Wen Collateralizing HP For a HBD-Based Loan?
Bitcoin as Collateral
One of the strengths of the derived Bitcoin assets (in wrapped versions, or native via Thorchain) in recent years is its ability to act as collateral to receive loans in a stablecoin, in most cases.
Since the cycle of Bitcoin is quite well established, ways to "have your cake and eat it too" can be planned pretty thoroughly, and Khal explained the process in a few posts. Without going into details, the process is pretty straight forward: you take a stablecoin loan against (some of) your Bitcoin holdings in the bear market, and pay it back in the bull market, after Bitcoin went up against the USD. Theoretically, if you calculate well, the timing is good, and the market reacts as it always has, you keep your cake (i.e. most of your bitcoins), and eat it too (the stablecoin loan, which you pay back from your bitcoin gains in USD after the bull market, remaining to replenish and increase the bitcoin stash during the bear market).
There are some conditions to this method:
- you need bitcoins and usually more than a fraction, or it doesn't help much
- you need to understand the process well, otherwise you might get screwed
- there are some risks: market price volatility risks, protocol risks, or platform risks
HIVE Power as Collateral
Having the ability to use HP as collateral to take a HBD-based loan could make sense. Note that I say HBD-based, not HBD. I believe this would probably be at the second layer, most likely.
How would it help? Well, it would make it more enticing for some people to hold HP instead of HBD reserves. That would probably prevent at least a good part of the "power down - sell and keep as stables for yield - buy & power up" dance (or a more complicated one) that people is tempted to do throughout the cycle.
Witnesses can use such a process to pay for infrastructure, instead of having a continuous power down running, for example. And choose when to sell HIVE, probably at a nice price toward the end of bull markets. Other services and businesses on Hive can use it too.
On the other hand, we need liquid HIVE, and enticing HP growth even more may not be such a good idea. It's certainly debatable.
I don't think we can have such a system built (if there is interest) before we have smart contracts. So, it looks like VSC needs to be adopted first throughout the ecosystem.
There are differences between having Bitcoin and HP as collateral. Bitcoin doesn't have many use cases, and this is one of its main ones. It also is a better (probably not ideal, due to its volatility) collateral than HP. But HP also has enough other roles.
I love how lending is implemented on Thorchain, with "0% interest, no liquidations or expiration". There are some worries about sustainability during the bear market, since it's a new feature, that's why I would wait to see it test through fire first.
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We have plenty of liquid HIVE, but they aren't "visible"... When you check out https://hivebuzz.me/ranking, and sort by HIVE, you will see some surprising numbers... Yes, they are mostly on exchange(s), but still, we have a lot of liquid HIVE out there...
Also, the best proof that we have it a lot are these pumps and dumps that happen occasionally... People have prepared their liquid HIVE for dump... just waiting for the right price... :)
In general, regarding the idea, it would be nice to see another use case for HP, as many people have no idea about the current use cases... and having another "monetary incentive" could push them to accumulate HP...
Hmm, from my observations, most of the liquid HIVE we see on exchanges is permanently liquid on exchanges. Weather it is there to provide needed liquidity, play market makers, or engage into p&d, that's hard to know, other than to observe what usually happens and where.
Btw, can you believe that Bittrex, an exchange that has closed down, still has over 500k liquid HIVE in their main account?
And yet, when liquid HIVE is needed for various use cases (LPs, for example) where it is needed, it's not so easy to find. Or those who have it are unwilling to use it outside the Hive ecosystem or even on Hive-Engine.
But yes, I'd like to see such a use case for HP. Otherwise I wouldn't have written this post.
Crazy stuff... Probably people forgot that they have crypto there... WHo knows how many other tokens they have...
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This is a good idea. In reality, there are many mechanisms the witnesses aren't even trying out just yet. So many creative ways to help hive hold value. With something like this, people might be inclined to just sell mostly during the bull market
I know only one person who has a business on Hive and has correctly taken advantage of the crypto cycle so far, and made it public (there may be others I don't know or kept it to themselves). That is Khal. People may like him or not, but he had a looong runway for business operations during the bear market, when everyone was cutting costs and laying off people. That takes some foresight and planning, as supposed to taking things day by day.
Ok, I am wrong. SPInvest played the cycle well and SSUK talked about it. But I was thinking about bigger operations, that involve serious costs with servers and employees/contractors.
This is a must have feature to get the best out of the bull market. It will even bring more value to HIVE and the best part is HP can generate a yield on its own. We may have the ability to have a 0% interest loan while keeping this sustainable.
Yes, I'd like to see it, but unfortunately, I think if it'll be built and we are lucky, it would be ready for the next bull market, not this one.
That is true. There aren't enough developers on HIVE. I think that could be an even bigger problem than not having enough users. There needs to be good DAPPs and features around to keep the users.
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This is an interesting concept. It is a bit different from what we've experienced with how Holozing handled their HP delegation, but finding more ways to use HP is really nice.
Yeah, that involved taking curation rewards in time and powering down and selling HIVE to pay for expenses. Using HP as collateral means first, that you own HP (which means that you might buy and power up HIVE to have it), and then take a stablecoin loan upfront collateralized with that HP, and paying it back in time from revenues.
Wow my number 1 Top G. Loving the blog a lot... Using Bitcoin as collateral for loans seems like a smart move, especially with its established cycle. But the idea of using HP for loans on Hive could be game-changing too, it would be incentivizing HP holding and reshaping the ecosystem.👌👌👌👌
It's not the first time collateralizing HP has been proposed. But if that will happen, it will be after other developments mature and are embraced in the Hive ecosystem. So, it'll take a while before the discussion can be applied in practice.
Wow I really do hope it happens.. it would be beneficial to the platform
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Thank you for your post @gadrian. This is very interesting. Is HP worth more than HBD? I am confused. Can you please clarify. I thought I knew about HBD and HP but I guess I don't know it all lol. 😂 Have a nice rest of the week! Barb !BBH !CTP #ctp
They are... different. HP is staked HIVE, which is volatile. HBD is stable, or tends to be. But if one could collateralize HP and get a second-layer token pegged to HBD in return as a loan (I'm not sure if HBD directly would be possible or desirable), one doesn't have to power down and sell HIVE at bad timings price-wise to cover expenses, because they can be paid with the stable coin taken as a loan.
OK thank you @gadrian 😊 !BBH !CTP
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$PIZZA slices delivered:
@theringmaster(2/5) tipped @gadrian