HBD: The "Safe" Stablecoin?
The Hive Backed Dollar (HBD) is making a lot of progress. Since it came into focus the last few months, a great deal was done to improve it. Through those efforts, with culminated with the changes in the last hard fork, we saw the entire scope of that token altered.
It is something that is happening at an interesting time. Stablecoins are getting a lot of attention of late, and not necessarily from beneficial sources.
Most believe that, up to this point, cryptocurrency failed as a payment system. In fact, that was the message of Chairman Powell of the Fed just last week. While that is mostly true, the speculative nature of cryptocurrency means it will likely continue.
However, there is one area that could serve this role very well and that is stablecoins. Here is where we see a major threat to the current financial system and the currencies associated with it.
For this reason, we can understand why there is attention being placed upon them.
Regulation
Everywhere we look, we see the attention kicking up. Just this past week, South Korea tightened regulations on cryptocurrency. This is all about supervising what is taking place to start while moving down the road to control them in the future.
We can presume that, when these governments see the growth to the point where a large percentage of transactions are done in cryptocurrency, they will seek to eliminate them. It might coincide with the massive rolling out of CBDCs.
Not to be outdone, Janet Yellen of the United States is going to get together with the Fed and SEC to look into the matter of stablecoins.
The guise is the threat to capital markets. This is a misdirection because the amount of money that is at play, compared to the whole, is basically an insignificant amount. The genuine threat is not to capital markets but, rather, their power. If stablecoins take off in terms of their use, this will reduce their ability to control things.
Ergo we are going to see them try and instill rules to reduce the viability of stablecoins as a new payment mechanism.
Centralization
The biggest challenge comes from decentralization. This is where the existing powers have an issue. If something is truly decentralized, there is no single point of vulnerability. In essence, there is no place for them to turn.
Unfortunately, this is not the case with the present state of most of our stablecoins.
It is also something that did not go unnoticed by the powers that are. These same regulators are taking a closer look at what is taking place. Again, we can expect clampdowns especially since there tends to be a point for them to go after.
They even have a term for these entities: shadow banks.
One that is moving towards their crosshairs is Circle. With the issuance and popularity of USDC, they have gotten on the radar of the United States regulatory bodies. The fact that they are moving towards a stock exchange listing is only bringing up more scrutiny.
With more regulators watching stablecoin growth, the Federal Reserve chairman said they are close to weighing in on the role that crypto will have on the US money supply. Circle’s listing through the SPAC merger has raised concerns about transparency.
This will most certainly result in greater regulation. Of course, the writing is on the wall. Even Powell said this week that stablecoins do offer more efficiency but would not be necessary with a digital currency from the bank.
Hence we can see where they want to take this.
The Decentralization of HBD
The Hive Backed Dollar's biggest challenge right now is to see if it can hold its peg. As spelled out in Hive Backed Dollar becoming a stablecoin, the range on the token tightened since the hard fork but we are not certain it is going to keep it as time pass.
If the peg on HBD does hold, we are in for some very interesting times.
To start, it is best to clarify what backs the Hive Backed Dollar. Too many seem to confuse it.
HBD has nothing to do with the US Dollar. This is not tied to fiat currency in any way.
Here is what it is: HBD is $1 worth of Hive. It is not worth $1.
The USD is simply a unit of measurement. HBD is backed by Hive, $1 worth. The unit of measure does not change, if pegged, although the value (the amount of Hive for each HBD) can.
Thus, we see their is not tie to the USD or anything the Fed is doing.
We also know there is a decentralization that is in place already. The situation with Hive Blockchain, the company proves that. With Hive, there is no single point of access.
HBD resides on the base layer of the blockchain. It is not controlled by any single individual or entity. All the witnesses run nodes that validate blocks on a rotating basis. This is all set by the base code and run all over the world. The witnesses are not located in a single country nor are all of them known. Plus there are the 100 or so non-consensus witnesses who validate blocks on a rotating basis also.
Therefore, HBD does not have any association with the physical world. There is no corporation or foundation behind it. If someone did want to come a-knocking, there is no door.
HBD operates entirely in the digital world. Sure, there are servers that are running things yet they are spread globally, with a couple operating in individual homes.
Could we see a stablecoin that is out of the reach of the establishment?
As stated, the only question is whether HBD can operate as a stablecoin. If it can, there is little doubt it is out of reach from the establishment. It suddenly becomes akin to file sharing. While they could go after Napster, they could not stop the wide spread use of it, even 20 years later.
Stablecoin regulation will be the same. If there is a company to go after, they will do that. However, something that operates without this will circumvent their control.
As a final note, we also saw the interest rate of HBD that is in savings increase from 7% to 10%. Now it is on par with some of the other returns provided by DeFi applications.
The savings rate on HBD was increased to 20% in mid-2022.
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