How much would Hive be worth with a robust smart contract layer where decentralized finance application could be spun up along with tokens?
This is a tricky question since we have no idea how markets will respond. What we do know, however, is that we saw a similar project in UST and LUNA. The failed stablecoin did have some issues that Hive has addressed. For this reason, we can look to this analysis as a baseline for what is taking place.
In this article we will take a look at what is going on with Terra along with the advantages that hive can leverage.
$2.5 Billion
We all know the story Terra and how UST collapsed, causing the loss of billions. This has given the entire stablecoin market a black eye. It also really turned many people off to the idea of algorithmic driven stablecoins.
The problem with this viewpoint is that it is akin to disregarding search because AskJeeves is not longer around. One failed project does not negate the entire opportunity.
Of course, can we call Terra a failed project? In looking at the residual value that is tied to the ecosystem, we see that the fractured ecosystem is still worth $2.5 billion.
This is not all in the value of the coin. There are different applications with tens of millions in DeFi money still locked. Some of this has grown over the past few months.
Nevertheless, using this as a barometer, we can see how, if equated to Hive, this puts $HIVE at $6.70.
Is it possible for ecosystem to get to this level?
Utility
Hive has something that Terra did not outside of DeFi: utility.
Sure, some can make the case that the LUNA token was the "gas" fee on Terra just like we see on Hive. However, outside DeFi trades, what was resident on that chain. With Hive, we have a more expansive use of the base layer coin.
Staking $HIVE allows for more than just speculation. The access to the blockchain enables the playing of games, via posting Customer JSONs. One can also post long form text that is stored in a decentralized manner. As of Hard Fork 26, the ability to delegate Resource Credits to other accounts is now possible.
Through the expanding of utility, the ability to create demand for the coin keeps increasing. Over time, it is likely that posting directly to the blockchain will get more expensive. This means more Resource Credits will be required.
How much is decentralized data storage which is immutable worth? That is the multi-billion question. At this point, not a lot put much into that. Perhaps, as other chains get revealed for their centralization, and potential KYC, things could change.
At the end of the day, Hive is a permissionless database that stores long form text. The only requirement is to have enough Resource Credits to operate. This only comes from Hive Power.
Hive Backed Dollar (HBD)
To some, the mentioning of the Hive Backed Dollar (HBD) brings up the memory of UST. This is an issue since the only similarity between the two is they qualify as algorithmic stablecoins.
Terra has no precautions in place to prevent an attack. This was an advantage since, when things were running up, it was able to expand without issue. However, there were also attack vectors which caused problems. For example, it could create a near unlimited amount of UST. As long as the price of LUNA kept surging, UST was printed.
Naturally, this created a major vector of attack when the vulnerabilities were exploited. With tens of billions in UST, the value of LUNA did not cover it. Even the Bitcoin reserve was completely useless.
Hive looks to address this in a couple ways.
The first is the fact there is the haircut rule. Under this situation, when the market capitalization, in USD, of HBD reaches 30% of $HIVE, the blockchain stops generating HBD. The conversion mechanism is essentially frozen until the ratio returns to a safer level.
There were times where the market cap of UST exceeded that of LUNA. We can see how poorly designed that was as a reserve.
Another area that we are seeing a major difference is in the area of utility. At the moment the use cases for HBD are minimal. This is not the end of the world since the expansion is very slow. Thus, a lot of HBD is not required at the moment.
That will not be the case in the future. A number of ideas are being worked through to see if we can provide some greater utility, thus establishing resiliency within the Hive ecosystem.
Some are:
- time locked vaults on the blockchain
- the Hive Financial Network
- Ragnarok using HBD as the payment coin, with all being locked into savings and rewards paid from the interest earned
These are just a couple of propositions on the table with different teams. All provide a use case for HBD while also helping to protect the network even more.
Again, this is not something we saw with Terra.
Outside Of DeFi
Terra was solely interested in DeFi applications. There is little doubt this is a quick way to ascend. The money tied to the financial arena can be mind blowing. We witnessed how fast it was to $50 billion in market value.
That said, there is another area that Hive separates itself. We are focusing upon more than just the financial arena. Commerce is also something that is vital to the ongoing success of an ecosystem.
In the digital era, this means social media is a part of the story.
Elon Musk made headlines with his idea of turning Twitter into "the everything app". What is interesting is that, when we look at Hive in totality, any front end can be the everything application. Blockchain, by default, is a payment system. It is built in with cryptocurrency. So while Musk is going to, presumably, build a payment system into Twitter, we already have a powerful one in operation.
The other advantage is that it is fast (a smidge over 3 second settlement time) and feeless (only require RCs to engage with the chain). Musk is looking to rake in billions each year in transaction fees.
This makes Hive an idea base layer to build commercial applications. There is a built in stablecoin with an internal exchange. The wallet system is standard as well as being easy to use (individual names instead of just numbers). A smart contract platform opens the door for second layer offerings such as NFTs. This could be tied to a host of options, appealing to the user base.
As we move into a world where communities are the main source of economic activity, Hive will be well positioned. Layer 2 smart contracts will make Hive a multi-billion dollar chain.
If we achieve the level of the tattered Terra ecosystem, we are looking at a price of $6.70 for each HIVE.
Of course, even at this level, Hive is still worth a fraction of what Terra was at its peak.
This is something to keep in mind as development expands within the ecosystem.
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