We are about to take a major step forward regarding the Hive Backed Dollar (HBD). This is something that was in the works for a long time, a topic we discussed over a year ago.
With the rollout of the VSC smart contract platform, many options are available to build a decentralized finance (DeFi) system on Hive. One of major focuses is going to be on HBD.
When it comes to a currency, it is important to remember that value is derived from:
- payments
- funding and investing
- collateralization
- derivatives
This is what we are seeing being done with HBD.
So let us dive right in and see what is taking place.
HBD Staking
At this point, most are familiar with the saving program offered on Hive. One simply puts their HBD in savings, receiving a return. This is a rate set by the witnesses. The only factor is the HBD is locked up for 3 days.
VSC is taking this another step further. By producing a derivative, in this instance sHBD, utility is provided while HBD is in savings.
This means the value is available for use while earning the interest on being in savings.
Here is how the team described it:
Giving users the ability to still use their HBD in the form of sHBD while it is staked is just the beginning. Imagine a world where there are DeFi platforms that support sHBD for yield farming, or even as collateral for synthetic assets. These are just a few things that come to mind when you start to think of HBD as more than just a stable coin. HBD staking on VSC will turn HBD into a highly composable asset that everyone can implement into their system.
What we are looking at is a huge step forward.
This is a derivative in that the value of sHBD is garnered from HBD yet an entire ecosystem can form around the former. The utility build tied to sHBD will provide enhanced value to the holders. Ultimately, this can mean a better return.
In other words, the value of HBD is pushed further out, compounding. As the ecosystem around sHBD forms, the risk profile is also altered. Essentially, there is a line of defense erected, protecting HBD.
Think of it this way: if an particular option of a company, say Apple, blows up, it doesn't hinder wipe out the stock nor the company. Those involved with the derivative might lose their money but the stock itself is not at risk. Certainly there could be some market turbulence resulting in price volatility but that will pass in time.
HBD = Resource Credits
One of the most innovative moves regarding HBD is now upon us.
Again, we discussed this in the passed as a potential utility for HBD. This is a "sink" that has the potential to be enormous.
Most blockchains are screwed for many purposes due to feed. While this is valid for finance, since that is a world accustomed to such transactions, most activity on the Internet does not see the cost of operations passed directly onto the user.
Anyone who used Hive knows how this was circumvented. By staking Hive, one receives a non-tradeable token (called Resource Credits) that provides the ability to write to the database. This recharges on a daily basis making $HIVE an access coin.
HBD is not going to serve that purpose on VSC, albeit with a twist.
The plan is to provide fee-less transactions simply by having liquid HBD in one's wallet. In other words, there is no requirement to stake the HBD to gain transact. It simply can occur as follows:
As an example, let’s say you have 10 HBD in your wallet. As you make a transaction X amount of your 10 HBD will be locked for Y period of time depending on RC requirements for that transaction. You can also stake your HBD manually. If you stake 10 HBD, it is locked and you receive 10 sHBD on VSC. NOW you can perform transactions with the RC associated with that amount of HBD staked and earn interest while still allowing you to access its value in the form of sHBD.
As an aside, we have to stress is only pertains to the VSC network. The operations on Hive are not changing. That still requires Hive Power to gain RC to interact with the blockchain.
HBD And AI
My next article is going to detail how I envision the world of AI, metaverse, and micropayments unfolding. It was going to be a topic I covered but it will include this update with HBD.
The key takeaway, for the moment, is the position VSC is putting itself in. I cannot stress enough how the transaction system (i.e. Resource Credits) is going to affect things.
There is always a cost to running infrastructure. This cannot be avoided. The problem is that most are not accustomed to paying for it. For example, with social media, users are free to engage as much as they like. Superusers actually cost Meta or X more money. Of course, they make it up in other ways.
Web 3.0 is no different. There is a cost associated with the servers that generate the transactions. It doesn't matter if it is a transfer of funds, a swap, or an upvote. To the system, they are just data requiring processing.
What happens when we have the Metaverse? How will AI agents change things?
These will be covered in the next article. What I want to mention is that we are going to see a lot of transactions conducting miniscule (not even micropayments). How are most systems going to handle it? The answer lies in how they are structured.
Centralized entities will monetize in other ways. We saw that over the last 30 years. However, if we are dealing with decentralized platforms, where does that come in? This is still a major question.
VSC is providing one solution.
Here is the article announcing about sHBD and staking.
Posted Using InLeo Alpha
I like how it opens up a lot of possibilities for Hive assets. I wonder how the different applications in the ecosystem take advantage of this. I am thinking that it can also entice a lot of outside investors.
It will be something to watch. There are a lot of possibility for the applications. Smart contracts are really needed on Hive even if a sidechain. We will see how things unfold.
The plan is to provide fee-free transactions simply by having liquid HBD in the wallet. In other words, there is no need to stake HBD to get transactions. It can simply happen as follows.
You are simply killing the main HIVE token in the VSC, it's as if HBD is the main way to interact with it.
HIVE is still very useful for RCs on the Hive side of things. VSC the network itself will consume quite a bit of Hive just for operating and with future plans it could even eat up several hundred thousand to support it's user base. However, the issue at hand is the Hive token cannot be used to power VSC as there is no way to easily obtain value from it by staking it for the network. HBD on the other hand is very simple and easy to use for accomplishing that.
That was a good answer. I hadn't really thought about the need for VSC to have to use Hive to operate on its part. A big project I think
Keep in mind, these are two different networks, both with costs associated with running them. Those have to be paid someone.
VSC could do like other smart contracts platforms, i.e EVMs, and charge a transaction fee. If it did that, would that affect HIVE?
It seems that VSC already answered my question about this. You're also right, using EVMs to pay fees for each transaction doesn't seem interesting or right for a protocol powered by the Hive network.
Depending upon what is built on there, it could be problematic.
They are on the right path there.
I read yesterday the article it is nice. I see many benefits in there. 1st giving the option of liquid staking for the used and maybe use HBD to other DEFI actions, maybe LPs and borrowing HBD for example. This way the user get something on top of the HBD APR and in addition it creates a bigger utility of HBD in the chain. There are many critics of the HBD savings saying that it doesn't help anything the blockchain (which I disagree ).
This is a promising development for Hive and HBD, as it not only enhances the utility of HBD but also strengthens the overall ecosystem. The move towards integrating more DeFi functionalities could attract a broader user base and increase the adoption of Hive. It’s exciting to see these innovations unfold, and it will be interesting to watch how they impact the Hive economy and the broader crypto market.
This is an interesting concept and cannot w8 to see sHBD in action.
This makes the hive platform more interesting and saving in the platform better than in our traditional banks.
The wrapping feature of HBD to earn like a liquid staking token will be interesting.
My guess is it will also depend upon what else is built. That is where the true benefit will be realized.
It seems very interesting, let's see how it will be in practice.
We do know the RC system works in practice so there is no question about this.
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Read a familiar article yesterday and was very curious. Thanks for putting it up friend, I must say there is a lot to digest from here. I will have to re-read this article. Will get back to you should there be misunderstandings.
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