Direct from the desk of Dane Williams.
With so many collapsing around it, we look at why Hive Backed Dollars (HBD) is the best algorithmic stablecoin in 2023.
When you talk about the best algorithmic stablecoin in 2023, the sad thing is that we no longer actually have all that many to choose between.
When you take all of the centralisation, algo blow ups and hacks across the algo stablecoin space into account, you aren’t left with a whole lot of competition for what I still see as the clear best.
The best algorithmic stablecoin in 2023 is Hive Backed Dollars (HBD) - The decentralised algorithmic stablecoin that is pegged to $1 USD worth of HIVE.
At this point, it’s not even a contest.
Let’s take an updated 2023 look at why HBD is the best and how you can take advantage of its truly decentralised properties.
2023 stablecoin update
In my 2021 look at the best algorithmics stablecoins, I highlighted HBD as an underrated gem.
HBD was a clear choice as the best option then and it’s still a clear choice as the best option a year later.
But the crazy part is that in that post, I listed HBD alongside two other options.
Who were those other algorithmic stablecoins I spoke about alongside HBD, you ask?
UST and FEI.
Yikes.
The code behind Terra Luna’s UST was fundamentally flawed, seeing its completely unsustainable tokenomics send the stablecoin into a death spiral to zero and investors rushed for the metaphorical door.
FEI on the other hand faced a hack and the completely centralised nature of the stablecoin meant the task of making investors whole again was a complete disaster.
While the coin technically still exists, why you would ever trust an algorithmic stablecoin that is anything but decentralised and permissionless after something like this, I will never know.
Hence we come back to the best and only truly decentralised algorithmic stablecoin on the market.
Hive Backed Dollars (HBD).
What are Hive Backed Dollars (HBD)?
First of all, let’s start with a quick refresher on what the algorithmic stablecoin called HBD actually is and what sets them apart as we search for the best.
Stablecoins like HBD are based on trustless algorithms.
Although pegged to the USD, they are actually priced in HIVE and backed by the entire value of the Hive network.
As such, you’re always able to use an on-chain conversion mechanism that allows holders to convert 1 HBD to an equivalent of $1 USD worth of HIVE tokens.
And of course back the other way from HIVE to HBD.
This is where the magic of HBD occurs because it’s via this on-chain conversion mechanism that HBD really sets itself apart in the algorithmic stablecoin space.
This way, the price of HBD is pegged to the price of the USD without ever actually holding any USD in collateral or transacting in the currency.
As long as the underlying network remains decentralised and untouchable by single state regulators, then HBD remains truly permissionless.
As long as the Hive network exists and HIVE has value, then HBD will continue to operate in this manner and hold its peg.
Since Hive forked from Steem, you can see that HBD’s on chain price has never dropped below its peg:
The most recent Hive hard fork has lifted the debt limit to 30% and elected Hive witnesses are still ensuring HBD stored in savings accounts on chain earn an industry leading 20% APR.
Where to now for HBD?
While HBD’s link to the Hive blockchain makes it the only permissionless algorithmic stablecoin on the market and therefore the clear best choice, it does have a long way still to go.
In the grand scheme of things, HBD is - and in the short term at least will - remain tiny compared to other stablecoins.
In my opinion, the biggest thing holding HBD back from achieving its full potential is liquidity.
Moving into HBD via the blockchain’s conversion mechanism puts you at the mercy of price for 3 days.
A necessary security measure to help protect HBD from falling into the same death spiral that ended UST, but a constraint nonetheless.
If whales instead try to use Hive’s internal market, they’re quickly limited by a severe lack of liquidity that just doesn’t make it viable for big players.
Enter LeoFinance, the ability to wrap native HBD into bHBD on BSC and use the Cub Finance DEX to permissionlessly swap between bHBD and BUSD.
Leo’s Cub Finance platform is currently incentivising the bHBD:BUSD LP with a 27% APY and currently houses $250,000 of liquidity.
Nowhere near enough for big players.
But at the moment, that’s the price you must pay to store your money in a truly decentralised and permissionless algorithmic stablecoin like HBD.
Any other stablecoin in 2023 opens yourself up to a whole other world of risk.
Best of probabilities to you.