Things are starting to get very exciting around the Hive Backed Dollar (HBD).
We had a discussion about this subject on the most recent episode of CTT with @theycallmedan and @starkerz. During the broadcast, we talked about the concept of Hive Savings Bond as well as the success of UST. It is becoming evident of the power of an algorithmic-based stablecoin and what it can bring to the ecosystem. At present, there is a circulating supply of almost 16 billion UST. This means we are going to need a lot more HBD to be valid.
The correlation between HIVE and HBD cannot be overstated. It is vital for people to understand that we have the ability to expand the amount of HBD that is in circulation by converting HIVE. This does not burn HIVE as much as converting the value to another form. This is vital. Instead of destroying value, we are actually keeping it and, hopefully, using it for profitable purposes.
Source
Expansion Through Creation
One of the main premises behind the idea of the Hive Savings Bond is to generate more HBD. Right now, there are two ways the blockchain creates it. One is when there is a 50/50 payout on posts. The second is when the interest is paid on the HBD that people put into their savings account.
The concept is simply to expand this using the time-locked feature on Hive. This will allow us to pay a higher return, say 25%, for a one-year lock up. It is a simple idea that will increase the amount of HBD that is organically generated.
Of course, the goal is to use this feature to pull in more money from the outside. Compared to what other stablecoin projects are paying, Hive can be very attractive. The UST return is presently 20% yet that is going down. On Hive, we can have an aggressive interest rate and sustain it for long periods of time since we need so much HBD.
Using the present 12 million in circulation (not including what is in the DHF), if all was put into a 25% return account, we would have 1.04 billion HBD after 20 years. That is 1/16th what UST has today.
This shows how we have a lot of upside with what can be created. In short, Hive can be the most aggressive fixed income, stablecoin market there is. To go from 12 million to 5 billion is going to require a lot of expansion.
Polycub Adding HBD and HIVE LPs
On the most recent AMA by the Leofinance team, we got some major news. Khal announced they are going to set up liquidity pools for both HIVE and HBD on Polycub. This will put both token on the Polygon network.
As stated on that broadcast, the goal is to have the largest liquidity pool for both tokens. It also appears the pairing will be with USDC. That is huge for HBD.
Users are going to be incentivized to fill the LP by being rewarded in POLYCUB. The HBD that is put up will be put into savings earning the 12%. This will help to feed into the pools rewards. At the same time, LP providers will get a percentage of the transaction fees.
This could be highly profitable if people use this as a way to get into and out of HIVE and HBD.
The idea is to have a great deal of liquidity available for people to be able to enter both tokens. We face the challenge of neither being on many exchanges. Having a large liquidity pool could help alleviate that issues.
HBD Scarcity Means Higher HIVE Prices
If the goal is to have a large liquidity pool of HBD, we are right back to the same problem. There simply is not enough HBD out there to fill the LP. Even if the Hive Savings Bond was implemented immediately, the pace of growth would not present enough HBD.
This means there is only one option: convert HIVE to HBD.
Here is where things will get very interesting. The relationship between the two is price in USD. Since HBD is backed by $1 worth of HIVE, we can see how the higher the price of the latter, the more of the former that can be created through the conversion.
Since HBD is needed, and not available, some large amounts of HIVE are going to be converted. This means somebody is going to have to pick up a great deal, at some point, on the open market. While the initial stages might be from present HIVE holders, that will likely run out quickly. Many are already staking their HIVE, using it for on-chain utility.
As an aside, we must also mention that Resource Credit delegation is going to be part of the next hard fork. This means that some investors could be attracted to the idea of powering up more HIVE and delegating the RC for a return. It is likely we start to see applications offering rewards in their token based upon RC delegation.
This will only be compounded by the fact that some are going to convert HIVE to get HBD for LP purposes. As we can see, if the Hive Savings Bond is coded in, we could have a number of different options available for HBD in a short period of time.
If we have a liquid pool paying around 20% along with an on-chain time-locked option of 25%-30%, we can see how the appeal of HBD escalated very quickly. When it comes to returns in the stablecoin market, that will put Hive directly in the center of the conversation. It gets even more interesting if we add higher payout amounts for longer time lock periods. In other words, Hive will be an epicenter for the fixed income market.
Chicken Or The Egg
As we can see, there needs to be some use cases for HBD before large amounts are generated. Yet, we also need large amounts of HBD for people to develop use cases. Here is the chicken or the egg scenario.
We are getting the use cases. A 12% return in the Hive Savings Account is a strong destination for HBD. This is in the range of what stablecoins are paying. However, adding a liquidity pool to the mix takes things to another level.
It is evident that we are going to soon be at the point where a lot more HBD is required. This is where people are going to have to start creating however they can. More money might flow into the savings program, expanding the supply organically. That is a slow process.
The quickest way is going to be conversion. This requires buying HIVE on the open market and moving it to HBD. It is how the egg part (or is it the chicken?) gets solved.
For this reason, we are going to see the price of HIVE explode. It is easy to picture how the use cases for HBD will keep expanding as more becomes available. The key is to get the process started.
This is now on the horizon. For this reason, it is not unreasonable to think that we might need a hundred million HBD over the next 12 months. Where is all of it going to come from?
Remember the correlation between HBD and HIVE? That is about to become very important.
Be prepared, things can move very quickly. This could be one of those situations where the floodgates open very quickly.
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Actually it is around 9M HBD in circulation!
HBD is in a great spot right now, with the debt level at almost all time low, at around 2.5%. The haircut is at 10%, so a lot of safe zone even with this extremely low levels of allowed debt.
With the upcoming hard fork and increasing the debt level, holding HBD with be much more comfortable for investors.
Hey @dalz, what is debt level? What is haircut? Could you please explain? I am a tiny pleb. 😢
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Debt is HBD supply/marketcap to HIVE virtual supply marketcap.
Haircut happens to HBD, when the debt increases over some percent of debt that the blockchain allows. Now 10%, soon 30%. Haircut means the blockchain wont give a 1$ price for HBD anymore when conversion happens. The higher the debt the lower the price of HBD. Its a protection from death spiral.
Details here
https://peakd.com/hive-167922/@dalz/the-haircut-rule-the-biggest-risk-for-the-hbd-price-or-historical-data-on-hive-debt-and-hbd-price
Awesome. Thanks for the explanation. I will read the blog to understand more of it. I couldn't get it from the whitepaper.
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Yes it will be plus there will be increased use cases forming.
This is all going to evolve nicely. Some big pieces falling into place.
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I continue to stack HBD as my wallet shows. I'm not a big player but I have almost as much HBD as you do (in this account). I still feel it is a fairly stable token and its yield is good, and I expect this to be the case in the future.
Interesting news about the upcoming PolyCub LPs, I had not heard about that so thanks for sharing it!
Question
I have some, but not a lot of experience with LPs. I don't understand how PolyCub can lock up HBD for 3 days which is required to obtain that 12% interest. Locking an asset seems counterintuitive to the ability to provide Liquidity. Was this explained in more detail in the CTT episode you referenced? Is there a simple explanation someone could write here in a few sentences?
HBD Rich List
One can go to https://hivelibrarian.herokuapp.com/ and select Hive Rich List then Choose the asset type to sort by of HBD-Savings in order to see who is availing themselves of this nice 12% APR interest. I find myself currently at position 111 but I'm moving towards breaking into the top 100. All credit and thanks for this awesome tool go to its creator @geekgirl 👍
That is one area where it will be interesting to see what they do. You are right, there is a 3 day lockup for the HBD savings. This means they cannot put all the HBD that is in the liquidity pool in the form of pHBD. They will likely have to only do 70% or 80%, something like that.
That is my guess anyway.
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I listened to you explain this on Ctt. I agree, HBD is very important for Hive growth. If Khal succeeds in this, Hive is going to benefit alot from this. It might also pave way for other projects to do this same. It's going to be big!
And at the end of the day, the Stabish HBD might become Stable.
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Liquidity always helps with stability since non-liquidity always brings volatility. That is the opposite of what we want with HBD.
It does seem we are moving much closer with HBD and having some great action with it. The next few months will be very interesting.
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I agree with your hope. We are moving in the right direction. Attention is being drawn to it. This is something that gets the ball rolling.
From here, we need to see a couple things roll out and people to get involved.
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I love that Leofinance is creating a hbd - hive - usdc pair. Can’t wait!
It will be a major breakthrough. We will see how long it is until it rolls out. That could bring a great deal of value to Polycub.
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HBD and Hive will be on polygon, that will sure speedup the investment direct from Hive Engine based ecosystem.
It would be a profitable venture once we see HBD having a back of liquidity and pairing with other tokens.
Can't wait more to see them in action.
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It will certainly help with accessibility. Of course, the next step after that is of interest also. What does the team do to paid HBD with other things?
That could be very interesting.
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This is creating a great use case and need of HBD and like you mentioned that HIVE will be used to buy HBD. This way the value of both tokens will grow and HBD is going to be such a gem decentralised stable coin. I hope to see it getting more stable.
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The relationship between HIVE and HBD is awesome. We are going to see some massive moves in the price of HIVE if we get HBD working as it can.
In the next few months, we might see a few options rolling out. We will see what things look like at that point.
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Las Dao hicieron de Dai y Ether grandes criptos, no veo por que un ecosistema como Hive, no pueda hacer lo mismo con HBD y HIVE, esto cada vez se pondrá mejor🚀
I’ve been looking for yesterday’s CTT, but can’t find it.
I dont think it is released yet.
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Hey Buddy, I plan on using $HBD in my games that are in the works. I am surprised more people are not using it for payment!
That is great to see. I think it will catch on quickly.
When more builders understand what is taking place here, we will see things expand quickly. It is only going to take a couple steps forward to really improve the state of things.
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It's a great time to be creating content on the Hive ecosystem.
May the Gods hear you and blast the Hive ecosystem at once! I am hoping it will become more appealing to serious investors to pour more money into it. That and user acquisition is a factor that should move us up in the ranking!
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Keep in mind that if HIVE is converted to HBD, in theory the total market cap of the two (combined) should remain the same. That means a lot of HIVE converted will reduce that amount outstanding, pulling the MC down.
Of course, markets do not operate in theory and activity coupled with a tighter supply can send things upward.
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This would be true if HIVE had no other utility. However, we know people do want HIVE/HP for RCs and for voting and governance. Actually, usage of HBD increases demand for RCs. So it is likely that HIVE being converted to HBD will increase the price of the remaining HIVE. But time will tell.
I agree. However, at the instant moment of conversion, it theoretically should be a push. Of course, real world and theory do not align very often.
Then couple the fact of what you mention. In fact, attracting outside capital, even as a fixed income investment, means that resource credits are needed. So the act of more people claiming monthly rewards adds to the onchain activity.
It is all building from what I can see.
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Hive is going to be on top soon. That means is time to pay attention to Hive and HBD.
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Oooo flood gates!! Let's go :)
Great info. So many announcements. Very interesting times. Go Hive!!!
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Would love to see Hive explode so I can create more HBD through converting it. This is all part of why having Hive Power is so important as you will benefit from the price movement big time. The upswing for the Hive price is big and not fueled by a pump, but out of necessity which is a big difference.
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The chicken or the egg. What will make HIVE explode? The need for lots of HBD. What will cause a need of HBD? Probably Hive exploding.
So we just need to develop a few more sinks to see things radically changing.
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Given that Hive and HBD are going to Polygon, is the Leo team making these tokens? I think the additional options for getting in and out are good but I am still wondering whether or not just leaving the HBD in savings is the better choice or not.
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They will have to create another form of HBD and Hive on Polygon. It will be pHBD and pHIVE, similar to what they do with LEO.
When someone moves the HBD, as an example, across, the HBD goes into their account and the pHBD is in the Metamask (or whatever wallet). From there it can be put into the LP.
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To make HBD more stable, it should also be added to Curve factory, Solidly etc. DEXes and projects like Polycub can incentivize that liquidity further.
A tomb fork pegged with HBD can also be created on Polygon to jump start a usecase with high APRs (yeah, a seigniorage for another algo stable, lol). So when HBD is in short supply for new usecases, the pegged coin from this tomb fork can help provide liquidity (provided the peg operates successfully).
The need of a decentralized algo-stablized stable coin is huge if it can maintain its peg successfully. HBD can fill the void of stablecoin market if sufficient liquidity, availability & cross-chain bridging for it is there.
There are a lot of different options to pursue. The key is to get the first pool going and get some liquidity. Here is where we will see the first need come from.
It then can be enhanced by what you describe and then some. No reason it cant keep expanding from there.
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That's so interesting about hbd. So the best way is to buy hive to convert to hbd. Great for hive, need to buy !
It is the best (perhaps only way) for large amounts. Whether it is the best for smaller amounts, that is debateable.
For example, there is the internal exchange that lacks a ton of liquidity but one can get small amounts without too much slippage.
A LP might help to reduce the slippage if there is a lot of HBD in there.
The conversion is more for the need of HBD since there is so little available.
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I believe that the future of HBD is bright no matter, am thinking that I should buy hive now and convert it to Hbd next week.
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Here's my conundrum. I receive HBD from my project in the DHF. Apart from a few payouts to contractors and @privex I convert a lot of it to Hive.
If I think the Hive price is increasing I want to convert more of it and quicker to Hive!
Long term I feel Hive is going to do better than 12% pa!
I also have been buying bitcoin (with Hive) to cover the conversions my @v4vapp does. Hopefully that will be more in balance now I convert both ways.
Certainly there are many options out there better than the 12% on the savings of HBD.
However, does everyone put all their money into Apple or Tesla? Or do they put some into bonds, dividend stocks, and even savings accounts?
Here is where we see the difference in opportunities and investors. Now all are going to speculate.
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I guess I didn't catch that part of the AMA about them allowing HBD to be pooled. That is pretty cool. Plus they are then going to earn the 12% on that HBD. Very cool. I've gotta say, I am not feeling bad right now about how much HBD I have been putting aside over the past six months.
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I keep growing my holdings too. It is vital to get as much HBD flowing to market as possible. This is something that can really enhance the value of the entire Hive ecosystem.
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I believe this is definitely a good way forward for the HBD and I believe users will follow the strategy in saving it
I get more excited about the future of HBD every time you do a post about it! Adding it to polygon will be huge.
This is the first I've heard of RC delegation being added in the next hard fork. That will add even more value to this ecosystem.
Wow, Hive is going strong. Can't wait to see what's next!!
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Yes the coding is done from what I understand and it is on testnet. So all good there I presume.
It will allow for those with a lot of HP to delegate RC without losing the VP that comes from the HP. This is a major breakthrough.
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I wonder what kind of returns one could except after delegating RCs?
I guess that is up to the applications to decide. It will be interesting to see what they come up with.
The fact you can delegate to new accounts without putting out HP is a big move. We will have to see how this all unfolds.
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I'm pretty excited that you pointed that hive/hbd will be on polycub. I have friend always complaining to me that is hard for him to buy hive living in New York because he's so limited with exchanges. I know its a bit easier to get hive now but a lot of people are just convinced they can't get it because that has been their experience. It would be nice to be on polygon for sure!!!
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Getting HIVE is a pain right now. The accessibility is not great. For that reason, this should help to open up the entry by people. It will also allow for larger purchases.
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Just noticed this post in the trending section on LeoFinance and I had to lend my support.
I'm with you that the price of HIVE can and should rip if we handle HBD correctly.
Keep championing the cause for us mate!
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Nice post! Lots of information and very well explained!
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It sounds wonderful to me from an investor standpoint, but I wonder, how will the HBD collected from buyers of the bond be deployed in such a way to sustain 25% apr payouts in productive capacity? OR will it in the long run be a way for investors to siphon capital out of the hive blockchain?
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Oh Snap that's HUGE for Hive honestly! Super happy to see that coming into focus and for more integration of hive into these systems to support the platform they are using. HUGE PLUS!!!
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Amazing article. You are good at writing article. I really admire you. I hope ı can write like you :)
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I hope Khal succeeds. I think that would be very helpful to the success the Hive.
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Reading this the second time helped but I still need to learn more. Thanks for your post.
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That is some excellent news and yet I am a bit sad as I was hoping for another year to continue building my stake while the price is nice and low.
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I like that "Get Rich with Hive" email. Great title!
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Yeah, but what if we die in that explosion? You didn't of that, have you?!?!
I bet you didn't expect such a dumb question here in LeoFinance lol!
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