20% Interest on HBDs... A Good Idea...?
A few of the Top Witnesses have recently started signalling for a 20% return on HBDs in savings, a significant increase from the 12% we currently have.... but is a 20% yield sustainable....?
NB that 20% is new money printed, new HBD (effectively Hive) inflation added to the supply every print-block.
ATM the current supplies of Hive and HBD are:
- 377M HIVE
- 24M HBD….
- = 403 M Hive….
And with the price of Hive bouncing around the $1 mark that means the total HBD supply is 6% of the value of total Hive supply, so we are a long way off the 10% Hair Cut rule kicking in.
NB of that 24M HBD only around 3M is in savings and a further 6M liquid with 15 Million in DAO (which can't go into savings).
What are the likely effects....?
Firstly we have an increase in the total Hive-HBD inflation as this is new inflation - but only by a tiny amount - with 3M in savings being paid out at 20% rather than the current 12% , that's < than a 0.1 % increase to the overall Hive inflation, so even if the amount of HBDs in savings increases 5-10 times, it's still relatively small.
This move SHOULD increase the demand for HBD as 20% is an attractive return on a stable-ish coin, so more holding and buying of HBD to take advantage of the decent yield.
One would also expect some downward pressure on the price of Hive as there would be reduced buying pressure on the internal market - why buy and power up Hive when you can get double the yield on HBDs?
You might also expect some people to PD Hive to buy HBDs, creating further sell pressure and downward price action.
HOWEVER, I think the downward pressure is limited - the only way for people to buy significant amounts of HBD without too much slippage (given the relatively low liquidity) is through converting Hive and effectively burning it - relying on the 3 day average price to get yer HBD.
And by 'significant' we are talking anything over $1000 - liquidity is pretty thin!
There should be limited negative price pressure on Hive - once the TMC of HBDs hits 10% of the TMC of Hive, then the HairCut rule kicks in stopping the printing of new HBDs as part of Hive Rewards thus restricting the supply to control the debt level of HBD to Hive.
This SHOULD lead to a healthy demand for HBDs, pushing the price above $1 (just) at which point the HBD Stabiliser Fund starts selling HBDs for Hive, pushing the price up.
Hypothetically speaking ATM IF the total amount of HBD remains the same and Hive goes below $0.50 that's the point at which the Hair Cut rule kicks in, roughly.
Similarly if there's a sudden increase in demand for HBDs and we double the amount of HBDs in existence and Hive stays at around $1, the haircut rule would kick in then too...
Where does this leave the long term price of Hive...?
Obviously increasing the amount of HBD debt relative to Hive isn't a good thing - but the ratio we are currently talking about is relatively conservative, and I think there are mechanisms in place to handle a 20% APR on HBD savings.
Hell, it might even create more eyes for Hive, more burning of Hive and lead to an INCREASE in the price of Hive too if Hive gets burned along the way for HBDs....?
Long Term it just means money waiting to be dumped back into Hive, which could increase volatility down the line, so there are risks.
However, RIGHT NOW I am feeling pretty risk tolerant and I think I am up for a 20% return!
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I'm not sure it's a good idea to disincentivise powering up as that makes for a better rewards distribution. Currently you can earn about the same from curation as from HBD savings. I know some people want the quicker access to funds though. I really don't know how good this would be for Hive in general. It is competing with other crypto that offers a better return.
It could be good for the Hive price as people burn it to create HBDs... then a better yield for those who leave HIVE powered up.... maybe?!?
Lots of maybes around this as usual.
As long as it's sustainable. Let's not got greedy and ruin a good thing! I'm loving the 12% interest, obvs 20% is better as long as it doesn't screw everything up 🤣
Given the relatively small amount in HBD savings, I don't think 20% is a big deal, and an easy way to get more eyes on Hive for sure!
20% will definitely get more eyes on Hive!
It looks like there is a growing consensus to raise interest rates to 15%-20%. That's pretty obvious but what impact it will have is unknown. Maybe introducing the higher rates could be phased in over a couple of months?
The advantage we have is that this rate hike doesn't require a fork and could be reversed fast if it all goes tits up?
The arguments for and against are equally valid risk wise but also both are conjecture. We just don't know.
HBD is looking stable and the mechanism seems to be working well.
I say suck it and see.
We've got a lot of competition from other cryptos offering crazy yields.
Pumping the interest rate on HBD might get us some attention and even raise the price of Hive?
Just have the brakes ready to apply.
Probably this is amongst the goals of this initiation. If other people, who currently do not know about the Hive blockchain, will notice the Hive blockchain, and start using it, then that is a win-win situation for every Hive user, both old and new too.
Exactly. We do have a lot of competition from other crypto projects which offer higher yield albeit a lot riskier.
I think that's all fair enough - probably 15% would be a sensible half way step!
Makes sense to feed in the rate hikes gradually that way we can adjust if needed. 15% seems reasonable place to start.
I rather get less returns on hive then hbd with it being stable ish i rather keep it in hive since it has more potential to gain price .
In theory I probably should be putting my HBD into savings, but in practice I keep using it to buy Splinterlands cards. 😂
Ah I'm buying a lot of those myself! Now's a good time I think, during the lull!
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It's a really good initiative. As a result, the price of HBD will increase. People will buy HBD and try to save.
Nowadays the price of HBD is relatively stable around $1 USD, and this is good, because it is a stablecoin, and it is pegged to the USD. Stability and the level of the actual/practical usage should be increased, instead of its price.
20% is a decent amount for one of the safest chain out there, I think this is the most underrated aspects of hive.
Nice improvement, the witness turns a great ordeal number then.
What percentage of the total reward pool is accounted for the HBD interest rate(12%)?
It's new inflation, separate from the rewards pool.
I guess having this relative values would be a nice comparision putting things in perspective.
The author reward pool is about $10 million per year and interest is currently about $300-400K per year.
If the old proportions hold good till now(I am not aware what changes have been made in the lat two years), then the 32.5% o the total reward pool is for the content creator and 32.5% for curators, 10% fo Hive DAO, 10% fo witnesses and the remaining 15% for vested token holders(for HP holders). Please correct me if any of these figures have been altered/adjusted of late with the subsequent hard forks. So I just want to have a tentative idea of what percentage of the total reward pool is being distributed as HBD interests?
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Of course that’s a good idea, the best idea in years! No better incentive than this!
Here's the other thing to take note of half of your earning on hive are locked for 13 weeks right away upon payout. So a $100 post gets you $50 worth but cut that in half and you only have $25 of a liquid asset to actully do something with. That's not a lot and the funds would have to start coming from outside sources. Perhaps 20% would be attractive enough to get people to pile in but the other issue is trying to get your hands on HBD is no easy task either. Swaps, pools and liquidity are needed so it's going to take time.
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There's always the dreaded conversion mechanism....!
20% will be amazing, I just want them to have a proper plan to make this work, I want to enjoy great returns on my hbd.
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Even 15% would be good!
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No it is around 0.23 .... again becouse hbd in the dhf doesnt count as debt
Live data here
https://hive.ausbit.dev/hbd
Oh year cheers I didn't change that!
Doesn't sound so good.. $0.23 and even that's not a hard floor!
My first reaction is that it feels like a 'desperation' move just copying the 20% of anchor and recently Near protocol who introduced their stable coin. I'm don't think 20% is healthy and sustainable and don't like the idea of returns just coming from coins printed out of thin air as inflation. While it's might work in the short term, long term it is bound to create problems.
I think 15% is a more sensible move - it can always be changed back!
After reading this I think it will be a good decision in the short/medium term, especially if it can achieve its goal of attracting new investors and getting people to lock more HBD in savings.
15% now already, getting there!
I thought they would put a minimum staking period like 6 months or something in order to obtain 20%. Would love to see hive a lot higher so I could convert and earn more HBD but that will happen surely at some point. This is just balancing out your Hive portfolio and is the sensible option having both Hive Power and HBD.
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I can see little point in powering up my HBD earnings now, I'm feeling 50-50 is about right!
The HBD in the DAO doesn't count toward the haircut rule, so in reality there are only about 9M HBD circulating or in savings (those do count).
OK thanks, so we've got a while to go before it kicks in.
Exciting to see it at 15% already.
20% apr will be a good thing , more people will be interested in buying HBD and more people will hold it , so it is a win win at shor term
I am loving to read all this points of view. I feel like it can be positive but it will depend on how the investors and the traders on the crypto markets will react to it I guess!
It's all about those outsiders!
I'd say it's worth a try. I understand the points everyone against it are making, but what they all seem to be missing is that it can always be lowered if things don't go well. Doing so may anger outside investors, but the Hive faithful would just shrug and move on, just like we always do when something doesn't work out. In otherwords, setting it at 20% would be a good experiment. If it works, great! If not, reverse it and return to 12%, no harm no foul, and hopefully learn something from the attempt.
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Let’s see how it goes that’s for sure. I’m interested in getting more interest for my HBD but maybe not to the detriment of the environment as a whole. I hope we can look at the action going for 3-6 months and determine what to do long term. With it sitting at 12% I saw some decent savings going but what’s going to happen at 20%?
I don’t know the benefits versus hive power if all this. For me, I’m more interested in hive power because it’s compounded with resource credits and all that.
Looks like 20% has passed.
I have to admit, 20% is looking attractive.
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