Sorry about the rambling nature of this post. I've been dispirited since the witnesses raised the interest rate to 20%. This stupid move just might bring the downfall of the whole HIVE ecosystem.
The Merchants of Debt
The merchants of debt are subtle in their seductions. They whisper promises of unlimited passive income while white washing potential risks and the negative social impact of debt.
During my life I've seen numerous lives destroyed by people doing things like buying stock on margin. Buying houses they could not afford on mortgage. The financial landscape is littered with companies that listened to the merchants of debt. I've seen companies destroyed for holding mortgage backed securities as cash equivalents or taking on debt at from the advice of corrupt financial counselors.
Debt kills. The decision by the witnesses to take on huge amounts of debt felt like a knife in the heart.
Seriously! I beg the reader to look at what is happening on this platform. The witnesses raised the interest on HBD to 20%, not because the platform needs an infusion of cash. The witnesses raised rate to 20% simply because they have some rich friends who want to earn a large passive income.
To express my disappointment, I stabbed a heart shaped box with a scary looking chef's knife.
Austrian economists call the pursuit of passive income "rent seeking." Moralists call the pursuit of debt "usury."
Having studied world history, I tend to side with moralists. Economic history shows that debt throws individuals into poverty, corporations into bankruptcy. The merchants of debt have even brought once mighty nations to their knees.
Having read a few hundred articles about the decision, it appears that the driving force for this decision is that several cryptocurrency millionaires want to find a high interest haven for their crypto holdings.
If this is the case, then the witnesses raised the interest rate to 20% percent because there are people who want to loan out funds at a high interest rate, not because the HIVE platform needs the money.
Several articles indicate that HIVE wants to lend out $5 million in HBD. HIVE will then pay $1 million in the first year to service the loan which will bring the debt to $6 million. HIVE will pay $1.2 in the second year bringing the debt to $7.2 million. The third year will bring the debt to $8.64 million. The debt will have doubled by the fourth year of the loan.
The goal of HIVE is to give a small number of millionaires a chance to double their money.
The formulas used by HIVE guarantee the HBD debt with HIVE. As I understand, the "Convert HBD" button found on wallet.hive.blog and peakd.com will destroy the HBD. It then creates the dollar equivalence of HIVE minus a 5% fee. The process takes 3.5 days. This guarantees the price of HBD at 95% of the dollar; So, in theory, if you bought HIVE at $1.00, the most you could lose is 5% conversion fee.
There is also a program to convert HIVE into HBD. If the price of HIVE jumps over $1.05; then it is worthwhile to convert HIVE to HBD. If it below $0.95, it is worthwhile to convert HBD into HIVE.
I thought that the introduction of 20% interest would have led to a brief period where the price of HBD jumped over 1.05. This would have led people to convert HIVE into HBD. Converting HIVE into HBD would have reduced the float of HIVE on the market which would temporarily raise the price of HIVE.
This didn't happen.
Since the high interest rate is creating millions upon millions of HBD which will eventually be converted into HIVE, the 20% interest rate on HBD is likely to take a heavy toll on the price of HIVE.
The first negative effects of the high interest happened on Hive-Engine, which I will discuss below. Before that discussion, I want to discuss Proof of Brain v. Passive Income.
Proof of Brain v. Passive Income
I joined SteemIt four years ago because I saw the platform as a possible source of revenue for independent web sites. HIVE has funded a few games and there are some cookie cutter tribes, but HIVE has not funded the creation of any high quality web sites.
I stayed because the platform promotes the "Proof of Brain" concept. #POB rewards people for their work. Both authors and curators work for their rewards.
It is a tough market, but it was possible for artists and bloggers to make a little bit of money for their effort.
I never really thought much about HBD. HBD offers passive income. I am not here for passive income.
The decision to raise the interest on HBD to more than the interest on HIVE flipped the POB structure on HIVE.
Since HBD pays significantly more than HIVE, HBD and passive income is the primary focus of the platform.
The witnesses listened to the rent seekers and the merchants of debt and flipped the platform upside down.
Yes, the 1 percenters of the universe want structure that return huge amounts of passive income because the rent seekers know that they can control the people through the rent.
HIVE claimed to be something different.
Interest on HBD is a pure passive income. Raising the rewards on HBD above the rewards for HIVE reverses the structure. The proof of brain work done by majority of HIVE now subsidizes the passive income of a few millionaires at the center of the platform.
We can see the destructive nature of the HBD interest by the collapsing coins on Hive-Engine.
High HBD Interest and Hive-Engine
HBD is an artifact of the original design of SteemIt.
SBD involved an attempt to create a currency pegged to the US dollar. The peg worked well enough to help pay the fixed costs associated with developing and hosting the platform, but it never worked well enough for people to use the coin outside HIVE.
So, the original SteemIt ecosystem had just two coins: STEEM and SBD.
During the kerfuffle with Justin Sun, HIVE developers launched Steem-Engine and Hive-Engine. Steem-Engine collapsed. I just looked, Steem-Engine has under a hundred dollars a day in transaction. Justin Sun destroyed Steem Engine.
Hive-Engine did a little better. The platform has several hundred alt-coins and usually does several hundred transactions a day. The total number of swaps and transfers that take place on Hive-Engine probably exceeds a million a day.
Most of the tokens are associated with Hive Tribes. Offerings on Hive-Engine support numerous games and financial products.
LEt's face it. Many of the offerings on HIVE engine are weak. There are far too many generic tokens on the the platform. Few of the tribal sites are developing a strong niche market. Many of the coins were falling and a few coins like PAY and BLOG appear to have failed outright.
The act of raising the interest on HBD to 20% had a predictable effect of setting up HBD as the primary focus of the HIVE ecosystem. People rushing to buy HBD dumped their alt-coins and most of the alt-coins on Hive-Engine have declined sharply in the last two weeks.
The decision to raise the HBD interest to 20% has already resulted in substantial harm on HE.
I admit, for the last several months I had been transferring all of the HBD earnings in to HIVe engine. Since the alt-coins are unlikely to recover from the HBD interest rise, I have to write off the money I sent to HE as a loss.
The witnesses claimed that the 20% interest was supposed to lead to a pop in the price of HIVE. HIVE was trading around $1.20 . HIVE is now around $0.90.
The true negative impact of the 20% interest will come in the future when the platform has to start paying interest the HBD loans.
Conclusion
I was extremely sad when the witnesses made the decision to raise the interest on HBD. I felt like I was being stabbed in the heart. It is funny. I was wandering through a local park trying to decide if I should waste anymore effort on HIVE when a Pitbull broke its leash and bit my leg.
I admit I had fallen for the claim that HIVE wanted to create a platform that would help common people enter the crypto world.
The truth is that the witnesses are looking to sell out the platform to a new class of crypto-millionaires seeking rent.
Setting the interest on HBD at rate higher than the interest used for authorship and curation makes HBD the primary focus of the platform.
The coins on Hive-Engine have been in a nose dive since this ill conceived decision. The price of HIVE also appears to be weak. The witnesses are destroying the platform for nothing.
I guess that I should conclude by pointing out that HBD sets up a potential catastrophic failure for the platform.
The formulas at the base of the blockchain were designed to guarantee the price of HBD with HIVE. So lets imagine a drop in the price of HIVE to say $0.50. The people holding HBD are apt to panic. So, lets say HBD holders decide to convert a million HBD to HIVE. This would lead to the creation of 2 million HIVE which the HBD holders would dump on a weak market.
Imagine the price halved a second time and panicking HBD holders converted another million HBD into HIVE at 0.25. This would create 4 million HIVE that they would drop on a weak market.
By raising the interest rate to 20% interest rate, the Hive Witnesses created the potential for a cascading failure.
The move to raise HBD interest to 20% has me quite depressed. The move will transfer a large amount of money from people who are trying to make a little extra cash by authoring and curating posts to a small number of millionaires who are seeking large returns on passive income.
I feel like I've been stabbed in the heart ... and like I've been bit by a vicious. What the witnesses have done feels far worse than what the irresponsible dog owner did.
Of course, my saying anything is just a waste of time. HIVE has never been anything more than an echo chamber where people brown nose the whales hoping to get little upvote rewards.
Unfortunately, it is in echo chambers like HIVE where the merchants of debt are able to do their worst damage because will not question the political forces at the center of the platform.