I finished yesterday's post with my the idea that what Hive builds in Venezuela may end up dwarfing bitcoin's achievement of becoming a legal tender in El Salvador.
And, without intending to make it adversarial to bitcoin on this matter, I'd like to explain further.
So, what do we have to compare?
On one end, we have bitcoin in El Salvador, which is legal tender, meaning it is officially recognized that it can be used to pay any kind of debt or taxes in the country. That's powerful. The question is, is it or will it be used this way on a large scale? Here's where I have my doubts, and it's not about education or adoption in El Salvador for using this means of payment, it is for different reasons.
On the other end, we have the HBD stablecoin in Sucre, Venezuela, and potentially growing further than that.
It is possible at this point HBD usage in Venezuela in the real economy is lower on some or all metrics than bitcoin in El Salvador. I don't have much insight in what happens in El Salvador, other than in the real economy bitcoin use seems to be kind of contained to a certain beach, or something like that. Even though theoretically it can be used everywhere in the country.
So, why do I believe HBD has a higher chance of skyrocketing its use in real economy than bitcoin?
I know we in the crypto verse are dreaming to a day when we can use our crypto holdings in the real economy like we use fiat money today. But, if we disregard stablecoins, I believe that day is far, far, FAR away still.
Here's the most immediate example. We are in a bear market for alts and whatever it is for bitcoin. How much would it hurt if one needs to pay for groceries, utilities, etc. with, let's say, HIVE, these days? Quite a lot, right? Same with bitcoin? Why is that? Because their price is low and the expectancy of price rising in the coming bull market is high.
Conversely, at the top of the bull market, most people feel more comfortable spending volatile assets, knowing they are hyped up and about to go down in price in the bear market. But you cannot only spend during the bull market.
Yes, attempts can be made to create circular economies in small geographical areas, where prices are all in HIVE or all in bitcoin, so the variation of price shouldn't matter.
But I have two counterarguments:
- such a local economy cannot be self-sustainable, so there will be outside influences
- people are people, and they will still want to profit during the bull and not spend during the bear; online (and even offline) investments are worldwide and not confined to geographical areas
Why else is bitcoin a poor choice as a currency?
- fixed amount
- zero elasticity
Why is HBD a better choice then? HBD is by design a stablecoin pegged to the US dollar. That makes it very useful in the real economy, as the majority of prices can be set in HBD without needing a circular economy first to sustain commerce. But a circular economy helps give value to HBD in the respective economy, rather than being a coin to exchange to something else (usually fiat).
Maybe we don't like it, but the entire economy still revolves around fiat currencies, and of them, around USD in particular, despite attempts to reduce its influence. Here's where HBD has an advantage, since it is pegged to USD.
Where HBD is lacking is in numbers, i.e. market cap. But if demand is there the market cap can be expanded, the easiest way through conversions from HIVE. That would burn HIVE and create HBD and theoretically increase the price of HIVE.
Others may object HBD is an algorithmic stablecoin similar (they would say) to UST, which crashed. But the comparison, other than being an algorithmic stablecoin, can't be further from the truth from multiple points of view that have been discussed over time.
One of the best protections HBD has on the short term that UST didn't have is that it isn't hard pegged and it is allowed to fluctuate around the peg.
The 3.5-days median price used for conversions and the 5% fee on HIVE to HBD conversions are deterrents against short term price manipulation.
The HBD stabilizer helps... stabilize the price of HBD around its peg.
And the ultimate protection is the haircut rule, which stops HBD from being printed when it reaches 30% of HIVE's market cap. HBD will NEVER reach or exceed the market cap of HIVE as UST did with LUNA, unless this failsafe is removed in a hardfork and everyone will know about it.
In the end, both bitcoin in El Salvador and HBD in Sucre and Venezuela at large are experiments. And if either of them succeeds is a win for crypto! Of course, I would be much happier to see HBD expand its influence in the real economy since I am so involved on Hive, and bitcoin win means more of a general crypto win for me.