INTRODUCTION
With traditional financial institutions paying basically nothing on interest accounts and world governments threatening regulation of fiat backed stablecoins, the average investor needs a break. And the needed break is here - the Hive Backed Dollar.
In this supplemental article submitted to the HBD Coin Guide, let's give a look at why Hive Backed Dollars (hereinafter HBD) should be a welcome addition to any investor's portfolio.
FACTORS MAKING HBD A GREAT BUY
- HBD are a unique type of stablecoin that is pegged in value to the US Dollar, but is backed by the value of $1 worth of Hive tokens (in actuality, HBD is backed by the Hive blockchain code that by smart contract converts HBD to Hive).
- HBD exist by virtue of the Hive blockchain which is decentralized and trustless. There is no set team, no company behind it, is not based in any one jurisdiction, and has nodes / stakeholders / contributors worldwide.
- As a result of the preceding two bullets, world governments would find it virtually impossible to regulate, restrict, prohibit, or sanction any trading or operational aspect concerning HBD.
- While HBD can not be purchased directly from fiat, HBD is offered on several Exchanges and is easily obtainable by purchasing and converting BTC into a tradeable pairing.
- HBD is easily converted to and from the Hive token on the readily available DEXs present on the Hive blockchain.
- Trading HBD is a pleasure as a result of the extremely fast 3 second block times present on the Hive blockchain.
- Trading HBD on Hive is likewise a pleasure as a result of the feeless transaction costs associated with the Hive blockchain.
- Converting HBD to Hive is accomplished directly on the Hive blockchain so liquidity for the conversion will not be problematic.
- Holding HBD in savings within your Hive wallet provides an attractive financial benefit. HBD presently is paying 10% APR as set by the network witnesses.
- While the interest paid on HBD is not of the magnitude of the 20% paid on UST on the Terra Blockchain (Anchor Protocol), the 10% that is paid is market competitive and is well in excess as compared with savings interest paid by traditional main stream financial institutions.
- Interest paid on HBD held in Savings is set by the network witnesses and is likely to increase over time dependent upon market conditions.
- HBD is basically a debt instrument (a convertible note if you will) and certain debt ratio logic mechanisms have been hard forked into the system to insure preservation of the underlying asset backing it.
- Arbitrage is utilized and incentivized in the system to maintain peg at or near $1.
- "The HBD Stabilizer is an automated trading mechanism funded by the Decentralized Hive Fund (DHF). This DHF exists to maintain a tighter peg upon the HBD token." [Nagoda, K. How do Hive Backed Dollars (HBD) work? [Including The HBD Stabilizer, The HBD Debt Limit, and The Haircut Rule]. (Accessed October 24, 2021)].
- If the price of HBD falls below $0.97, the HDB Stabilizer executes the smart contract to convert from Hive to HBD.
- If the price of HBD rises above $1, the DHF sells HBD on the native Hive Decentralized Exchange.
- HBD has vastly improved its ability to maintain trading at or near peg since HF 25.
FACTORS AGAINST MAKING HBD A GREAT BUY
- Historically, the price of HBD has vastly deviated from peg as demonstrated in the following graph:
- HBD is not widely available outside the Hive blockchain. The Bittrex Exchange maintains one trading pair for HBD (with BTC), and Upbit's HBD markets are available only to Korean citizens with KYC.
- The market for HBD presently is not deep and therefore large market makers and arbitrageurs are not present to aid in maintaining peg.
- At present, there are essentially no commercial uses for HBD.
CONCLUSION
In the case of assessing HBD two glaring points jump out in favor of holding HBD. First, HBD pays an attractive and competitive rate of interest for holding it in savings. And, second, due to the nature of HBD being an algorithmic stablecoin without any fiat backing, it is relatively insulated from attack by US and other worldwide regulatory agencies.
Accordingly, for the reasons set forth above, HBD is a great buy and a wonderful addition to any investment portfolio.
DISCLAIMER:
- Your author holds a long position in Hive Backed Dollars (HBD).
- The content herein is presented for educational purposes only and should not be construed as investment advice. Any loss incurred as a result of investing in Hive Backed Dollars (HBD) is yours and yours alone and may not be imputed to this author. Any foregone gain as a result of not investing in Hive Backed Dollars is yours and yours alone and may not be imputed to this author.