Senselessly Inflating HBD Could Backfire

reonarudo in #hive-167922 • 3 years ago

This is the price chart of LUNA, the cryptocurrency backing up the TUSD stablecoin.

HBD stands for Hive Backed Dollar. If the market cap of HBD should far exceed that of HIVE one day, the peg couldn't possibly hold if there is a disturbance on the market like the alleged attack by Citadel.

Another thing, some people have been saying that HBD is too unstable and that it should track the USD much more closely to be a proper stablecoin.

I disagree. It is desirable that the HBD fluctuates more easily than most of the so-called stablecoins on the market. It helps keep it real for the market participants.

DAI is holding up remarkably well. This is because of its overcollateralization. If the market cap of HBD is allowed to grow indiscriminately, the risk of catastrophic failure goes up exponentially.

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#leofinance #hbd #stablecoins #luna #terra #neoxian #proofofbrain #archon #mancave

3 years ago in #hive-167922 by reonarudo

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jfang003 3 years ago

I don't think it will be that big of a problem because there is still a haircut (maximum amount of HBD) and it takes 3.5 days to convert. If we want it to be more secure, then I suggest adding in a 5% tax for converting HBD into Hive and letting everyone use the internal market instead.

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reonarudo 3 years ago

The amount of HBD would be rapidly expanded through much higher interest rate on HBD savings. That is the risk. HBD is still far from being undercollateralized. I'm just saying that HIVE is so volatile that to keep HBD sufficiently collateralized, its supply cannot be expanded too much. 10 cent HIVE is still entirely possible. STEEM went from $8 to 9 cents in a little over a year. HIVE and HBD work pretty much the same way as STEEM and SBD.

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jfang003 3 years ago

HBD does increase the number of Hive out there but I think it's fine to increase the supply so long as it doesn't go out of hand. I am sure the witnesses will reduce the APR when things start to change. However, I don't think SBD was really being used as payment option because HBD is being put on the forefront. With ragnarok and whatever that gambling site is, I think we will see more use case of HBD.

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hivebuzz 2 years ago

Dear @reonarudo, we need your help!

The Hivebuzz proposal already got important support from the community. However, it lost its funding a few days ago and only needs a few more HP to get funded again.

May we ask you to support it so our team can continue its work this year?
You can do it on Peakd, ecency, Hive.blog or using HiveSigner.
https://peakd.com/me/proposals/199

Your support would be really helpful and you could make a difference.
Thank you!

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