One of the common questions asked is what is a better investment, HP or HBD? The fact this question is asked is a good thing. First, it shows Hive offers multiple options of investment. Second, there is a gamification element of strategically choosing between the two, all while everybody is given a fair and transparent opportunity to choose. In this post I would like to explore potential answers for this question. Discussing the Hive economics and relationship between various assets within the network economy may have benefits as well. Hive is a complex blockchain, and solutions it offers may even seem magical. This post is intended for larger audience beyond Hive as well for future reference. If covering the basics bore you please skip towards the middle/end of the post.
Hive blockchain is possible due to its native coin Hive. There is a necessity for a native coin to make a network decentralized, and economical benefits are just the positive side-effect. There is a need for an incentive mechanism to attract participants of the network and grow it. Bitcoin solves the incentives to run the network in a decentralized manner by providing miner rewards and allowing transaction fees. Hive as DPOS rewards witnesses or block producers with Hive coins for running the nodes. Instead of rewarding liquid Hive, witnesses received producer rewards in Hive Power. In value Hive and Hive Power are same. Except HP is locked up and not is not immediately available to sell. It only takes 13 weeks to fully power down the HP and convert to liquid Hive. Since conversion is made on weekly basis, we don't have to wait full 13 weeks to get some of the funds in liquid.
Hive as a liquid coin is useful. All Hive wallets come with awesome features like security, complete ownership, fast and free transfers. Hive itself can be great choice for payment systems, international transactions, conducting business, building communities, etc. There are communities who pay in Hive already. It is easy, it is convenient. Very easy transfer of value system in decentralized fashion. Nobody can confiscate the funds, delete the wallets, or steal the funds. All the owners need to do is be responsible for keeping private keys secure and not leaking anywhere. Multi-compartment wallets with dedicated keys make using Hive accounts/wallets more secure. For example posting keys are used for social activities, and active keys can be used for financial activities. Since a lot of activities on Hive are social, posting keys are used all the time. Exposing the posting key by accident or due to hacks or falling for phishing scams won't put funds in the wallet at risk.
So, yes Hive as a transfer of value coin is great. But it is better as Hive Power. As the name suggests converting Hive into Hive Power or in other words powering up, unlocks the true power of Hive. Unlike liquid Hive, HP gives its owners influence in the governance of the network, picking the witnesses that make up the consensus, social credit to convey ideas for the benefit of the chain and the network. Along with governance influence Hive Power gives its owners opportunity for financial gains. Immediate financial benefit for HP is HP starts earning some interest from overall Hive inflation. I believe it is around 2-3%. Correct me if I a wrong please.
Hive Power also gives an ability for owners to participate in rewards distribution for content creation activities. We all know this process as curating, or simply clicking upvote buttons for posts and comments. Clicking downvote buttons also influence the rewards distribution. Most common use is for upvotes. Ever since EIP was implemented, curators and authors share content rewards 50/50. If I am earning 10 Hive in curation rewards, that means authors are receiving 10 Hive as well. This is another way Hive Power can bring financial gains for its owners. There are accounts that choose not to participate in this activity for various reasons, but most do.
One of the ways to figure out the curation APR is using the tool developed by LeoFinance, hivestats.io. Hivestats is great to see recent rewards earned, but also we can see curation APR for an account. My curation rewards seems to be 8.98%. This number is usually 8-10%. Considering that the same amount is given out as rewards to authors, we can conclude HP has an APR of about 20%. If my curation APR is 9%, multiply this by 2, we get 18. Adding 2% from HP interest, we get 20%. It can be a little lower or a little higher.
Of course we don't get to keep all of 20%, as some of it is distributed to authors. We still get to keep at least 10%. The 10% distributed to the authors is our investment in the network itself. Most HP owners do not hold HP for the curation rewards or interest rewards. In general the strategy of this investment is: Hive is a revolutionary idea. It has great technology, awesome community, solves many of web2's problems. Once discovered by masses this will be huge. In other words the HP owners are long term investors who believe the benefits Hive offers will make the underlying coin Hive appreciate in price exponentially. Many of the long term investors wouldn't even consider selling their Hive for $1. At the current price, Hive going to $1 would mean 4x gains. That is not small. By comparison, 10%, 20%, 30% gains become negligible. Sharing rewards with authors is a small price to pay for the growth of the network. After all future gains and losses depend on the growth of the network. Of course there many other ways participants of the network contribute to the growth of the network. But that is a topic for another time. Bottomline is HP does earn about 20% is used in rewards distribution. Only some of it is reinvested back into the network.
The third native asset of the Hive blockchain is HBD or Hive Dollars. HBD stands for Hive Backed Dollars. As the name suggests it HBD is a stablecoin pegged to US dollars and is backed by Hive. This means 1 HBD holds a value of 1 USD. HBD can either be sold in the internal market or external exchanges or converted to $1 worth of Hive at any given time. Conversion is not as simple and quick. There are more details to it. But general idea is HBD can be converted to $1 worth of Hive, hence HBD holds the same value as USD. I know this is an oversimplification of what HBD is. But that's what it is. Perhaps I won't be able to convert 100 HBD to exactly 100 USD anytime I choose, but I am confident I can achieve this if I am not in a rush.
Hive Dollars use the same awesome feature of the Hive wallet: secure, complete ownership, fast and free transfers, etc. Hive Dollars are also liquid just like Hive coins. Hive Dollars may actually be a better fit for businesses, merchants, transfer of value, payments, gifts, payroll, etc. Because Hive Dollars have the same financial value as USD, it makes it easier for parties to agree on the value being exchanged. Utilizing Hive Dollars is like using the latest technology and all of its benefits while engaging with something that is familiar to all around the world. While Hive builds the future of the web and finance, Hive Dollars work as bridge to and from traditional web and financial systems.
HBD is a great as a medium of exchange, not necessarily as an investment. It is great as a personal bank. The ownership wallets provide gives the full control of the funds to the owners, and not the banks or other financial institutions who can block accounts, go bankrupt, or lose the funds in other ways. In addition to all of these awesome benefits, HBD can be used as an investment asset as well. That is thanks to Hive blockchains generous interests paid just for holding the HBD in the Savings. In addition to liquid wallet-compartment, Hive accounts/wallets have Savings-compartment. Just like checking and savings accounts banks offer, Hive's liquid and savings accounts function in similar fashion. Liquid is for daily use, savings is to save money that is not immediately needed. Savings also provide extra layer of security. Hive and HBD in savings is almost liquid. It only takes 3 days to move funds from Savings to liquid. By keeping HBD in Savings, owners get the benefit of earning 20% APR.
Unlike earning for HP, APR for HBD in Savings is not coded into the blockchain. Consensus witnesses decide what the current APR is. Each witness has parameter for APR that they can set to any value they deem is good the blockchain at any given time. Median of the APR from all consensus witnesses is registered as the current APR. While currently consensus is at 20% APR, this may change in the future. I think it is a good thing as well. Since HBD's value depends on USD. How USD doing overall in traditional economy matters. When inflation was high and USD has been losing its purchasing power, it made perfect sense to offer 20% APR for HBD. This way holding HBD would negate the purchasing power loss for HBD hodlers.
Now the question is which investment is better: Hive Power or Hive Dollars. There is no objective answer to this question. It is a question every individual owners who participates in Hive needs to decided for themselves. This adds an interesting layer of gamification in the network. Owners would have to constantly reevaluate their investment strategies. The simplest explanation of the differences in these two types of investments would be the analogy of stocks and bonds. While Hive Power may produce lower APR and is a riskier investment, it has no limit for the potential gains. Hive potentially can become $100 in price. Hive Dollars are capped at exactly $1. The only gains for Hive Dollars is 20% APR. It too has risks, but risks are so low, it is almost inconceivable that owners would lose significant portions of their original investment. Nothing is without risks. There are always risks. Question is how to determine our risk tolerance and balance rewards expectations.
My strategy is very simple. Hive Power is the main investment. Hive Dollars is a hedge. I go with 90/10 rule or goal. I would prefer to keep 90% of holding in Hive Power and 10% in Hive Dollars. If I didn't believe in the potential of this technology and the network, there would be no reason to be her or hold any Hive or Hive Power. Even if HP went to zero tomorrow, the journey itself and the effort to bring decentralized solutions to the web and being part of it is an invaluable experience. It is unlikely Hive would go to zero. Now if it did gravitate towards it for some reason, then the hedge strategy in HBD would become super useful. This would give an opportunity to obtain more Hive Power at low cost. But if all went as planned, and Hive keeps steady and continues to grow and appreciate in value, Hive Dollars would still be there earning passive 20% APR. By the way, if Hive were to go to zero, HBD would go to zero as well.
I would like to leave you with a final thought experiment I shared two years ago in my Case For A Hundred Dollar Hive when Hive was paying 12% APR for HBD in Savings.
12% annual interest rate on a stable coin that is pegged to USD, one of the strongest fiats in the world and the world reserve currency is not a small thing. Now consider I am an investment fund manager with $10 billion dollars under my control, and I want to allocate 10% of my funds to very low risk but high return asset like receiving 12% compounding interest annually. That means I have $1 billion dollars to invest in HBD. But the entire Hive network is billion dollars worth and it only has $24 million HBDs in circulating supply. Where am I going to get $1 billion dollars worth of HBD.
I know the secret that nobody knows, I can buy as many Hive coins as I want or are available in the market and immediately convert them to HBDs. Of course this would require a certain strategy, not to move the Hive prices too high too quick. Since I am only interested in HBD, what price I buy Hive doesn't matter. I will be converting every purchased Hive into HBD. So each USD worth of investment will retain its value in HBD. In fact, if planned my strategy properly I will end up buying my initial HBDs at lower prices and make quick profits from the beginning.
By the time I get to the point of spending all of $1 billion to buy Hive and convert to HBD, price of Hive will go so high that its market cap will be in tens of billions of dollars already. Once my colleagues get the word of what I am doing, they will find out this is a good strategy for them as well. They will allocate some of their funds too. And soon enough one Hive coin will be worth $100 and perhaps keep goin up higher, because many more fund managers would want to be in action as well.
It is not easy to imagine $100 Hive at this time. But it is within realm of possibilities. Of course, there are many other ways Hive can reach those high, not only via HBD. It obvious to me that Hive, Hive Power, and Hive Dollars play important roles in the success of Hive and benefits it bring to the world. I think we have been on the right path with making HBD stronger. I am sure we can do more, and am confident HBD and Hive will keep getting better.
Holy shit. This means that HBD is actually THE MOST LIQUID stable coin on the planet already, today.
This is incredible. We already have more liquidity than any other stable coin. I just don’t think ppl even on hive see it how u are explaining above yet.
First to onboard a hedge fund gets an upvote
Of course this is with the limitation that it’s a 3.5 day wait amd 5% fee on both sides.
Your assesment is pretty inaccurate.
First there is only 5% fee on one side. HIVE to HBD.
HBD to HIVE doesn't have any fee.
HBD has a very very small market cap for a stablecoin and very little liquidity.
Try buying 10K HBD on the market and you will see how much you are going to lose. Probably less than 500$ (that is thr amount you lose if you convert HIVE to HBD.) But still in the 200-300 range. Which is a lot of lost value.
And any HBD you convert will get converted to 1 dollar worth of HIVE. Do you think you would not lose any value in the process of selling for example 100K worth of HIVE?
You would. Probably at least 10%. The moment you decided to convert your HBD back you would tank the market cap back to where it was.
While what geekgirl saying would work in a hypothetical world where everything is perfect. It doesn't in the real world.
Yes ur correct about the fee on one side.
I don’t agree with the rest of your comments. There are various real world outcomes.
Also, I’m not talking about using liquidity that exists to buy HBD. I’m talking about using the conversion. There is no such issue with liquidity there
If you can inflate a market cap just by buying, someone as easily can deflate the market cap by selling. Geekgirl's theory assumes a perfect world where no one does sell their Hive after she is done purchasing hive and market cap to stay the same.
And by converting your hive to hbd, you are actually increasing the debt ratio. When it reaches the upper soft limit(20%) all conversion requests of HIVE to HBD is rejected. So her premise is already flawed from the get go.
This is true. But I don’t think this is what will happen, and it’s certainly not a reason not to approach such a method of HBD creation. The theory is that as pne buys hive to covert to HBD, the hive market cap will increase significantly more than the HBD market cap being created.
It means it should lower the debt ratio at the same time as creating more HBD.
In real world, people sell their Hive. People are selling their Hive right now, and bringing market cap of hive down.
I am not saying it wouldn't create more HBD, it will create more HBD until certain point and that point is 20% of the market cap.
And as she says in her theory, she is not going to buy too much too quick so price doesn't move too fast. That means affect on the market cap would not be significant.
Market Cap = Coin Price * Coin Amount
If you are not moving the price too much, it means you are also not moving the market cap much.
I don’t think it would even come close to 15% doing it this way
Affect on market cap will be significant. Hive goes up, hbd goes up even less, haircut limit is further away.
The idea is to move the price, and put hive buy orders under the market to support the price so that u guarantee a great HBD conversion price. If u are clever, u can make a contract with the investor to take 20% of any HBD u get them over their USD investment price. As far as I can see, u do this right and everyone here, including u retires
Free market will always work things out...
In my example, there is a player with massive amount of money that is equal or great than the current market cap for Hive. That kind of funds would definitely make big moves in the market, even with slow and steady strategy.
I also assume in free market such price movements would be noticed quickly by other players would also want to participate. These would be new participants of Hive network.
Of course there will always be those who sell. People sell everything all the time, if there is a right price. Selling is great for Hive, it makes the distribution of Hive wider and makes it more decentralized, and networks becomes stronger.
I doubt debt ratio limit would be reached, because upwards momentum of Hive price would hold for very prolonged time until crazy Hive price becomes a norm. (think bitcoin! Those who would sell it for 10k few years ago, won't do it now)
Cashing out or selling HBD wouldn't be immediate, because the investment strategy is long term to earn APR by holding HBD as a hedge or diversification. I would take several years for HBD holder to sell them, or network action that makes APR not as attractive anymore. By this time, there will be plenty more interested in this action. They will gladly by HBD from the seller, instead of paying the conversion fee.
Also, any big price action in Hive or big interest in HBD would make major exchanges to list both, which open bigger markets.
Yes, it is just a theory. But it is a theory I would go for if I was managing $10 billion, and become a fund manager of the year/decade.
And that is why you are not managing $10 billion.
As I said people are already selling at $0.27, they will continue to sell it at $9.80.
Only difference is you would have to buy it at $9.80 to keep the market cap. Since now you pumped the market there is more money in the market than you can afford. Which means market cap would go down pretty quickly once you run out of money to support the price.
And if someone else comes and does the same as you did, now you are even in bigger trouble. If they don't try to support the elevated price, now you need to defend that elevated price or the debt limit would be reached.
This someone else doesn't need to be an instuition, they can be individuals. Any HBD they convert or gain is a nail in your coffin. Because individuals would not defend that price, they would not have the power to defend that price.
And thanks to you pumping the price of Hive to statosphere, everyone is earning ton of HBD.
Even before you can buy enough HIVE to convert to HBD, ton of HBD would already be printed.
There is really nothing stopping a fund just market buying hive each day and converting to the same market cap in HBD. HBD liquidity. That is exactly what makes HBD bigger. And such types of entries into HBD will also push the hive market cap up more than the new HBD created.
Anyone saying that we need to get more HBD into the market to make it more liquid via APR has not understood this about how liquid HBD really is.
Thanks for helping me clarify this better. It’s very very powerful Indeed
Your post provides a comprehensive and insightful analysis of the investment options within the Hive ecosystem, specifically focusing on Hive Power (HP) and Hive Dollars (HBD). You've explained the benefits and potential returns of both investments, offering a well-rounded perspective for readers to consider.
It's clear that you have a deep understanding of the Hive blockchain's dynamics and how these investments can play a crucial role in the platform's growth and user engagement. Your analogy of Hive Power being akin to stocks and Hive Dollars acting as a hedge is a helpful way for readers to conceptualize their investment strategies.
Overall, your post is informative and well-structured, making it a valuable resource for those interested in understanding the investment opportunities on Hive. It encourages readers to think critically about their investment choices within the platform. Great job!
Thank you!
You are welcome
I think there are benefits to both sides. I still prefer to have some HBD while the APR is 20% because that has a lot less risks and the it's starting to be used way more as a stablecoin with Sucre and other places. If Hive does drop down a lot to like 10 cents, my HBD will probably be spent buying Hive but I hope the APR does stay at 20%.
What is Sucre?
Omg, can’t wait for u to discover more about what is going on in @hivesucre
I found this post that explains it, but Sucre is a city in Venezula.
https://peakd.com/hive-167922/@aksurevm89/what-is-hive-sucre-and-how-does-hive-sucre-promote-the-crypto-adoption-of-hive
Good comparison, I think HP and user engagement should be valued more than putting HBD into savings.
I think there should be some sort of balance that encourages both engagement and investment.
This is a very well-written article, @geekgirl. You've explained very clearly the good reasons for all the choices. Right now I am focusing on powering up Hive. I am at Dolphin level now. But I want to go as far as possible. It is nice to keep some HBD in savings though. Can't get those interest rates in a regular bank.
The fact that you took your time in explaining Hive, HP and HBD one after the other for better understanding is very great and knowledgeable.
I was able to understand the importance of each of them and also understand the APR percentage as well.
Awesome!
Our accounts are somewhat similar (albeit mine much smaller). I have about 9.5% curation APR, and i just intuitively hedge a minority of hbd and majority HP. Just seems like the most sensible approach.
Good read!
9.5% is impressive!
Pointing to one being better than the other is what makes Hive and HBD fun. It shows the strength of the Economy and how one determines where their current situation is the most profitable in relation to hive. Eye opening article.
I believe that the right choice between Hive Power and HBD is to choose both. Hive Power creates our influence on the platform but the HIVE coin is subject to sudden changes in value, while HBD is our stablecoin which, when saved, generates interest. Having both creates a good balance, I think the worst choice is to choose only one of the two. Great post, great topic
They're both attractive investments tbh. I'm not converting my Hive to HBD just yet because I still think that it is undervalued below $1.
Hive has been a stream of diverse income, the HP and the HBD, most people are convenient with any of the two, while most people prefer to hold in HP, another prefers to take the lower risk by going for HBD, but the more risk something is the more it can profit, HBD. is a stable rate it can give you, which is 20% while HP, become more profiting when hive token increase in value.
I will keep transferring HBD to the saving account and get interest payout as long as the interest rate stays at this level. Because I calculated that the current monthly interest payout of mine, when converted to HIVE, is much more than that of the curation rewards if I converted all my HBD to HIVE and powered up. (Not a financial advice)
Due to market movement, I will clearly say hive power is of much investment much more than HBD even though HBD is a stablecoin
Personally I don’t favor one over the other. i want to hoard and grow both. I remain bullish on Hive. And should one succeed the rest follows.
Thanks for sharing your content on leofinance.
By additionally sharing it on leo threads you can increase the reach and exposure.
The following post would help you in this regard
https://leofinance.io/posts/anomadsoul/curation-on-leo-finance-threads-outreach
Leo is awesome. I need to find some time to explore threads.
Thank you!
Thanks for the enlightenment.
I would like to share my personal opinion here that out of these two both are better and will give people a good profit in the near future and the way HBD is still giving if If a person buys a HP and powers it off, his account value increases and then he can earn some money from Aram, so I think it's better to take the HP as it is. Its price may go up in the near future.
With so much explanation of both HP and HBD, both have risks and advantages too. I still prefer investing in HP than HBD. HBD, for me can only be saved and used for a short term. But just as you have said, whether to invest on HP or HBD depends on an individual.
Wow! Sounds as if there's a better investment in HP.
But yet if there could be a mechanism of luring more people to invest in buying hive and converting them to HBD as you say, the coin would have gain high level popularity. Nevertheless, if that projection is correct, let's just give it time. It will certainly get to $100 per HIVE.
Both are good, I would choose 50/50, if I have money to invest in, I will invest 50% in HBD as I know it is one of the best stable coins out there, and the 20 % APR is juicy. on the other hand, with the help of hp, you can earn money by posting. curating and engaging with the community. Both have their positives and negatives.
Great guide, very well put together and easy to understand esp. for new users. Essential read for onboarding new Hivers imo. What I find most interesting though is your 90/10 strategy as I haven't come across it so far. I've seen the 80/20 or 70/30 rule being applied numerous times by dolphins and orcas. Thank you for putting this together. Have bookmarked it.
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I love both options. I just hope that the 20% remains. HBD is a great choice especially during bull markets. It can then be converted to Hive when the bear wakes up...
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Wow, thanks for sharing the difference between the 3 of them in such a great way.
I am completely new to this platform and have no knowledge of Blockchain and Cryptocurrencies except that it is tradable instrument just like currency pairs, commodity and stocks. And by writing blogs on this platform, authors can earn this currency in the form of appreciation. But being a Complete Beginner, I didn't completely understand the information provided by you. But as far as I have understood, for now I have to focus only on making my account valuable. for which I guess I will have to collect as much HP as possible.
Please correct me if I am wrong.
thanks I must say as a newbie I have really learned a lot
It get very easy when you consider the marketcap. I was initially a little skeptical about $100. Then I thought of comparing a below 50 Billion USD marketcap against Big Tech and other cryptocurrencies.
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Personally, I would invest more in HIVE power but I also think that putting HBDs in savings in the long run is a very good economic strategy here on the HIVE blockchain. I am writing from personal experience here, so I know this very well. Very interesting conclusion and I strongly think HIVE will get better and better in the future! I am very optimistic about it as well! All the best and plenty of success here on HIVE! 🙂
Please, in the end draw a conclusion, I will do not read all this, thank you!
Very nice this post ,
Honestly, it is always hard for me to choose one. Well, I love HO more because it will help me to perform actions ok the platform. Also, the interest on the HBD is also very cool too
I love it!