HIVE/HBD is not LUNA/UST - Splinterlands Giveaway #47

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Hello fellow Hivians!

Today I wanted to chat about HBD our very own 'stablecoin'. With the entire LUNA/UST debacle currently ongoing I wanted to have a dialog about why that would or would not also happen to HBD. To do we will go over how exactly these tokens are 'stable' and what makes them different from each other.

So first off, both tokens were backed by their respective crypto Hive/LUNA and primarily support the development and use of their networks, namely creation of additional dapps and services. Both tokens use a form of delegated proof of stake in that we stake our tokens and then "delegate' via votes for witnesses/validators etc based on our stake. In this both LUNA and HIVE are quite similar. The stablecoins related to each ie HBD and UST are effectively a debt (approximate $ value) that the blockchain owes its users. As in any case the ability to pay that debt and how that debt is paid is of importance.

Although HBD and UST both have a similar methods in maintaining their economic system they do differ in key areas. Most critically UST/LUNA has an ALWAYS guaranteed rate of conversion for $1 worth (albeit with a tax) whereas HBD does so with certain caveats which protect from collapse.

For one, the conversion price is an average price of HIVE over a 3 day period. This helps the network delay any immediate runs by extending out the runway by 3 days. In addition to this instant vs 3 day conversion the other key is that the price only guarantees a $1 conversion as long as the total debt amount of HBD stays below a certain % of the total Hive marketcap. This design was put in place to help combat a bank run. Basically, if the marketcap of Hive drops significantly, the % of HBD over the HIVE total marketcap increases which would then lower the conversion rate of HBD to HIVE. The debt % limit is set by the witnesses and it is the key to the kingdom so to say.

A further failsafe is in place once the HBD debt limit is passed. At this point no more HBD is printed via posts. This means that all posts such as this one for example, would be paid out only in HP which further stops the HBD supply from over-expanding.

I suspect that we will start to see massive stress on just about all algorithmic based stablecoins but I'm still confident that HBD in itself will remain strong.

All right so enough about that, on to the giveaway.

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Giveaway Prize

Winner's Choice from the below cards.

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BONUS
If we can meet a designated number of upvotes I'll instead replace the winner's choice with one of the Chaos Legion Rare reward cards.

We will be shooting for 75 votes this week.

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How to participate

  1. Leave a comment including the Splinterlands name the reward should be sent to and your response to the below prompt.
  2. Upvotes are not required but are appreciated
  3. Reblogs not required but are appreciated
  4. Not required but I'd love to hear your thoughts on the post topic.

I will be using Hive Picker to select a winner which will be announced in my next giveaway post.

Previous Post's Winner

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Please let me know via a tag in the comments if you would no longer like to be notified of future giveaways.

Congrats to the winner!

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(Edited)

I think HBD is a pretty solid investment, not like Luna/UST at all. The added safety mechanisms in HBD like the 10% haircut make it significantly safer.
I would like the Pelacor Bandit.
IGN: gregory-f

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Yes, the haircut, as you call it, is exactly the failsafe that will keep HBD strong. I think that any algo stablecoin without a similar function is ultimately susceptible to a bank run similar to UST. These exchange protections must be in place. That said, I would like to see some form of regulation over stables further requiring partial pegged currency backing even for algo tokens.

End of the day, over regulation is bad but some regulation is helpful.

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Count me in @bokica80
!PGM

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Sent 0.1 PGM - 0.1 LVL- 1 STARBITS - 0.01 MOTA - 0.05 DEC - 15 SBT tokens to @bokica80, @kotenoke

remaining commands 9

BUY AND STAKE THE PGM TO SEND A LOT OF TOKENS!

The tokens that the command sends are: 0.1 PGM-0.1 LVL-2.5 BUDS-0.01 MOTA-0.05 DEC-15 SBT-1 STARBITS-0.00000001 BTC (SWWAP.BTC)

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Support the curation account @ pgm-curator with a delegation 10 HP - 50 HP - 100 HP - 500 HP - 1000 HP

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I'm a bot, if you want a hand ask @ zottone444

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HBD was not a popular coin before raising the interest to 20%. Quite frankly, I think the only thing that saved HIVE from a major reckoning with HBD was that the ratio of HBD/HIVE market value was extremely low when the last market correction occurred. It was hovering one percent.

Ausbit's HBD Page shows that it jumped to 4%. The high interest rate means that HBD market value is climbing faster than HIVE. So, we could be in trouble if there is another major market dip this year.

The nasty aspect of algorithmic stable coins is that they amplify movements in the price of the coin that guarantees the stable coin. It makes the peaks in the value of HIVE higher, but makes the dips in the price of the base coin much deeper.

HBD was not popular before the interest rate spike. The percent of accounts that had HBD in savings was very small. I don't think the coin is worth the increased risks and increased price volatility.

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The HBD savings % honestly doesn't sound sustainable but the way HBD creation and peg works simply means that with higher APR, HBD will hit its debt ceiling faster and simply stop printing which would then encourage a sell off of HBD at prices lower than peg which in turn ends up burning HBD.

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As I understand the peg works as follows: The "Convert HBD to HIVE" button will destroy the HBD and produce $1.00 worth of HIVE. The system charges a 5% fee. The conversion takes 3.5 days. People should only use the "Convert" button when the price of HBD is below $0.95. (A large number of people don't know this. They press the convert button because they find the internal market confusing.

HIVE is currently trading at about $0.50. So converting 1,000 HBD would create 2,000 HIVE. Were HIVE to fall to $0.25, the conversion would create 4,000 HIVE.

The movement of HBD tends to follow HIVE. So when HIVE is weak, HBD is weak. The peg will generate large quantities of HIVE when HIVE is weak. It makes the price of HIVE drop even further.

HIVE cuts off the HBD conversion of the market value raises above the 10% price for three days. We could start seeing panic conversions and selling of HBD if there was a drop in the price of HIVE.

The mathematics of this system is really scary. It puts a huge downward pressure on HIVE.

I understand that the witnesses want to raise the haircut rate for HBD from 10% to 30% of HIVE.

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(Edited)

Its sort of like that but there is a big piece missing. Basically the key difference lies in the total Marketcap or in the case of HBD also the total count of HBD becoming > 10% of the total marketcap of HIVE. So if the price of HIVE tanks and HBD no longer can be exchanged at the 1:1 rate. IE 1000 HBD will not buy 2000 HIVE if HIVE is worth 0.50 it would be an exponentially reduced amount.

HBD exchange rate is equal to the lesser of 1 and 10 (ie the historic debt % limit) / the current debt limit.

For example lets say that HBD debt amount is 15% of the HIVE market cap.

We would have the following: 10/15 = .667. In this case, when you convert HBD to HIVE to you would buy at .667 the current HIVE price. Assuming you had 1000 HBD and HIVE is worth 0.50 you would convert your 1000 HBD to 1334 HIVE and not 2000.

HBD isn't a true stablecoin in this sense at is is algorithmically designed to depeg in the case of a bank run. That said, in a stable market the algorithm would keep it close to $1 so essentially, if the market collapses HBD wouldn't bring HIVE down with it to the extent that UST and LUNA crashed. We have seen HBD depeg multiple times and each time this exchange process allows it to recover.

All that said, it would be interesting to know what exactly WOULD happen in a scenario where people are willing to convert HBD to HIVE at such low exchange rates.

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Assuming that most HBD investors know about the haircut, I suspect that we will see investors start pulling funds from savings and trying to divest from HBD when the market cap starts approaches 10%.

This run should recess the price of HBD, which would lead to a large number of conversions from HBD to HIVE for immediate sale.

The downward pressure will occur at a time when the price of HIVE is weak. I do not think it will destroy blockchain. I simply think that HBD will push down the price of HIVE ... which isn't that good for the people who've been investing in HIVE.

The point I want to make is that the high interest rate for HBD has a cost for the platform at large. It is benefiting just a few people. At the end of last month just 12 accounts held over 50% of the HBD savings. It really isn't a good deal for the people who use the platform.

!BEER

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Put me in!

Pelacor Bandit for me.

!PIZZA

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(Edited)

PIZZA! PIZZA! PIZZA! PIZZA!

PIZZA Holders sent $PIZZA tips in this post's comments:
valdiva tipped kotenoke (x1)
@kqaosphreak(2/10) tipped @kotenoke (x1)
kojiri tipped kotenoke (x1)
silentwill tipped kotenoke (x1)

You can now send $PIZZA tips in Discord via tip.cc!

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Count me in! I would love to have Pelacor Mercenary or Venari Bonesmith.

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The failsafes should protect HBD but if we reach the use level that Luna did it could change things
I will take a win. IGN is @indiebandguru

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idk, with the way the exchange goes from 1:1 down I don't think that the supply of HIVE could inflate fast enough to cause that kind of a run.

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(Edited)

I am in!
@irisworld Pelacor Bandit
I add to the savings my HBD. It has 20% APY. And unlike Hive it is pretty stable

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Count me in for Pelacor Bandit @urkanon !PGM

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Sent 0.1 PGM - 0.1 LVL- 1 STARBITS - 0.01 MOTA - 0.05 DEC - 15 SBT tokens to @urkanon, @kotenoke

remaining commands 6

BUY AND STAKE THE PGM TO SEND A LOT OF TOKENS!

The tokens that the command sends are: 0.1 PGM-0.1 LVL-2.5 BUDS-0.01 MOTA-0.05 DEC-15 SBT-1 STARBITS-0.00000001 BTC (SWWAP.BTC)

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Support the curation account @ pgm-curator with a delegation 10 HP - 50 HP - 100 HP - 500 HP - 1000 HP

Get potential votes from @ pgm-curator by paying in PGM, here is a guide

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Archon-curator is not an account currently managed by cartel. I appreciate the way you displayed it. Join cartel discord to update your knowledge: https://discord.gg/mgETUCFH

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Pelacor bandit
Thks

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IT is interesting to see the differences between the two, thank you for sharing, I look forward to HIVE being around a lot longer then some of the items out there. :)
Have a slice of !PIZZA for your hard work.
IGN: Kqaos
Pelacor Deceiver or if the upvotes happen the Seedsmith, thank you for the opportunity!

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@jdike is in for a Pelacor Conjurer or Venari Crystalsmith

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