Sorry if I couldn't explain it better at first.
Your HIVE gets locked as collateral at the beginning and you get x amount of HBD. The actual conversion happens 3.5 days later and the price for x amount of HBD gets calculated. Then some of your HIVE is taken for the price of HBD and the rest is returned to you.
If the price for HIVE goes up, you end up paying less HIVE for x amount of HBD. So you get back more HIVE.
Also, Peakd is right, if the price of HIVE goes down significantly, you end up paying more HIVE for x amount of HBD, so you get less HIVE back at the end.
The conversion method results in more HIVE gain overall
IF (HBD > 1.05) and (HIVE stable or going up).
Alright, I now understand that I don't understand how it works :)
There are still unknowns in the algorithm.
At this point, does the initial amount of HBD given at the beginning get deducted from the total calculated after 3.5 days?
What if, as you said, hive goes down significantly? I presume the algo won't ask for additional hive to be deposited.
Again, how can you pay more hive then what you deposited in the conversion? The amount is fixed. So you should get less HBD, not the same amount x.
That won't change.
The collateral amount is a bet by blockchain too. The blockchain asked for the double price as a collateral and won't ask for more HIVE if the price goes down too much.
You already paid double the supposed price for HBD! It won't ask more than that.
Yes, I now understand. I didn't understand the collateralized aspect when writing that comment. Again, thanks for taking the time to explain.
No problem. Thanks for the tip.
Ignore my previous comment, I now understood what you meant. Thanks for taking the time to explain, it was pretty confusing!