One of the reasons why I am so optimistic about the Hive Backed Dollar (HBD) is because of the present need in the global economy. This is something that cryptocurrency is going to have to address and HBD has a chance to be a player in this arena.
Many feel the US Dollar is going to collapse. The challenge with this view is that something has to replace it. Bitcoin Maxis, of course, believe it will be that currency that steps in. As we covered in the past, there are a lot of challenges with this point of view.
Personally, it seems that, of all the cryptocurrencies, stablecoins could be offering a solution in the long run. This could be what steps in to facilitate the transaction we need to conduct. It is, however, a mammoth task. That said, as we will see, the opportunity is enormous.
So let us what what is required.
Global Trade
People have a tendency to look at monetary components in a vacuum. The reality is the global economy is a complex system that has many interwoven parts. Money does not operate on its own nor is it able to be isolated as a factor of what is taken place. It always works in the larger context of what is happening.
When it comes to this topic, one of the major areas is global trade. Here is something we can focus upon since we know enough money is required to facilitate it. If that is not the case, things will have to contract.
Ultimately the role of money is to facilitate business. This is due to the fact that business is what generates wealth. Money is only a tool to get there.
At present, the global economy is comprised of tens of trillions of dollars in trade. If one wants to replace the reserve currency, the amount we are talking is off the charts. We also must account for the fact the amount of money has to exceed the totals in trade. While we can incorporate things such as the velocity of money, the reality is most of time time, the largest percentage of the money supply is stagnant. This means we have to have an order of magnitude higher in currency for every ten trillion dollars in trade we are looking at.
The USD is able to serve this purpose to some degree. Sadly, we are at a point where, since the Great Financial Crisis, we are seeing a shortage in USD available. Due to breakdowns in the Eurodollar System, we are left with a contraction in balance sheets. This is even causes Triffin's Dilemma to become a problem for the Fed.
Stablecoins
Stablecoins offer the potential to augment the USD. While there are many who feel this is going away, the reality is the dollar is no longer a currency. There is no currency involved in the majority of global transactions. Look at the Repo market. This does $4T-$5T per day and there are no dollars involved.
Instead, the USD can be looked at as a unit of measure. It is no different than a meter or ounce. It is a way we measure things.
From this perspective, stablecoins could offer a massive solution. Since most are pegging themselves to the USD, we see how it is maintaining the measuring stick everyone is familiar with.
Unfortunately, due to the present approach of asset backed securities, most stablecoins will not alleviate the problem.
The largest stablecoins, by market cap, are Tether and USDC. Both of these claim to be backed by either cash USD or US Treasuries. Either way, they are not expanding the money supply. Instead, they are simply using money transformation. The currency is moving from 1 USD to one USDC.
As we can see, this is only going to lead to the same problems in the future. While stablecoins of this nature do hold potential, while also offering enhanced utility, the impact could be limited.
Another issue is, when looking at stablecoins, even the top ones deal in billions. Global trade is in trillions.
In other words, we need a lot more stablecoins.
Hive Backed Dollar Powering Economic Productivity
Could the Hive Backed Dollar be a part of the solution?
The answer is most definitely. In fact, this could be a bigger component than most people are realizing. The tendency is to look at Hive and believe nothing associated with that blockchain is going be successful in any meaningful way. To me, this is a mistake.
HBD is an algorithmic stablecoin. This is very important because it does offer the solution that is required. Of course, we have the hatred of the politicians and regulatory agencies but that is a side issue. The reality is we need these to expand greatly to provide the tools required to facility global trade.
Anyone who knows Hive realized that HBD is backed by $1 worth of HIVE. Thus we see how HBD utilizes the USD unit of account (measurement) yet is not backed by the dollars. It is tied to a completely different asset.
Hence the supply of HBD can growth without relying upon the US dollar. In fact, as that occurs, it actually enhances the money supply.
Under this circumstance, the USD is not transformed but, rather, augmented.
This is nothing knew. The Eurodollar system is estimated to fund 90% of international trade. This is the true global funding mechanism. Unfortunately, collateral constraints meant almost 15 years of deflationary money.
Stablecoins like HBD can step in to fill in the void that is being left. It is also a mammoth task.
The Repo market is trillions of dollar per day in funding. This number only encompasses what is known through the custodian and primary dealers. How much more is done on a bilateral basis is anyone's guess. Some estimates have that number over ten trillion (daily) alone.
In reality, we have no way of knowing.
Whatever total amount is, we are dealing with tens of trillions. This is the target for stablecoins. We are now dealing in tens of billions.
What this means is we are going to need a lot more stablecoins if the system is going to be funded in this manner.
That is what is required to power the global economy.
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Most stablecoins are currently pegged to the USD. If the USD will collapse, then what will happen to the peg of the most of the stablecoins? What will happen to their value? If the USD would collapse, then why would anyone look at it as a unit of measure. What will be the measure? And why the USD would collapse?
Is the ounce or meter going to collapse?
This is the point I am making. How does a unit of measure collapse if it is the standard most use?
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Because it is a currency, I still see its collapse as a possible scenario. See for example the Hungarian Pengő. My country used it between 1927 and 1946. The Hungarian Pengő suffered the most serious hyperinflation in the world history. A hyperinflation can kill the USD (and any other currency) too.
To start, there is no way to correlate the USD with anything from Venezuela and Hungary. They are two different world.
The USD is global in nature, backed by the two largest economies since Chian is basically dollarized at this point.
And viewing the USD as a currency is missing the major transformation. The reality is that most transactions in USD have no currency involved in them.
As stated the Repoo market is $5 trillion per day and there is very little USD actually in there.
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Seeing the USD as a unit of measurement is a new concept to me. It makes sense from a global perspective as most things are already measured using the USD. This mammoth task in front of stablecoins, will there be multiple winners or only one winner?
There is a lot that takes place globally that is measured in USD yet there is no currency involved (at least US Dollars). Hence we have a situation with money transformation.
I believe we will have mutiple stablecoins, there will not be just one. We are dealing with networks and some are going to have their own.
My guess is we end up with around 5 as the primary fuel for global trade and then a number of others that have niche use cases.
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I think possible 5 winners will be stablecoins that are really good at the basic level in terms of infrastructure and performance.
If the HBD uses the USD as measurement, would that not mean that if the USD goes down, the HBD goes down as well, e.g. compared to the value of the Swiss Franc? Not because the HBD is bad, but it voluntarily and algorithmically it decided to be coupled to the USD.
That would be true it would decrease against the Swiss Franc. But which is more likely to be strong over the next decade, the USD or other fiat currencies.
And as we saw, during this bear market, cryptocurrencies fell against the USD.
So it becomes a rather interwoven dynamic.
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I love the picture you paint. Unfortunately if it ever does become a reality I probably won't be around to see it. But it's fun reading your thoughts and looking at the world from a different lens. The potential is enormous. One brick at a time. It would be awesome if Hive and HBD could become part of the global solution.
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Yeah the potential is there. Few seem to realize it since they want to just discount Hive as nothing.
But there is a lot being put in place as a foundation.
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HBD stood the test of time and it is a strong token and pillar of the Hive blockchain. I see it spreads its use case on the Hive blockchain gaming space where it can provide anticipated returns rather than volatile rewards.
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Well it did stand up over the last year rather well. I am not sure that is standing the test of time but it is a strong start.
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The USD is the world's reserve currency and I don't think it will go away anytime soon. People's faith in it is very high because it has never gone negative for its debt and there just isn't anything out there to replace it. I wouldn't take Russia or China's fiat over the dollar due to the faith in the dollar. However, at some point, I do think something will be made to replace it. The government just acts dumber and dumber every single year so I would not be surprised if they did make people lose faith eventually.
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THe USD is bigger than the USG, that is the point.
And yes they do seem to get dumber and dumber every year.
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This article is very useful and we can take a lot of knowledge from this article.
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This is one of the more brilliant aspects of HBD. When I started reading this post, I immediately started to think if the USD collapses, so do the stable coins that are backed by USD. It happens to be most of the stable coins on the market. HBD being backed by HIVE takes that problem out of the equation. The more we understand the HIVE ecosystem, the more surprising it becomes that the wider crypto communities does not either know of, or choose to ignore it.
I think these are the things we need to use as arguments when marketing hive - show them how we're different.... Not just an explanation of what we are.