Happens every time.
When I start discussing HBD I write a long post I get it all out there and I think I'm done but then I get reeled back in because it's such an important topic and those who disagree with what I'm saying tend to disagree very strongly because the ramifications of such action have far reaching consequences.
The risk of guaranteed yield
If Hive is running around guaranteeing users x percent on a locked bond... it completely removes the ability for Hive to rugpull that yield. Under the current system we can rugpull the savings accounts anytime we want... in both an emergency and in the ideal situation.
The ideal situation is something like Hive price at $5+. In this case we can rugpull all the HBD yield in an attempt to flush network debt and sell the highs. Users who had positions in HBD for the farm will remove that farm and covert it back into Hive at a 5:1 ratio in Hive's favor. For every 5 HBD that get destroyed in this way we only have to mint 1 Hive, which would be pretty awesome for the network because the HBD in question were mostly printed at much much lower price points than $5.
The emergency situation is something like 5 cent Hive. In this case we're drowning in debt, the haircut has been triggered, and we are worried about systemic threat to the network's existence. With the haircut in play we would be able to capitulate here and cap the total amount of Hive inflation we were willing to print, flushing out the debt during the network's darkest hour.
Neither of these options are possible if we have a bonding system where the network promises to maintain the yield and allow bonds to mature organically no matter what situation we are in. So not only does the timelock make it so the network has no options, it's also something the user doesn't want either as it locks the liquidity up while under the current system it's only a 3 day wait.
inb4
The natural counter-argument to something like this is going to be, "Well the secondary market will have gobs of liquidity so don't worry about it." Not only is this a blatant assumption, but also only covers the very final point being made while ignoring the glaring main point (guaranteeing yield is bad).
Timelocks do not decrease risk, they increase it.
I already somewhat explained this fact above but there's even more to it than this. What is the difference between locking a bond for a year and locking it for 3 days? People in crypto seem to think that locking assets into a contract creates security because the stake can't be sold during the lock.
This is false, as this dynamic creates even more risk to the network in a counterintuitive way, part of which I have already explained (the yield is locked in and we can't move to change it given the current economic climate). It's also false because liquidity, especially Hive's liquidity, is razor thin and can be pushed around by a mere tiny fraction of the liquid supply. The timelock does nothing to push the price up. That's not what it's for; the whitepaper is wrong.
Example:
Every year the network issues 1M HBD worth of inflation to locked bonds. Say these bonds are locked for one year. We have to pay out the bonds when they mature. The timelock is completely irrelevant and does not protect Hive from dumping. A year will pass quickly and we are right back where we started.
More than this, a year will pass and we will then move to issue more bonds in the exact same way. So bonds are maturing at the exact same time they are being issued. Once a year goes by we are back in a situation where the timelock is actually mathematically meaningless because for every timelocked bond we issue another one is maturing and creating the exact inflation we were trying to avoid with the timelock.
User's don't want the timelock because it's an extreme inconvenience, and the network doesn't want the timelock because it doesn't help anything and actually takes power away from the network and the user at the same time. The idea that a magic secondary market is going to come along and create exponential liquidity like it's a world-reserve currency should not be taken seriously.
HBD is not "pristine collateral"
I love HBD all the other Hive permabulls love this network and what we've got going here. You know who thinks HBD is a scam? Every person we have ever had a conversation with outside the network. Perception is reality, and we are falling victim to our own hubris thinking we can jump into the world economy and random users are going to trust it. Projecting our own feelz onto Hive onto people that don't know anything about it is not good optics. Avoid.
Eurodollar Shmeurodollar
And then there's this false dichotomy where we are trying to for some reason compare a bonding system to the Eurodollar system. These are two completely different things. The Eurodollar system was a global network of banks. Hive is one bank, and we have connections to zero other banks. Hive also does not issue loans, so arguably not even a bank. In fact a bond, by definition, is Hive taking a loan from the user... which is the literal opposite of what we are discussing. Comparisons like this make it look like we have no idea what we are talking about.
Well obviously you can't create a secondary market with 3 day locked contracts.
I've heard this argument as well and didn't even think to challenge it. Yes, "obviously" if a contract is only locked for three days why would we even consider creating a secondary liquidity market for people who wanted immediate liquidity? But if we actually think about this statement it is also inherently false.
Markets are created when supply meets demand.
If there is demand for a secondary market on 3 day timelocks then we can supply that demand and create the market. It doesn't have to make logical sense, crypto is a highly irrational space, but it in fact does make logical sense. Crypto moves very quickly, and if someone holding HBD in savings feels the extreme need to cashout liquidity right this second, they should be able to do it. It's just a question of how much that's going to cost them.
This could be such a rare event that liquidity providers won't take the deal unless the HBD holder is willing to give up like 5%-10% of the amount they are trying to withdraw instantly. This becomes a pure math game where users providing liquidity for instant withdrawals need to be making more than what they would earn if they just put their own money into the savings account. Or (more likely) the liquidity provider to this market is holding their value in an asset that doesn't even earn yield (like on-chain Bitcoin or Hive/HBD on a centralized exchange) and they are looking for a way to put that money to work instead of just sitting there idle.
How do we know that a secondary market for 3-day locked HBD could be viable?
Because people have complained about the 3-day lock time many a time.
This is not really a serious idea but rather a challenge to look at this stuff outside the box and realize that crypto doesn't have to make sense in an irrational environment.
Another example...
I've keep hearing this argument:
What's better for the network:
- Issuing 10% yield on a 1 year bond.
- Issuing 15% yield on the savings accounts.
And first of all I would say that obviously if users get to choose between one of these two options they're going to pick #2. What's being implied is that there will be enough demand and competition in the market to make #1 happen, which is not necessarily true... but let's assume it is true for simplicity and sake of the example.
Let's put a nice round number on the principal.
Say 10M HBD.
- Paying out a guaranteed 1M HBD after 1 year.
- Paying out a variable 1.5M HBD after 1 year.
So which deal is better for the network? Obviously #2 is better because that yield can be rugpulled whenever we want. #2 is guaranteeing 0 HBD will be printed because witnesses can rugpull immediately whenever they want, while #1 GUARANTEES 1M HBD will be printed NO MATTER WHAT. This example only works in #1's favor if that side pretends as though the 15% yield is locked in and guaranteed just like the 10%.
It is not.
We know it isn't.
Why are we pretending?
Oh whatever we'll just do it on the second layer
Bonds literally derive all their value from the yield allocated to them.
They can't be put on the second layer.
Anything else... ???
I'm already well over 1000 words and I promised to be "brief".
I think I've made my point well enough that I can stop talking about this for a while.
So I will unceremoniously kill it here without even my traditional "conclusion".
The "we" here means the HIVE community, not some top down "HIVIAN RESERVE BANK". When HBD is pulled from savings en mass, that nice interest rate would have to be adjusted way down. It's not like there's some HIVE dictator is waking up every morning, looking at the numbers, wondering when to pull... sort of like it feels like with fiat.
Yeah good to mention stuff like this.
Witnesses can be removed from power immediately.
Politicians can take years to remove... and their seats can be bought by advertising dollars.
Its even more dynamic than he says because the interest rate on savings is a median.
There is no median result on an appropriations bill.
Good feature of HIVE, removing bad witnesses very quickly. !BBH
via Inbox
IMO the “we” does not include the Hive community even.
That we does not include me at all. I won’t be associated with the word rug pulling anything. Especially not here on hive.
Pls stop using such words and the word we together, like we have anything in common at all on this subject. In this discussion, the “we” is mostly just “what edicted the benevolent dictator would do” and represents little to do with what I would do, especially when using worlds like “rug pull” in public discussion forums.
Witnesses can project forward and control issuance of new bonds each month. Maybe they can even set the shortest bonds APR. Limiting that supply makes ppl compete with each other and gets hive the lowest APR paying for the maximum money flow in.
I agree... rugpull is a very bad word. Thank you for sharing this sentiment. !BBH
via Inbox
L2 solutions to L1 problems has always been such a dumb fucking take IMO. If folks can't find a reason to invest in L1, why in the hell would they add risk by investing in L2 derivatives?
Easy bro don't try to say the quiet thing out loud you might upset someone.
Ohhhh pretty sure Ive already pissed off a few and I've survived so far. Its far from the first time I've voiced that particular sentiment.
Yes I'm sure you were running your mouth quite a bit when a bunch of people were saying "let's remove rewards and port them to L2". I know I was. What a terrible idea. Either the model is worth doing or it's not worth doing. The second layer is not some magic vehicle that makes failed business models work.
I absolutely was. I spent a lot of time arguing about that, here and in hive-related discords because it was (and for the record still is) an appallingly stupid idea that would 100% kill HIVE.
no lies detected
Bad ideas are quite funny!
Interesting points, is it worth doing the bonds from the stand point of attracting more capital into the HIVE ecosystem?
Does having bonds attract more capital to the Hive ecosystem?
Why would it?
We are already offering 15% yield on HBD and it's attracted zero attention.
As I already noted people look at it for 2 seconds and immediately call it a scam.
Why is increasing the timelock and making it an even worse deal going to be appealing?
Well for the same reason why you are arguing that it is bad for HIVE to offer bonds. Locking the interest rate down provides a lower risk investment to big players who otherwise might dismiss HIVE as potentially another LUNA...
I would argue that locking in the high interest rate on top of the principal being locked in a bond contract makes it exponentially more likely that people on the outside will just assume we'll collapse like LUNA... and there's no way to exit if there are warning signs because again the principal amount is locked for a year inside the system.
Half of the original post was specifically explaining why locking up the money is higher risk for everyone; both the user and the network itself.
Interest rates would naturally settle down at 4-6% on 12 months, with high risk taking for high APR yeilds happening on the LII collateralised loan market, reducing risk on the LI as much as possible.
Hive and HBD have more than enough safeguards to prevent the issues that Edicted thinks will happen already in place without needing to add any more. The main risk reduction is removing high yield seeking HBD holders to LII where they can’t hurt the LI holders who should be the most conservative, lowest APR seekers of all
You are making up numbers and putting words in my mouth.
It's weird.
At this point you need to come up with a capitulation plan.
Realistically what needs to happen here before you change your mind?
Because right now the vibe here is that literally no piece of insight or data-point is going to convince you otherwise. If true, that's very dangerous thinking. More dangerous in fact than any of the other risk factors we have discussed thus far. We are walking on the cutting edge of technology, and anyone that doesn't have the ability to take in new information and act accordingly is going to lead us down a very nasty path sooner or later.
You keep pushing me to do more research and learn about this stuff.
And the more research I do the more it doesn't make sense.
I am not digging my heels in and looking for reasons to be right here.
I don't want to be correct in these assessments.
Bro, it’s just a collateralised loan market using bonds as the collateral. Bonds are created using a reverse auction in order to reduce the amount of APR the population has to pay for the inflow of fresh capital.
This is increasingly basic stuff and has been practiced throughout history. The system works and I don’t need to argue it on its merit. The fact that humans do this naturally time and time again over the course of history is enough proof that it works and it’s the lowest risk way to create insane amounts of liquidity while maximizing inflows into hive and minimizing the risk on the base layer of the economy.
U are arguing to prevent hive from having this opportunity. So I opppose what ur saying. U are not smarter than those who came before u. And so all I’m arguing to do is copy their models, which are peoven to work, except to do it on an open permissionless blockchain that will prevent the problems our predecessors suffered from in their closed private banking systems where problems, over leverage and excessive risk could be and were covered up and obscured.
Hive alllows us to create legitimate improvement to that system via its feeless and transparent nature with LI stable coin bonds and LII collateralised loan system which are both in a parallel banking system that can’t be shut down.
Really neither of us is qualified to argue the merits of such a system since it already works and it’s what economists choose to do all the time. I just want to copy what they normally do, but do it on an open blockchain (which is where they have gone wrong in the past, since they never had the tech).
Pls don’t suggest I’m doing something negligent or making up a new system. I wouldn’t do that. I am just proposing to copy what ppl far smarter than us have done successfully in the past over and over again
I’m just proposing to set hive up to be the thing that can provide an alternative to the international collateralised loans system (known as the euro dollar) which has made USD so insanely big that the US govt and the federal reserve truly are quite insignificant in the dollar today (apart from the US navy). why not set HBD up to be a legitimate alternative to this so that bankers, investors and liquidity providers who want lower risk and more transparency can come to hive and get the lowest interest rates on their loans and provide low risk loans to speculators.
Just copy the old system but do it on a transparent blockchain.
We know the old system doesn’t work since it’s hidden and mistakes are buried, therefore when done on a public, transparent blockchain, it solves the current system’s problems and opens hive up to receive trillions in inflows.
Luna harder is not a viable strategy.
Yup. Sense
Is there any chatter about changing things outside of this? I haven't heard much of anything, but I don't follow stuff as closely as I probably should. I wonder if the new VSC thing will offer some of the HIVE/HBD pairings that we need or is that totally separate. See, I know nothing!
Yeah no I'm just running my mouth off just in case it becomes a thing.
There's really no official word on actually doing this stuff.
But well respected community members vehemently support it and I feel compelled to take the other side of that debate... because nobody else is.
Devils advocate isn't always a bad thing. It shows empathy and that is something we need more of in this world!
I wouldn't call it empathetic but if you want to go nuts. 🤑
At the end of the day I have no doubt that most people here want what's best for Hive.
I think there is a bit of empathy involved if you are doing what you can to see both sides of a situation. It might not be what we traditionally consider empathy, but I think it fits.
yeah I mean it's possible that I could be giving a voice to the voiceless or that standing up to an idea that has a lot of support is "brave" or that doing what I think is best for the network is "selfless"
but I never really thought about it like this... in fact I often like to go the opposite way like doing what I think is best for the network is selfish because it benefits me personally. If capitalism has shown us one thing it's that sustainable flourishing economies has a certain foundation of selfishness and ego attached to them
people gonna people!
They certainly are!
HBD:HIVE Liquidity pool is the plan!
Very cool!
Hopefully its not all locked up in bonds by then!
Why would it?
Just happens to be the topic of the post nothing more. We are eagerly awaiting!
Hi, @vaultec,
This post has been voted on by @darkcloaks because you are an active member of the Darkcloaks gaming community.
Get started with Darkcloaks today, and follow us on Inleo for the latest updates.
Stoopid Question... are bonds coming to Hive with the next HF or something?
Hmmmm you know I actually don't know but my guess is they are not.
But I'm also not sure what will be in the next hardfork...
my guess would be nothing that thrilling!
Thankfully cryptoverse is fun atm!
I have to admit, any discussion about a HIVE "rugpull" is terrifying and makes me want to run. But I'm more mature than that, I am willing to face reality. It can't be a real "rugpull" scam, as (as far as I know) not one single account has enough "pull" to "pull" it off. But the HIVE hivemind could act all together to unintentionally "rugpull" ourselves! Cut off the branch we're all standing on.
Clearly I should not have used the term rugpull at all because out in the crypto jungle rugpull means you just lost everything. The context I'm using it here is just HBD yields dropping to 0%... so nobody actually loses anything... they just can no longer farm HBD yields.
I had to check the definition to make sure, but "rugpull" is when hype is generated about a crypto, then the devs sell everything and run. A HIVE rugpull (if it were possible) would destroy everything.
Pulling the rug out from under someone is a term that's been around for decades.
In in songs and all kinds of other references.
In this case it's a pretty accurate statement to make.
Farmers are expecting to farm high yields for at least a year because the term APR itself is annual by definition. If yields decline massively all at once the "support" is being removed "suddenly". So fits the definition pretty well but is triggering in crypto because of how inherently risky crypto is to begin with.
I would suppose that both definitions are valid. !BBH
via Inbox
Yes you shouldn’t have. U even used it on twitter. Not a good look for u or Hive. Worth correcting imo
I think the way the yield has been manipulated is a shame and it should be reverted back to the original 20% yield. The community got bamboozled by a few people that clearly had an agenda on lowering the yield for no particular reason and for weak narratives.
If something needs to be improved on the yield is to have a dynamic yield where the % adjust in relationship with the debt and the influx of how much marketcap we have. The more people invest into the network, the more this yield should give out.
In my opinion it should work like the difficulty algorithm on the mining space of Bitcoin. The difficulty adjustment algo is a great example on how reward works.
That yield was also manipulated up to 12% from literally 0% in the early days.
I also didn't agree with it being lowered... especially at the bottom, but on-chain metrics suggest that 15% is working pretty well, and 15% is still a good deal and totally worth it.
The yield is whatever witnesses say it is.
Those are the terms we have agreed to as a network.
It's actually an old system that's been in play since Dan wrote the code.
We only just now started using it.
To be honest, it feels like it wouldn't affect anything even if we gave 50%. Like we have a flat HBD supply this year. (Excluding the HBD in DHF)
No, I am not saying we should give 50%. It would be a terrible idea.
15% is not a good deal, it is an okayish deal. We say on the tin that you get 15%, but when you try to exit HBD a good portion of it just gets lost to slippage.
0% slip if you just convert the HBD directly into Hive over 3.5 days.
Over the last 10 years the S&P 500 made an AVERAGE return of 15%.
So to say that 15% is an "okayish" deal even though it's a guaranteed 15% with way less risk than the stock market... it's an amazing deal. It's so amazing people on the outside take one look at it and automatically assume it's a scam. That's how good it is.
Not really, there is still a chance you lose value even when you convert. You are not getting 1 USD worth of Hive at the moment of conversion, you are getting what witnesses consider 1 USD worth of Hive. (Also you have to sell that hive as well if you want to do something with that money, and voila what is that slippage you say.)
So realistically you get 12-13% which is okayish. I have a fund in Turkey that returns 18 to 19% currently. (Ofc, past performance is not an indicator yadda yadda)
Well, because they only see the APR that is written there and not what you actually get and I think they are right in a way.
Not really, there is still a chance you gain value if number goes the other way.
If the Hive token is higher 3.5 days later you get more than 15%.
It conveniently ignores what I said in parentheses. And I am talking about proper savings, not some measly 100 HBD. When you have to sell 20K, 50K, or 100K worth of Hive in USD, it is going to get eaten by slippage.
It is basically a "guaranteed"*** 15% APR. You can fill in the asterisks.
I love how you can be so brash and also agree with the point. I feel when chewing an idea, this type of feedback is valuable.
99 cents for edicted to chew on my idea? Subsidized by the reward pool of course.
Hm yes my brand is very... raw
No sugar-coatings here I suppose.
You get the black coffee response.
Imo it should be a reverse auction for bond sales in exchange for capital flow into Hive. We will accept capital flow in, in exchange for whomever will accept the lowest APR for the longest period of time
The points are really explained well and I got your point regarding HBD