Introduction
Oh, the possibilities surrounding the Hive Backed Dollar (hereinafter HBD) are expanding at an accelerated rate. So accordingly, let's take a moment to identify these possibilities and what results may emanate to the overall Hive ecosystem.
An APR Increase on the Horizon for Hive Backed Dollars Staked
Look, living in the US and more particularly New York State, you will hear no bitching from me about the current 12% APR on HBDs that are staked. Why you might ask? Well the answer is crystal clear if we look at some of the recent New York Big Bank savings rates:
Citibank: 0.08% APY
TD Bank: 0.02% APY
PNC Bank: 0.01% APY
Fifth Third Bank: 0.01% APY
Wells Fargo: 0.01% APY
Chase: 0.01% APY
USAA Bank: 0.01% APY
Barclay's: 0.55 APY
Ally: 0.50% APY
Marcus (Goldman Sachs): 0.50% APY
These yields, in a word, are simply pathetic! So it becomes clear why a 12% yield is attractive.
Nonetheless, and even better, the buzz is all over Hive that some witnesses have already been updating their witness node to raise the HBD yield from 12% to 20%. Yes folks, it is true that there are DEXs out there where more attractive yields can be found - but - are those higher yields on stablecoin investments? Nope, to garner those higher yields you will be required to take on varying degrees of risk. So especially at a 20% return, HBD investment provides a low risk, high return alternative for investors to consider.
How Does the Overall Hive Ecosystem Benefit From Raising Hive Backed Dollar Yields to 20%?
The major benefit to the Hive ecosystem is simple. Higher yields attract new investors to the platform. Hive has so much to offer investors in a decentralized format and by increasing the investor base in HBDs, there is greater pressure for price stability in the HBD which might see values consistently in excess of $1.00.
Likewise, as a result of increased numbers of investors, the whole of Hive benefits from increased exposure, not only in the media, but in market effect as well. Markets presently exist on the Hive blockchain featuring a trading pair for HIVE and HBD. As more investors are attracted to Hive as a result of the HBD 20% savings rate, there will be an increase in the conversion of Hive to HBDs which provides the opportunity for a HIVE price push as well as an increased possibility for a HIVE price pump.
The Launch of a pHBD-USDC Vault on PolyCub Finance
Let's face it guys and gals, at present the liquidity situation concerning HBD sucks, and in effect is a bar from exponential growth as has been seen by the likes of Terra's UST coin. Tell me: what the hell good is having an investment vehicle paying a return of 20% when there is insufficient liquidity to acquire it? A rhetorical question, but in the absence of liquidity a 50%, 75% or triple digit return wouldn't make a damn bit of difference at all.
Khal to the rescue for HBDs!
pHBD will be launched on PolyCub and a vault pair of pHBD-USDC will be offered to investors providing them a place to stake their HBD and earn a high yield.
A small fee will be taken along with the 12% APR on HBD staking on-chain. All of this will be deposited into PolyCUB's Protocol Owned Liquidity (PoL) where it will seed long-term yield optimization.
The pHBD-USDC staking rewards will outpace the rewards on Hive. Right now, that means offering an APY above 12% (likely in the 20-40% range).
If/Wen HBD's APR goes to 20%, we can always adjust the POLYCUB payouts to account for the increase and raise PolyCUB's APR to increase attractiveness. In fact, all APRs and the pendulum on PolyCUB will be governed by xPOLYCUB in the sooniverse.
[@khaleelkazi. PolyCUB Will Be the Seed Platform For HBD Trading and Liquidity. (Accessed April 10, 2022)].
Outside of all of the on-chain HBD mechanisms [see, e.g. Nagoda, K. How do Hive Backed Dollars (HBD) work? [Including The HBD Stabilizer, The HBD Debt Limit, and The Haircut Rule]. (Accessed April 10, 2022)], the proposed liquidity pool constitutes a second layer solution. Within this proposed mechanism, pHBD are created and deployed on PolyCub. Then, in the same way as LEO may presently be converted to pLEO, a similar process will be created for HBD/pHBD. Then the pHBD is paired with USDC resulting in a pool whereby investors can acquire HBD (converting their Polygon assets to Hive assets and onboarding to the Hive chain).
What Benefits Inure to the Hive Ecosystem as a Result of this pHBD-USDC PolyCub Vault?
Firstly, it is readily apparent that HBDs presence on the Polygon blockchain provides greater exposure not only to HBDs but to the entirety of Hive. This exposure should increase traffic to Hive as well as hopefully boosting the overall investment in the Hive ecosystem.
But of equal importance, under Khal's plan, a percentage of the HBD swapped to the new pHBD will be directed to PolyCub savings to fund returns. But in addition to funding returns, the effect of this mechanism also aides in the creation of newly generated HBDs on chain [see, Nagoda, supra].
Final Thoughts on Hive Backed Dollars
The potential exists for Hive to become a 'big fish' in the cryptocurrency ocean. Growth in the magnitude as exhibited by Terra (both in LUNA and UST) is possible for the Hive system.
As the fixed-income area of crypto becomes more and more entrenched in DeFi, the importance of HBDs relative to Hive's future is amplified. For this reason, the two propositions herein examined are timely and light the way for a successful future for Hive. The combined effects of both propositions, appeal and access, operate in tandem paving the road for the future of Hive. The need for both is now, and let's hope unnecessary delay does not hinder the implementation of either of these outcomes.