very soon.

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Yeah, if HIVE could tap into the fixed income market it would be insane. As you say, the amount of money out there looking for "safe" returns is nothing short of staggering.

I was building my stake in HBD....and then along came PolyCUB. lol I'm still trying to come up with a strategy to start adding HBD every day/week/month whatever.

I have visions of getting $1M in there and living off the interest. $10k a month, while not a fortune, could certainly afford a person a pretty good lifestyle. Even in the US. Imagine taking that to El Salvador....

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This is the reason that i have been adding to my HBD savings every week. The long term goal is to build it up to 250,000 HBD over the next few years and have a guaranteed income from it.

It's a big dream but a great option to have form HBD.

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