I'll be honest the 12% doesn't really attract me 90% of the time unless Hive is over $1 then I'll pack it. Under $1 though I end up just buying Hive for curation rewards and so forth lol. 20% might change that though but is 20% sustainable? I feel like it would need to be part of something bigger with liquidity pools etc to actully hold that kind of value of interest on it.
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I think it would be sustainable, because it would increase demand for Hive and increase Hive's price. As Hive appreciates in value, HBD becomes more affordable for the network to print. I don't know much though. I just would like to see how this experiment would work.
What do you believe to be the limit on HBD interest rate? If 20% is better than 12%, why not 30%, 50%, 100%, 1000%?
HBD interest does come at a cost to Hive holders, it both directly increases Hive inflation and it encourages risks related to Hive inflation. At the moment high interests are likely acceptable due to low overall savings rates, but there are ways that could quickly change.
There are two issues to the rate one being absolute cost and the other being diminishing returns.
On the absolute cost, it is minimal at 20% given the low amount of savings but wouldn't be minimal at 1000% (of course I know that was hyperbole).
In terms of diminishing returns, 20% is a widely available "high/promotional" rate on stablecoins right now. UST is paying it and a major new one, USN, is rumored to be planning the same soon. Anything much below that falls into the category of why should I bother with Hive and anything much above that is a waste of money since anyone seeking yield would find 20% enough. A case could be made for a slightly higher rate, say 22% or 25% to account for the fact that Hive is tiny and obscure. Still going too far is a waste of money when you're already offering something competitively attractive.
"Sustainable" (nonpromotional; derived from demand for loans) DeFi stablecoin rates are probably more like 10% or a bit less. We're vaguely competitive at 12% already but perhaps not enough to offset the fact that Hive is more obscure and more difficult to access. Again, some premium makes sense to attract usage and attention, but going too far is a waste of money.
I think 20% is balanced approach. Since HBD is pegged to USD, 20% would mitigate the loss of purchasing power in USD. I believe current USD inflation in terms of losing purchasing power is about 15%. Have HBD APR slightly above it, makes sense to me. But wouldn't go higher than the double of USD inflation rate.
At this time, the limit I would put would be 30%. Anything above that will get risky. Anything below is manageable. These risks can even be lowered by introducing longer lockup time as suggested by Taskmasters HBD Bonds idea.
What data are you using to suggest that USD is losing purchasing power at a rate of 15% per year?
US CPI is only 7.90% (exceptionally high at the moment, but way below 15%). Core inflation is 6.40%. Even producer price inflation is only 10%.
CPI is not a good indicator for overall inflation. It doesn't take into account everything. Now if you double it, it may represent more of a reality. :)
Better indicator of inflation was M2, which Fed discontinued after the massive printing during pandemic. Even M1 is, I believe around 13-14%.
More over, 15% is my personal observation.
M1 and M2 measure supply. This is tangentially related to price inflation/purchasing power and is absolutely not a superior metric to those that actually measure prices directly, regardless of the particular limitations of those metrics. It would be akin to saying that the change in supply of Hive from yesterday to today was a valid metric to measure the change in Hive price.