There is a lot going on with Hive. It seems we are getting activity in terms of announcement. Projects are expanding while innovation is taking place. This is exactly what many predicted would happen.
One area that is close to my heart is the Hive Backed Dollar (HBD). This is something that we discussed on a number of occasions, along with creating things such as the Hive Savings Bond. The idea is to use the time lock capabilities at the base layer to increase the amount of HBD created while also maintaining stability for the blockchain.
Of late, we are seeing more attention paid to HBD, especially in light of the success of UST. This is another algorithmic-driven stablecoin that is created through the conversion of the native token. It is a model that can have success. The challenge for that situation is the fact there is a company that is behind it along with Venture Capital money. This is a point of vulnerability.
For this reason, it is time for Hive to step forward and assert itself in the fixed income market. There is a lot of potential with trillions of dollars available. Keep in mind, most people do not speculate with their money. It is time to help the industry transition to the place where return (yield) is the focus.
We are going to cover two recent announcements that could have a significant impact.
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Increase The Savings To 20%
The most recent post by @themarkymark detailed how he increased the APR on the Hive savings to 20%. This is an idea the Witnesses discussed and he, along with a few others, increased the payout on their servers to 20%. Bear in mind, the actually payout is dependent upon the medium of the consensus Witnesses.
Nevertheless, this does show the intention to make Hive a bigger player in this market. Obviously the success of UST caught people's eye. There is no reason why Hive cannot operate on this level and attract a serious amount of capital from the outside.
One of the things Hive has going for it is the decentralization of the blockchain. There are the consensus Witnesses along with another 80 or 90 back up nodes. All block validation occurs on a rotation basis. Therefore, no one individual or entity has control of the blockchain.
We also have token voting. Here again, Hive is in good position with the distribution. The largest stakeholder (in Hive Power) has roughly 3%-4%. This is in contrast to many projects where the foundation, lab, or company behind it is holding 20%, 30%, or even more. We saw this the vulnerability of this in the Justin Sun fiasco.
For months we have covered the fact that these mean that HBD is actually outside the reach of regulators. There is no company backing it, hence nothing to submit an application to come under the banking laws. Nobody is making assertions (claims) what the token is backed by since it is evident simply by looking at the chain (and doing some simple math). HBD has nothing to do with the USD since it is nothing more than a unit of account, being backed by HIVE.
Investing in HBD at the blockchain level, putting it into savings, means it is a very low risk, high return opportunity. There is no third party counter risk since the blockchain is the paired party. One has full control of the HBD since it is only accessible through his or her wallet. We see no application involved.
It is also important to note that the return is paid out in more HBD. Many (most) DeFi projects pay out in another token, creating another layer of risk if for no other reason than introducing volatility to the equation.
HBD on-chain eliminates all of this.
Here we have a big step forward. As of this moment, there are a few Witnesses who increased their savings rate to 20%. We will have to see what the others do.
HBD Liquidity Pool On Polycub
We also had an announcement mentioning how there will be a HBD liquidity pool built on Polycub. The goal here is to have the deepest liquidity pool to give people access to HBD.
Here is where we see the base idea expanded upon. This is a second layer solution, outside the on-chain mechanisms. Under this idea, pHBD will be created. Just like people swap LEO over to Polygon in the form of pLEO, there is going to be something similar for HBD. It will be paired with USDC to create a pool for people to acquire HBD. This, of course, will also provide another on-ramp to Hive. One can take Polygon assets, convert them to pHBD, and toss that onto the Hive blockchain in the form of HBD.
Obviously, up to this point, HBD liquidity is a problem. Simply put, we are going to need a lot more HBD.
Without having the details, we cannot do a direct comparison. However, with the Polycub pool, there are some differences. To start, this does not generate more HBD. That is only done on-chain. Secondly, all returns are paid out in POLYCUB, the native token for that platform. Here is where the added layer of risk enters. We also see how this entails using Metamask or some other wallet application.
To get people to pool their HBD, this risk will have to be compensated for. This means offering a higher rate of return as compared to HBD savings. Return always has to be weighed with risk.
From an overall ecosystem standpoint, HBD heading over to Polygon is a good thing. Naturally, giving wider exposure to the token is always a positive. There is, however, another factor in this. A certain percentage of the HBD that is swapped to pHBD will be placed in the savings account. This helps to feed the return that people get for being in the pool. Yet, it also helps to create more HBD. In other words, it helps to keep expanding the amount of HBD that is being generated.
Steps are being taken to make HBD an attractive destination for fixed income dollars. This is an aspect to the industry that is just getting started. Here we have two ideas, one to increase the appeal of HBD while other is looking to help provide access. Both are needed to help take Hive to the next level.
Hopefully both of these roll out in a short period of time.
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