2022 UPDATE: Hive Backed Dollars (HBD) not only now offers 20% interest on stablecoin savings, but completely mitigates external risks.
Are you looking for the best stablecoin savings option available?
While USDT and the major centralised third party DeFi lending platforms may be well marketed, there are still unmentioned risks present.
This blog will discuss the concept of earning money saving/staking stablecoins and make an argument for why the safe and secure Hive Backed Dollars (HBD) 20% interest rate is the smart choice.
Earning on stablecoin savings is different to PoS staking rewards
Lets preface by saying that you don’t actually stake stablecoins in the same way you’d stake other Proof of Stake (PoS) cryptocurrencies.
Staking PoS cryptocurrencies refers to locking up coins in order to help validate transactions on that network.
As your coins are frozen for a period of time, you’re paid a percentage of the network fees for your trouble.
This is where traditional PoS staking rewards come from.
But while the outcome is the same, stablecoin staking is technically different.
Stablecoins such as USDC and Hive Backed Dollars (HBD) don’t run on your traditional PoS network that earns staking rewards.
Instead, staking stablecoins traditionally comes from a 3rd party platform loaning them out, with the borrower putting up collateral.
This is what we see on the likes of Nexo, Celsius and the like.
With the ability to earn around 10% staking USDT on these platforms, the returns are great when compared to a traditional savings account with your local bank.
But there is still the risk of a US regulator coming in and seizing the USD bank accounts holding the collateral that backs collateralised stablecoins like USDT.
A risk that is completely mitigated by an algorithmic stablecoin like Hive Backed Dollars (HBD).
Hive Backed Dollars (HBD) offers a unique savings solution
Hive Backed Dollars (HBD), the Hive blockchain’s algorithmic stablecoin, is completely different again.
When it comes to earning 20% on HBD, you don’t actually need to stake it on a third party platform that will lend out your money again.
Nobody is loaning out your staked HBD stablecoins and there is no associated collateral behind them.
Remember, algorithmic stablecoins like these, act less like a retain bank and more like a central bank.
Capital efficiency and price stability instead have to come from smart contracts or the network code itself.
With each algorithmic stablecoin being unredeemable in the traditional sense, supply/demand levers are pulled with the help of another network token.
In the case of Hive Backed Dollars (HBD), this role is fulfilled by the HIVE token.
While pegged to the price of 1USD, ’real’ US dollars are uniquely not involved in the process at all.
Unlike with Tether, nobody is holding an equal $1 in a bank account for every HBD printed to give the stablecoin backing.
Instead, Hive Backed Dollars (HBD) are backed by the value of the Hive network itself.
This backing is provided by an on-chain conversion operation that allows holders to at any time convert 1 HBD to an equivalent of $1 USD worth of HIVE.
It’s thanks to this conversion mechanism that the price of HBD is pegged to the price of USD, all without ever actually holding any USD in collateral.
A pretty wild concept on the surface, but one that makes total sense once you start to dig a bit deeper in the how HBD works section of our guide to Hive Backed Dollars (HBD).
Saving Hive Backed Dollars (HBD) offers 20% interest on savings
You can earn 20% by simply moving your Hive Backed Dollars (HBD) to savings within your Hive wallet.
That means keeping them all within the network itself, on the account that you and only you control the keys to.
Again, remember that you’re not actually staking your HBD in order to let the platform lend them out.
That’s not how Hive Backed Dollars work.
Hive Backed Dollars completely eliminates the risk of borrowers defaulting on their repayments AND eliminates the risk of regulators getting their hands on the underlying stablecoin collateral that backs stablecoin options such as USDT.
If you accept the responsibility that comes with holding a set of private keys to your own Hive account, the external risks are near zero.
When it comes to the best stablecoin savings option, make the safe, smart choice and earn 20% on Hive Backed Dollars (HBD) in savings.
Best of probabilities to you.
Direct from the desk of Dane Williams.
Why not leave a comment and share your thoughts on HBD being the best stablecoin savings option within the comments section below? All comments that add something to the discussion will be upvoted.
This Hive Backed Dollars (HBD) blog is exclusive to leofinance.io.