So will HBD lose peg?

So will HBD lose peg?

I have not received any HBD for my last 2 posts, and rewards are now actually liquid Hive as well as Hive Power. Hive Power is already understood in the rewards but why Hive now instead of the HBD. For me it bring up some ease that I no longer need to convert my HBD to Hive and I guess I most of times I received less Hive by converting HBD to Hive if compared with the Hive power payment of the posts but my ease is not the topic of this post.

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So before we go the main question that whether HBD can lose it's peg or not act as a stable coin, we have to start to understand that what exactly Hive is.

What is Hive?

As you can see from the above screenshot, Hive is a decentralized blockchain. but how do you achieve decentralization? Decentralization come due to rewards, individuals are motivated to take part in various aspects of this blockchain as they are rewarded with Hive tokens for their services. Witnesses (equivalent to miners in Bitcoin) are rewarded with Hive coins for there services. Authors and curators also get rewards in Hive for social aspects of Hive. In short, for Hive Blockchain, Hive token is the lifeline of the blockchain.

What is HBD?

HBD is the stable coin that is supposed to have a peg value of $1. It maintain peg value of $1 because in the Hive blockchain it is guaranteed that for 1 HBD, the Hive blockchain will give you Hive equivalent to $1 by converting HBD to Hive. Price of Hive for conversion is the average price of Hive over the last 3.5 days. So if average price of Hive in last 3.5 days is 10 cents then Hive blockchain promises to give you $1/10cents =10 Hive if you convert 1 HBD to Hive.

So this promise is now the function of the total Hive supply, HBD supply and Hive price in the market. To maintain this peg theoretically, Total HBD supply * $1 <= Total Hive supply * Hive price. But Hive blockchain in a practical nature, does not wait for the above condition as such and put more stringent checks. It is coded that if 20% of total Hive supply is not able to maintain the peg of $1 of HBD, the blockchain should not print more HBD as author rewards. It will cause Hive supply increase (Due to author,witness and other rewards) but HBD supply to remain constant and help to meet the condition easily in future (Assume hive of price is constant , or may be increasing.)

What is the purpose of dual tokens?

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Maybe if you have a question about Hive blockchain having dual tokens, then above screenshot clearly state that concept of HBD as stablecoin is to augment the commercial activity in Hive and help users to mitigate crypto volatility.

So what about the HBD interest rate?

When these stable coin mechanism were coded, at that time there was no interest in blockchain for staking stable coin HBD in blockchain. I am not sure if Hive goes on free fall, the one need to curb HBD generation from staking also or there may be already some checks in place and I am not aware of. Though my gut feeling is that HBD interests will continue unless witness push other fork to deal with it when Hive comes in risk of maintaining HBD peg.

So will HBD lose peg.

In my understanding , not at current price all of these measure are take so that HBD maintain its peg. To track how Hive and HBD are doing for maintaining its peg, you can visit HBD stats for real time data.

I hope, I had made things clear but do feel free to ask questions so that both of us can explore and deepen our understandings.