Introduction
As you may or may not know, the Hive blockchain has two native assets - HIVE and HBD. HIVE is used to power up your account for governance and curating, and can be converted to/from HBD. HBD, or Hive Backed Dollar, is an algorithmic stable asset backed by HIVE used for payments and a store of value. It can also be staked into savings to earn interest on the Hive blockchain. These two assets play vital roles in the Hive ecosystem in their own ways and have been used in the same ways for many years. With the launch of the VSC Network mainnet and our decentralized finance application, Altera in Beta, we feel it’s time to unveil something we’re very excited about. Liquid Staking is coming to HBD thanks to VSC smart contracts. Let’s take a moment to dive into what this means for you as a user and the greater Hive ecosystem.
What is Liquid Staking?
To really get into the weeds of what this means, we first have to understand what liquid staking is. In simple terms, it allows a user to stake an asset and, in exchange, receive a liquid asset tied to the locked asset that can be redeemed at any time for the underlying asset. It’s like having a magic piggy bank that lets you insert your coins for saving, and in return gives you derivative coins to use while your original coins are locked. Then, when you are ready and want to take those coins back out of the piggy bank, you just redeem the derivative coins.
Liquid staking makes assets more composable and unlocks value for the end user while still allowing them to take advantage of whatever staking reward there may be. It increases capital efficiency as well, because users do not need to choose between earning staking rewards or participating in DeFi opportunities that may be available. The network also benefits because capital can flow through its ecosystem freely, encouraging more use of DeFi. This creates a better experience overall for both the users and the applications on the network. For example, ETH staked on Lido gives the staking user stETH that can be used in many different DeFi applications. Aave allows users to deposit stETH as collateral for loans, and there are even yield farming options. We envision a future where all sorts of smart contracts that take advantage of liquid staking exist on VSC as well.
Understanding HBD on VSC
This new feature introduces not only a new form of HBD but also a new way of thinking about the asset as a whole. It's no longer just a stablecoin on Hive, but the backbone of DeFi on VSC that will connect to outside ecosystems. It's important to understand the different states that HBD can exist in on VSC, so we have created a simple "guide" for that. This will make it easy to determine how much HBD you might need to interact with different applications or games on the network. On VSC, HBD can exist in 3 states: Liquid, HBD Savings, and RC Locked HBD. Here are the differences between them.
- Liquid HBD: This is the actual HBD token that you can have in your wallet and send/receive freely, just like it exists on the Hive blockchain.
- RC Locked HBD: If you need to do any kind of transaction on VSC, some liquid HBD will be locked for Resource Credits, depending on how many RCs you need to perform the transaction. RC Locked HBD will unlock 5 days after the date of the transaction automatically in your wallet.
- Staked HBD: HBD staked on VSC in HBD Savings. It earns the same APR from Hive Savings, which is currently 15% APR, and is auto-claimed once per month. Soon, staked HBD will become liquid with the addition of the "sHBD" smart contract functionality. sHBD is the liquid version of Staked HBD on VSC that can be transferred, unlocking new use cases and liquidity.
Why Liquid Staking?
Unlocking capital for users through the power of smart contracts will increase overall liquidity in the network. We want users to be able to take advantage of DeFi opportunities without compromise. If you want to put your HBD in Savings, you can do that and still react quickly to market movements with trades using the liquid asset. No more panicking and trying to unstake quickly just to make a trade, then move right back into Savings. Simply trade with your sHBD while your HBD is safe and sound, earning interest.
We will be adding features to Altera that allow more uses of sHBD in the future, as more smart contracts are deployed as well. Other projects or applications will also be able to incorporate it into their systems with ease. For example, if someone wanted to create a yield farming platform that allowed users to stake their sHBD to earn another token, this would be possible. Maybe someone wants to allow users to pay in their game with sHBD as well as HBD, making it easier for users to interact without having to unstake. How about a lending platform that would allow users to deposit their liquid staked assets and get a collateralized loan? These are just some of the things we've seen other networks enable, and we want to bring them back to Hive with our own flavor - gas-free. Smart contracts unlock these possibilities, and we can't wait to see what gets created!
Conclusion
As we are currently in the final stages of completing the work to enable HBD staking on VSC, we wanted to make sure that we provided the community with more information on how this will work. We've already started getting questions related to HBD staking, so this should make it easy to understand. Once deployed, we will open this up for beta testing as well on Altera. HBD Savings on VSC opens doors for many DeFi possibilities with the addition of the sHBD token, and we cannot wait to bring this online. Being able to stake your HBD to earn interest and have access to that capital in the event you need to make a quick move in the market is extremely valuable.
These are just some of the benefits, and more will come in the future with the growth of the network as more smart contracts are deployed. We hope this article has given you a clear idea of what will soon arrive on VSC for our favorite stablecoin. Hopefully, we have addressed all the questions you might have, but feel free to ask anything in the comments below, or just giving us your thoughts on HBD Liquid Staking.
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