Direct from the desk of Dane Williams.
More answers to your most frequently asked questions around Hive’s algorithmic stablecoin, HBD.
When it comes to HBD FAQs, there is one that comes up more than any other.
That obviously being can what happened to UST happen to Hive Backed Dollars (HBD)?
In this follow up to the main Hive Backed Dollars (HBD) FAQ, I start by answering this question and then continue on from where we left off in the comments section yesterday.
Let’s dive right in.
Can what happened to UST happen to HBD?
No, the death spiral that spelt the end of UST, CANNOT happen to HBD.
The two algorithmic stablecoins are actually designed completely differently and as such, the comparison is not a like for like.
The biggest difference between the two is that HBD uses a 3.5 day average price when doing conversions.
This makes arbing in this manner a little harder, but is much more secure.
The second major difference preventing what happened to UST happening to HBD is the “haircut” rule.
Remember, HBD remains stable by being redeemable for $1 worth of HIVE - Essentially hard coded ‘debt’ creation.
But to prevent the blockchain taking on an unsustainable level of debt, the blockchain has a level where it stops creating new HBD.
Once the haircut level has been hit, the amount of HBD generated is halted until the ratio falls back underneath.
You can view how close HBD is to the current haircut limit of 30% here.
How is the 20% HBD interest rate determined?
Hive’s elected witnesses signal their desired rate and HBD’s interest rate is set by the majority.
You can check the APR that each Hive witness is signalling via PeakD’s witness voting section:
Don’t like the APR that the elected witness have chosen?
You’re free to buy more HIVE, power it up and vote for witnesses more aligned with your personal views around what’s best for the chain!
Where can I spend HBD?
In my opinion, the key to HBD isn’t that you can spend them.
It’s that you have a permissionless, censorship-resistant alternative to storing your US dollars.
While you can spend them via some Hive-linked services like Hivelist and ListNerds, I don’t think being able to spend HBD is that big of a deal.
Honestly, I don’t even think of them as a cryptocurrency in their own right.
Instead, I see them as nothing more than US dollars.
Use HBD to safely store the value of USD with no counterparty risk such as banks or collateralized stablecoin options, then swap them to other coins/withdraw them back to fiat in order to spend.
Is there a market for HBD holders to buy and sell? If not, what projects are building one?
Check out what HiveList is doing in terms of allowing any eComm store to accept HBD.
”The Hivelist.store is the online retail and services marketplace where anyone can shop and hire services using cryptocurrencies - Including HBD!”
Super underrated project that deserves more recognition.
Where can I sell HBD and HIVE for fiat currencies?
Don’t have a KYC account on Bittrex or Upbit?
LeoFinance has set up the ability to bridge your HBD to a BSC based derivative called bHBD.
They have then built liquidity pools on the Cub Finance platform for bHBD:BUSD and bHIVE:bHBD.
Meaning that you can now permissionlessly swap between HBD and anything traded against BUSD via a DEX.
Once you have BUSD, you can easily swap it to your coin of choice, or simply send it as is to your non-KYC CEX of choice to withdraw into fiat.
Check out my how to buy HIVE without KYC tutorial for the process (and obviously just change bHIVE to bHBD)
What non-KYC exchanges allow HBD trading?
Yeah, none.
I really just think HBD is a regulatory and administrative landmine for centralised exchanges.
Nobody is going to want to touch a truly decentralised, permissionless alternative that is obviously going to face media scrutiny in the future (gotta take the good with the bad when it comes to censorship-resistance).
So honestly, we just need to forget about them and focus on building out functionality on the internal market to trade HBD against HIVE and then DEXs to permissionlessly swap to whatever else.
Why should I hold HBD instead of HIVE?
You should hold HBD instead of HIVE if you think that the price of HIVE won’t go up by 20% in the next 12 months.
So you can earn 20% on HBD in savings with zero price risk.
Or you can expose yourself to price risk (both up and down!) on HIVE, and only earn 10ish% via curation.
Obviously there are some other social advantages to powering up HIVE, but if you’re approaching it purely from an investment point of view, that’s how you’ve gotta think.
—
Okay…
I have tried in my drafts, but I really need your help answering the technical questions of HBD.
Hey @dalz and @taskmaster4450, can you maybe comment a paragraph answering:
- Where does the 20% HBD interest come from?
- Is HBD’s 20% interest sustainable?
- What HIVE price will the haircut likely kick in?
@dalz, your is HBD sustainable post is great, but just too complex for me to effectively re-word for us dummies ;)
Any help simplifying would be much appreciated!
Best of probabilities to you.
Posted Using LeoFinance Beta
It is additional inflation on top of the existing one. This said it is less than 0.5% on a yearly basis. And it cannot increase by a lot because it needs more HBD, that pushes the price of HIVE and in reality decreases the inflation, like what happened in 2021 when HIVE ended deflationary with -2%.
I wrote a newer post on it:
https://peakd.com/hive-167922/@dalz/what-is-the-inflation-from-the-hbd-interest-realized-and-projected-or-august-2022
Short answer YES! But this is only my opinion :)
The haircut and the debt are what regulates HBD, the APR is just a bonus.
At the moment it is 7 cents but it is dynamic depending on the amount of HBD in circulation. If HBD in circulation drops trough conversions or buying from the stabilizer so will this price. For example at the beginning of 2022 we had 14M HBD and a floor price of around 17 cents, and now we are at 9.7M HBD and a floor price at 7 cents.
Live data here:
https://hive.ausbit.dev/hbd
You sir, are a legend!
Posted Using LeoFinance Beta
You've said it all, decentralization comes with it's downsides too, I wonder what we really need to to in the aspect of listing and centralized exchanges not wanting to touch truly decentralized coin as HBD. are we going to really burn this bridge in other to buy traction? It's crazy.
We are literally playing outside the current system and in my opinion, we need to fully embrace this fact.
HBD isn't like other stablecoins - Heck, HIVE isn't like any other network!
We don't want to become regulatory compliant, we want to be a truly censorship-resistant, permissionless alternative.
If that means not being listed on CEXs, so be it.
Just gotta focus on building DEX liquidity.
Posted Using LeoFinance Beta
The HBD is more preferable and secure as a stablecoin and maintaining it stability around $1 for a long time is really worth to appreciate. Currently the Crypto market is experiencing a heavy bloodbath and the hbd also is going down but that doesn't mean though because I believe it will gain it strength again.
Oh will you look at that - HBD held its peg:
Not only that, but the blockchain always honoured the peg, allowing conversions to $1 worth of HIVE.
Hope you took the free money on offer if you could get it!
Posted Using LeoFinance Beta
Excited to see the hbd bounce back again . I didn't utilize the opportunity to convert because I really don't have any to convert lol.
I still think HBD needs more use cases but I think we are plenty different from UST. The same issues won't happen and the 5% fee from Hive to HBD would shave off a decent amount off of people looking to scrape the pool. At the same time, the conversion takes 3.5 days and there is some collateral for Hive -> HBD.
Posted Using LeoFinance Beta
HBD already has all the use-case they need.
That is, they're US dollars that can't be touched by a third party.
Permissionless money.
HBD doesn't need use-case, it needs liquidity and more on/off ramps via DEXs.
Posted Using LeoFinance Beta
What I meant by use-cases was people using it as a stable coin to buy or sell things. I guess it could be said to be an offramp for it but HBD doesn't seem to extend outside of the Hive ecosystem right now.
Posted Using LeoFinance Beta
Never thought of that. I am already thinking of withdrawing my HBD from my savings and buying more Hive. 😁
!1UP
Buy HIVE at the bottom of bear markets.
Buy HBD at the top of bull markets.
We're obviously in the midst of a pretty deep bear market right now and you should only be moving your HBD into HIVE if you think it's coming to an end.
Posted Using LeoFinance Beta
I would definitely consider that. 🙂
Nice update 👍
I thought there was a hint when it's updated to 20% because it's ever below 20% as far as I remember. But, I doubt my brain. 🤣
^This is the most possible answer that's good enough for HBD. Talk like... crypto bank? Where you can withdraw your money through HIVE whenever you want 🤔
Someone needs to build a Cashapp clone - But its literally just your Hive account holding HBD liquid and in savings.
Permissionless money.
Posted Using LeoFinance Beta
This is awesome! We can learn a lot through this series you are putting out especially that you write them in easy to understand terminologies, so thank you :) Would be interesting to read the answers from TM and Dalz on the questions.
Posted Using LeoFinance Beta
Yep, trying to keep the language as easy to understand as possible.
Dalz' content is excellent, but it's so hard for me - let alone a normie - to understand haha!
Posted Using LeoFinance Beta
Thank you for doing that. If it's hard for you then yes, it will be a lot harder for us normies :D
Posted Using LeoFinance Beta
The great news is that the guys always looking for an edge to take advantage of make the system stronger. I still don't quite understand how HBD works on the open market but since I only use things in the HIVE ecosystem it doesn't concern me too much.
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What don't you understand?
What questions would help you if they were added to the FAQ?
Posted Using LeoFinance Beta
I was extremely impressed how HBD held up during all of that madness, although most of my money was in the UST ecosystem as far as DEFI, lol. Yeah, that hurt... But anyway, decentralization of the system is key. The way the conversion tool works from my understanding would keep that kind of thing from happening, but we have seen huge swings before, so it's not guaranteed.
The resilience of HBD has been great to watch.
The security mechanisms in place functioning as designed and keeping the network - and investors funds - safe.
Like you said, nothing is guaranteed.
But at the same time, this is true for every coin and network in the entire space!
Posted Using LeoFinance Beta
I use it as a healthy piggy bank which I keep robbing, 20% is insane.
Love the KISS tone of these articles, makes it easy for anyone to follow, not always easy to write so concisely like that, so well done.
Posted Using LeoFinance Beta
Just rename it from your piggy bank to your spending account and you'll feel better ;)
Posted Using LeoFinance Beta
You have said it all..
HBD is more stable than UST for me
Well seeing as though UST has completely collapsed, that's probably a safe statement to make haha.
Posted Using LeoFinance Beta
I think these are some good points which most don't understand or don't see
Thank you mate.
Do you have any more questions you'd like to see added to the original FAQ post?
(I just did an update)
Posted Using LeoFinance Beta
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