Direct from the desk of Dane Williams.
Answering the most frequently asked questions around Hive’s algorithmic stablecoin, HBD.
Did you know that there is an algorithmic stablecoin called Hive Backed Dollars (HBD), still paying 20% interest?
In the post UST world that we live in, your first reaction is no doubt that this is probably too good to be true so don’t want to even bother.
But if you dig a little deeper, you’ll quickly discover why HBD’s model is not only sustainable, but boasts censorship-resistant properties that no other coin can compete with.
It’s most definitely worth your time!
Let’s find answers to some of HBDs most frequently asked questions and discover why it’s hands down the best algorithmic stablecoin in 2022 and beyond.
What is HBD?
As mentioned in the introduction, Hive Backed Dollars (HBD) is, in our opinion, the best algorithmic stablecoin currently on the market.
Supported by the decentralised Hive network’s ability to convert 1 HBD into $1 USD worth of HIVE at any time, they provide a novel solution to the (at least soon to be) highly regulated stablecoin space.
There are more detailed constraints on HBD creation that are coded into the blockchain and designed to keep the Hive economy sustainable - Of which you can read about in more detail in the guide I’ve linked to in the paragraph above.
An example of HBD in action would be that 10 HBD can be instantly converted into $10 USD worth of HIVE using a mechanism within the blockchain.
So rather than being backed by physical USD in a bank somewhere else, it’s the Hive network’s conversion mechanism which ensures HBD remains pegged at $1 USD.
The most talked about feature of HBD is that when it is placed in the savings section of your Hive wallet, it earns a 20% APR.
An algorithmic stablecoin interest rate that is unrivalled in the industry.
Is HBD really decentralised and permissionless?
When we talk about a stablecoin like HBD being permissionless, all that matters is that the underlying network is decentralised to the point that it is unable to be taken over or manipulated by one or a couple of colluding bad actors.
Quite simply, you can’t trust an ‘owner’ of the coin or network to say their coin is censorship-resistant because when push comes to shove, they WILL cave to regulatory pressures.
As such, all that matters is technical censorship-resistance thanks to a truly decentralised, underlying network.
As an algorithmic stablecoin backed by the decentralised Hive network, the answer is yes - HBD is REALLY decentralised and permissionless.
Is the price of HBD stable at $1.00 USD?
By now, you’ve probably Googled ‘hbd price today’, clicked your favourite crypto data aggregator and been greeted with an extremely underwhelming price below $1.
Ignore it - It’s bullshit.
The price feed that these data aggregators (such as CoinGecko and the like) use are tied to prices on centralised exchanges.
And if you go down to the markets section of HBD on one of these sites, you will quickly discover that they are taking their prices from HBD’s only 2 CEX listings.
- Upbit - A Korean only KYC exchange.
- Bittrex - A non-US KYC exchange with all but zero volume.
CEXs are reluctant to list HBD for regulatory reasons, or simply unable to because their processes require a company name and address to be placed on the application.
Something that a truly decentralised algorithmic stablecoin like HBD, just can’t provide.
If you want to check the price of HBD, first check Hive’s internal market where it trades against HIVE at the price of $1.
Then double check against the highly arbed derivatives bHBD and pHBD for a clear USD price.
Finally you can monitor HBD’s algorithmic fundamentals here.
Still don’t believe me that the price of HBD is stable?
Then I encourage you to buy as much of it under $1 that you can get your hands on, because you can simply move it on chain and convert it to $1 worth of HIVE.
The reality is you won’t be able to, because the price is stable at $1.
Where does HBD’s 20% interest come from?
HBD’s 20% interest comes from the Hive blockchain’s inflation.
That being, freshly printed tokens.
This inflation used to pay interest on HBD in savings, is actually in addition to HIVE’s regular rate of new tokens being minted per block.
Keep reading! 👇
Is HBD’s 20% interest sustainable?
Yes, HBD’s 20% interest rate is sustainable.
While many consider inflation to be a dirty word, the reality is that the rate new tokens are created to pay interest on HBD savings is actually less than 0.5% on a yearly basis.
When you consider just how small our market cap is, this is an inflation rate that is more than sustainable.
Remember, for HBD to take its place at the table amongst the major stablecoins, it needs to increase its size 100x from here…
…and then some!
So I’d encourage you not to get caught up in interest payments being paid via inflation.
Furthermore, paying HBD interest via inflation in this manner can't increase inflation too much because for that to happen, Hive needs more HBD to be created.
More HBD created means that the price of HIVE should go up.
Then when that occurs, we would begin to see Hive’s inflation drop.
A phenomenon we saw play out in real time throughout 2021 when HIVE actually ended the year as a deflationary asset.
The bottom line is that the haircut rule and ultimately the amount of debt that the blockchain takes on is what regulates HBD.
As such, the APR paid out on top is actually insignificant to the sustainability of HBD.
Does HBD's 20% APR compound daily or monthly?
You are paid interest daily based on a 20% annual simple interest rate.
But you can only claim and reinvest your interest earnings monthly.
This means that if you do claim at the end of each month and compound your interest, then your actual APR will be higher than 20%.
What HIVE price will the haircut rule kick in?
For the haircut to kick in, the HBD market cap must rise above 30% of HIVE’s market cap.
You can check the live HIVE price that the haircut would kick in on @ausbitbank’s Hive Backed Dollars Monitor.
But at the time of writing that price is 6.9c:
The acceptable debt limit is dynamic depending on the amount of HBD in circulation.
If HBD in circulation drops through conversions or buying from the stabiliser, so will this price.
For example at the beginning of 2022 we had 14M HBD and a floor price of around 17 cents.
Now we are at 9.7M HBD and a floor price at sub-7 cents.
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.
—
The plan with this Hive Backed Dollars (HBD) FAQ is to build an evergreen resource in easy to understand language that we’re able to point people to.
No doubt you’ve seen these same questions pop up over and over again and maybe not been equipped to answer them.
Well now you will be!
But wait, I need your help.
If you have any more questions that I’ve missed, then drop them in the comments.
And don’t be shy to answer any of these yourself - 100% LEO upvotes are on offer for anyone that helps me out here.
Best of probabilities to you.
Posted Using LeoFinance Beta
More questions:
Where can I spend HBD?
Is there a market for HBD holders to buy and sell? If not, what projects are building one?
What non-KYC exchanges allow HBD trading?
Why should I hold HBD instead of HIVE?
1-2. I think Hivelist and Listnerds allow you to spend HBD for services -- Hivelist has various kinds of merchandise, and Listnerds is a reasonably good content promotion service for Hive -- although I would use the free version and test it for quite a while before upgrading.
None that I know of, BUT, because Leo has some bridges to Polygon and the Binance Smart Chain, I think there is a way to wrap HBD on both chains and trade them for other wrapped assets, and I think both Polygon and BSC has non-KYC access points.
20 percent interest -- the way I think about why hold HBD is because of yield on both sides of the market. I hold on to some Hive because the bear will give way to the bull someday, but HBD gives me 20 percent interest in savings day in and day out. Polygon and BSC through Leo projects also have higher yield farming options up to around at least 40 percent... a bit too out there for me, but, it is available...
Hive, the token, is constantly inflated because new Hive is minted. I am not particularly up to speed on this because I do not use Hive for money, so haven't dug into and schooled myself on details, but I think there's a slowly declining rate of issuance.
The 20% interest rate on HBD in savings is higher than this rate of inflation the Hive token is subject to.
Hive, the blockchain/codebase (maybe the user @blocktrades provides it. Not really sure TBQH), includes an internal market where you can exchange HBD for Hive at rates set by the buyers and sellers in that market. I've used it and it works.
I'd encourage you to give @dalz a follow and check out his monthly HIVE Inflation stats posts.
October's HIVE inflation actually looks good.
Remember, inflation is not a dirty word.
It's actually imperative and extremely healthy if you are growing as a network alongside it.
Posted Using LeoFinance Beta
Very interesting read and much needed FAQ on HBD, as much as I like the idea I still struggle with comprehending the specifics of it, thanks for the work you put in!
Posted Using LeoFinance Beta
Cheers for stopping by.
I've just transferred a ton of new questions into this original.
If you have any questions to add, let me know! :)
Posted Using LeoFinance Beta
Can anyone tell me where can I sell HBD and HIVE for fiat currencies? Also a link to an explanation would be appreciated. So far I was unable to find valuable information on this topic.
Where can I sell HBD and HIVE for fiat currencies?
Don’t have a KYC account on Bittrex or Upbit?
Well, 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 (@opinizeunltd's suggestion of BTC or ETH will take another step as you can't buy those native assets on BSC), 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)
Posted Using LeoFinance Beta
Thanks for the response, and the link!
Exchange for btc or eth then go to fiat
This is an extremely well written post, and very fitting under the current circumstances. I have indeed faced these questions in the past and as you said, was not equipped enough to answer. Bookmarking this post for future reference!
Agreed 100%
Posted Using LeoFinance Beta
Thanks mate, appreciate the kind words.
Do you have any common questions that you, or people you speak to about HBD, have?
Posted Using LeoFinance Beta
Nice post to learn more about HBD. wait for your other posts 👍
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.
I still need a little help answering this one.
Bear with me! ;)
Posted Using LeoFinance Beta
I think the interest rates are just dictated by the top witnesses (median). Either way, I don't know if the interest rates will stay that high forever and I expect it to drop over time when the supply of HBD is high enough so it doesn't affect the inflation of Hive that much.
I think buying HBD would be easiest through the bHBD pool on CUB and pHBD pool on PolyCUB.
Posted Using LeoFinance Beta
The evolution of HBD's interest rate is going to be super interesting to follow.
I'd like to see it act dynamically in the same way we see in traditional economics.
For example offering a higher interest rate when times are bad and a lower interest rate when times are good.
But we'll see what happens!
Posted Using LeoFinance Beta
No questions at this point but will be definitely following for!
Posted Using LeoFinance Beta
All gee! :)
Posted Using LeoFinance Beta
HBD is a hidden gem!
I believe it's much harder for it to suffer from the same thing that "killed" UST. The haircut rule is one of the things that help preventing such events if I'm not mistaken
Posted Using LeoFinance Beta
great post, I hope this clarifies HBD to newcomers
@tipu curate
Upvoted 👌 (Mana: 30/50) Liquid rewards.
Do you have any questions that you'd like to see included?
Posted Using LeoFinance Beta
Excellent ... I am grateful for every bit of HBD I have graciously been rewarded with, because it is a gem in these highly inflationary times, and to think that it can be obtained with only the investment of good content ... this is a BLESSING!
I only am not able to completely agree on the matter of decentralization, because whales can - and do - collude to elect a slate of consensus witnesses that creates an oligarchy of Hive governance. That may not be all that relevant to your definition of what decentralization is, but it is notable that when @ned sold his stake in Steem, which was a sort of premine and substantial enough to be able to dominate Steem governance unitarily, to Sun Yuchen (Justin Sun) and it was suddenly used to do exactly that despite @ned never having done so, and saying he would not do so, Hive was born and the consensus of witnesses that had run Steem began to run Hive.
If that oligarchy is faced with regulatory action, it can cave just as thoroughly as it forked with consequences just as substantive as forming Hive out of the total centralization of Steem.
FYI
Thanks!
Without the Steemit Inc pre-mine which became the DHF, HIVE actually has excellent token distribution
Distributed enough that the situation you describe with if even a group of 10 faced regulatory action, that it still wouldn't matter.
The community would simply vote them out and the chain would continue as normal.
And remember, the nuclear option of forking is still always there.
If Justin Sun, with his pre-mine head start and all his monetary resources behind him couldn't gain control of the Steem Blockchain, nobody is gaining control of Hive.
Posted Using LeoFinance Beta
Very well, one thing that has saved me is the fact that I had some HBD (some in savings) from setting the rewards to 50/50. Recently, I started to power up some of my posts to reach my 800HP goal but now that Hive itself is kind getting some lows, HBD is still there to save the day. And I use HBD for transactions mainly.The 20% APR is quite juicy too. 😁
But how can I exchange my HBD myself.. Because what I do when I need to convert some funds is to send to someone who then sends fiat to me..
Posted Using LeoFinance Beta
Sorry, can you explain the exact process that you wish to follow?
So you have USD pegged HBD and want to essentially send USD to people without Hive accounts?
Posted Using LeoFinance Beta
Maybe some notes will do...
Basically, I mean when I want to get fiat, I send my HBD to someone who then sends me the corresponding fiat. Right? So, I am asking how I can do this by myself. Or better still, how can I send HBD or Hive to another wallet outside of Hive blockchain? Do you get my question now, please?
Came here for the post but ended up learning more from all of those informative Q&A under the comments section. 😊
!1UP
Happy that we can all come together and help add to the content - LeoFinance is a social dApp after all!
Now I just need to edit all the gold that's been added in the comments section into the main body of the post :)
Posted Using LeoFinance Beta
I will be looking forward to that. 😊
~~~ embed:1590273472197840897 twitter metadata:ODg4MDI1Mzg3MDI4MTYwNTE2fHxodHRwczovL3R3aXR0ZXIuY29tLzg4ODAyNTM4NzAyODE2MDUxNi9zdGF0dXMvMTU5MDI3MzQ3MjE5Nzg0MDg5N3w= ~~~
~~~ embed:1590399034640199681 twitter metadata:MTg4NDc3MTkxMnx8aHR0cHM6Ly90d2l0dGVyLmNvbS8xODg0NzcxOTEyL3N0YXR1cy8xNTkwMzk5MDM0NjQwMTk5NjgxfA== ~~~
~~~ embed:1590533344877768707 twitter metadata:MTQxNTE1NTY2MzEzMTQwMjI0MHx8aHR0cHM6Ly90d2l0dGVyLmNvbS8xNDE1MTU1NjYzMTMxNDAyMjQwL3N0YXR1cy8xNTkwNTMzMzQ0ODc3NzY4NzA3fA== ~~~
The rewards earned on this comment will go directly to the people( @katerinaramm, @documentinghive, @shiftrox, @rzc24-nftbbg ) sharing the post on Twitter as long as they are registered with @poshtoken. Sign up at https://hiveposh.com.
You have received a 1UP from @thecuriousfool!
@leo-curator, @ctp-curator, @bee-curator, @neoxag-curator, @cent-curator
And they will bring !PIZZA 🍕.
Learn more about our delegation service to earn daily rewards. Join the Cartel on Discord.