#hbd

Request for comments: HBD stabilization DHF proposal

@smooth@smooth (74)2030d

I intend to make a proposal with the DHF to assist with stabilization of HBD to the peg. Over the past several months, we have seen the HBD peg restored and the price relatively stable at about $1.

However, I believe we can do even better going forward.

The most recent hard fork added the ability to send HIVE to the DHF fund (previously it was only possible to donate HBD). Using this new functionality, we can create an automated process that works to stabilize the price of HBD. The process works as follows:

On each (hourly) HBD payment from the DHF, examine the price of HBD
If the price is between LOW and HIGH (0.99 and 1.01 may be reasonable values for LOW and HIGH, or perhaps somewhat wider initially and narrowing over time), send the HBD immediately back to the DHF
If the price is above HIGH, use the HBD to buy HIVE, and send the HIVE back to the DHF
If the price is below LOW, use the HBD to convert into HIVE (takes 3.5 days). Upon completion of the conversion, use the HIVE to buy HBD and send that back to the DHF

Notice that in all cases, the HBD or HIVE is sent back to the DHF, either immediately or after a 3.5 day conversion cycle. There will not be any HBD or HIVE accumulating with the payee as a result of the proposal. Trust is minimized because in the event that the payouts are not being returned as intended, stakeholders can vote out the proposal and stop funding. (Reasonable allowance should be made for short interruptions due to technical difficulties.)

As a consequence of this process, any excess demand for HBD (per step 3) is translated into demand for HIVE. All else being equal that would likely increase the price of HIVE. I am optimistic that we can make HBD attractive enough that this may ultimately result in a large amount of demand for HBD (which is then transferred into demand for HIVE), but of course no one can predict or promise actual prices or future price movements. However, for this to happen we first need to stabilize the price and firmly establish the linkage between excess HBD demand and the HIVE price.

In addition, any profits which result from deviations in the price of HBD away from the peg would accrue to the DHF in the form of larger expected amounts of HIVE or HBD being returned (via either step 3 or step 4).

The amount of the proposal funding is TBD. It would likely start smaller and potentially ramp up over time. My initial thought would be to start with 2400 HBD per day, or 100 HBD per hour. Again, this does not represent an actual expenditure because all of the payouts will be either returned to DHF or used to stabilize the peg and then returned to DHF along with what would normally expected to be a profit.

I welcome any comments, feedback or suggestions.

Beneficiary is 100% hive.fund

Comments · 27

@firstamendment(58)· 666d
So when the crazy interest rates, was 20% now 15%, allows a whale to have even a crazier amount of HBD, and for whatever real life situation forces them, or their estate, to dump presumably at exchanges, this proposal would lead to trading hive to accumulate HBD causing hive [even more on top of any hive they liquidated] to fall to correct HBD prices? Is my understanding of the mechanics wrong?

Is there an easy mechanism to gauge how much hive is being sold/purchased/converted to artificially maintain the stability of this coin?
@mistakili(77)· 1597d
Such genius this man
@poshbot(59)· 2000d
https://twitter.com/ybanezkim26/status/1367002296811356166
@transisto(75)· 2025d
Sounds good, Better than the sbdpotato.

Could make multiple proposals so the amount can be increased in a more granular way.

2400HBD seems good enough given current small market size.
@acidyo(84)· 2028d
I personally think we should go ahead with this just cause it's @smooth and I like having him around. Go vote the proposal guys, or else
@geekgirl(80)· 2029d
First of all, great to see you back. If such proposal would be made I would approve just because I would trust knowledge, expertise, and experience of someone like yourself. And it does makes sense to make HBD work as it was supposed to.

However, I have few reservations that go beyond HBD being pegged. I like it to be pegged at a lower end and guarantee $1 USD but not too convinced about it being capped at $1 USD. Let me explain why.

If HBD is meant to be pegged to $1 USD in the first place, free market should decided that, and we shouldn't be scared of it and intervene with haircuts. 1 HBD should be worth of $1 of Hive coins. It sounds simple. But with interventions like haircuts we try to secure and preserve the Hive and the chain. I have heard the arguments for it. But still, as a stakeholder I wouldn't mind my Hive stakes diminish to make HBD work as it is supposed to.

Next, unreasonable price hikes of HBD or previously steem did prove to be helpful in making Hive(previously steem) more attractive for engagement and being more active. It simply paid more. Over the years I have come to understating that crypto is unreasonable. Perhaps these unreasonable spikes in HBD price are good for Hive ecosystem?

Bottomline, I would like to see 1 HBD to be worth at least 1 USD. But I wouldn't go as far as limiting its move upwards. Because eventually free market will do its work to balance things out and higher HBD prices will lead to higher Hive prices. That has been proven with historic price movements.

Lastly, perhaps it would serve better for Hive if content rewards are finally moved to a layer 2 or different token. That has also been proven to be more efficient and successful (eg LEO). This would remove the sell pressure from Hive, I believe.

GREAT TO SEE YOU BACK!

P.S. I wouldn't even mind removing HDB completely at this point.
@ssjsasha(74)· 2029d
Voting bots were the killer app that brought in demand, when those were gotten rid of, so went the buying pressure.
@ats-david(75)· 2029d
I gave this a little more thought after my initial response last night.

4 - If the price is below LOW, use the HBD to convert into HIVE (takes 3.5 days). Upon completion of the conversion, use the HIVE to buy HBD and send that back to the DHF

One of the reasons I would support this would be to limit the printing of HIVE, particularly through HBD conversions. After the conversion is run, instead of sending all HIVE back to the DAO, could a portion be nulled? This could push some value into HIVE rather than creating more inflationary pressure.

If this system is then combined with an HBD "DeFi" solution that's paying out yields for holding HBD (maybe only to those who hold HBD in their savings account), then both HBD and HIVE would gain tremendous value over where they are today. Yields earned from holding HBD would also help keep at least some downward pressure on HBD prices as holders sell off those returns, so there's a little less risk of runaway prices.

The interest on HBDs, if only paid to that amount held in savings, would also limit how much would be going to exchanges that hold the tokens. On the other hand, some exchanges may want to list HBD as a "DeFi" option where customers can essentially stake HBD on their exchanges for a share of the interest payments. This brings more visibility to Hive and additional listings/pairings would help with exposure to and liquidity for HBD, which is sorely needed.
@marki99(62)· 2029d
Step 4 sounds risky. What happens when hive goes through a big bear market and HBD exceeds the 10% debt ratio? HBD will constantly be valued under a dollar, because it can't be converted to 1$ worth of hive. In that case the HIGH and LOW limits will have to be constantly readjusted so that the current HBD market price is centered between both numbers.

Otherwise, the DHF can run into big losses quickly. For instance, Hive's marketcap is 50 million USD. But, HBD's supply is 10 million. That means that one HBD now converts to only $0.5 worth of hive. If LOW remains at $0.99, while HBD trades at $0.6, then the DHF will be executing step 4 while it should execute step 3.

This brings up the question, who sets HIGH and LOW? If it's hardcoded into the proposal, it's going to run into the problem I mentioned, and we will need to write a new proposal and vote it in quickly, which is impractical.

Another way is to hardcode HIGH and LOW into the proposal, and then have the witnesses provide purposely the wrong price feed for Hive's price so that the blockchain thinks HBD remains at 1$. But this method will affect other aspects like posts payouts, so also not practical.

A way to make it work would be to have witnesses set HIGH and LOW similar to how they set hive's price feed.

Let me know if I missed something or if this is the way you thought it would work.

Another idea I would prefer is the following, but it is simply a matter of choice, not mechanics, and I would support the proposal even if it is ignored.

I would prefer if the profits or extra coins resulting from the arbitrage would be burned instead of sent back to the DAO. That would benefit everyone on hive, including the DAO since higher price for hive would mean a larger budget.

How it would work:
- in point 3: use HBD to buy hive. For every HBD printed, use 1$ of the HBD to buy hive sent to the DAO, and use the rest to buy hive sent to @null. So if HBD is trading at $1.50, $0.50 worth of hive will be burned for every printed HBD and $1 worth of hive will be sent to the fund.
- in point 4: send HBD back to the DAO until it reaches the amount initially printed, burn the rest.
@tarazkp(86)· 2029d
Welcome back to posting :)

Out of curiosity, what would likely happen and is it possible to not have HBD on exchanges at all, so that is only used natively to speculate on HIVE.

It seems silly that a pump of a small supply in Korea can affect the tokenomics of the entire Hive platform.
@chekohler(76)· 2029d
Would it be possible to get HBD added to ETH too and added to dapps like Curve where they pool it with other stable coins to help maintain the peg or is this a purely a chain issue that can't be assigned with off-chain arbitraging?
@lordbutterfly(80)· 2029d
I guess this could work. Id rather see more robust changes to the system but ... dev time and good ideas dont fall from the sky
@joshman(74)· 2029d
Welcome back!

The more trustless and automated the better in light of the HBD Potato becoming rotten.
@shmoogleosukami(73)· 2029d
I think we should just scrap HBD and simplify hive's core token systems.
@cryptographic(70)· 2029d
I'm going to revisit the original premise and put forward the most basic (and essentially important) of questions: why should HBD exist in the first place?

I can think of reasons why it shouldn't exist, in fact, between us all, I think we could make a long list. But why even bother with that until we first have an argument for why it should exist? What needs does HBD satisfy (that already aren't met by dozens of others already - only a couple of which are really successful - and by fiat itself!)? What value added does HBD give us?
@dalz(81)· 2030d
HBD in general is acting as a stablecoin with Hive as collateral on a blockchain level (1000% collateral). Meaning there is no individual responsibility for maintaining the collateral and the peg.

Can we provide a solution for HBD where each account will be individually responsible for the collateral and at the same time incentivized to maintain the peg trough buy and sell orders around the 1$?

For me these shared (systemic) solution always lead to someone abusing the system.
@sanjeevm(78)· 2030d
Kill HBD all together - is there a necessity to have that ? What value it adds to community or chain ?
@borislavzlatanov(65)· 2030d
Wouldn't it make much more sense to code this at the blockchain level? Then it becomes a feature of the blockchain and a reason for other people to come and build here.
@hivebuzz(74)· 2030d
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You received more than 15000 upvotes. Your next target is to reach 20000 upvotes.

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@themarkymark(81)· 2030d
What value do you think HBD has at this point? Even with interest, I doubt we will be able to hold the peg well. Maybe doing a bulk of the time (like we do now with little to no tooling), but in the end has HBD lost it's way?

It's suppose to provide a stable currency for commerce and activities that need it, but it does that very poorly. Even a small 5-10% fluctuation which is a daily occurrence is huge to business.

It is suppose to help buffer the price of Hive, but when most people are selling does it really?

I'm kind of jaded at this point over HBD and I think it overcomplicates a over complicated system with little advantage left. I was always heavily supportive of a pegged asset and what value it could potentially provide, but is it really worth trying to put a round peg in a square hole?

Maybe I'm losing my mind at this point.
@urun(69)· 2030d
Nope I think smart would it be to take loan out of Hive.

If the price of HDB is higher as 1$ (lockup 500% to 1000% to be abuse save):

I take a loan on Hive.

Is it below, I can buyback.

So it's a useful mechanic + the user could make a pooled fund.

Makes 1000x more sense.

Also, HDB is at the moment the most shitty stable coin. It will be never used to buy something with a haircut and all this bullshit.

If I want to buy something with HDB and there is only a limit available, which sense has the coin? No sense.

Btw, a Loan would give the users/community the tool to fix the price. So if Koreans go crazy and want to buy HDB for 20$ they can, More HDB printed and more hive locked up. EZ
@themarkymark(81)· 2030d
There is a project sbdpotato/hbdpotato that does something similar with a few hundred Hive run by @thecryptodrive. He has long since abandoned Hive though and only cares about his fork Blurt.

Yet he has 350K Steem (@sbdpotato) he started using for his dlease project on Steem and over 200,000 Hive which runs as @hbdpotato. Neither of which he will return back to the DAO.
@bitcoinflood(80)· 2030d
The real question. Why is there even HBD when it doesn't do what it's suppose to do. Just make it one token Hive and be done with it.
@pfunk(73)· 2030d
HBD needs some form of upward price peg, and this is a well thought out solution. And I trust who it's coming from. I'll vote for it.
@disregardfiat(74)· 2030d
I would like to see this being handled by a (layer 2) DAO. While there appears to be only $8400 of exposure there is no good reason to use a non-multi-signature mechanism if one does exist. After all getting people to change their votes on a proposal could take weeks to months depending on where the support is at the time of a misstep. Not only that, technical difficulty, as it's put here, would be mitigated from a system of peers where no one party has to perform actions.
@bluerobo(70)· 2030d
We already have the hbdpotato creating a sizeable amount of inflation by converting HBD. I don't see why we need a second operation that does the same.
@ats-david(75)· 2030d
I'm not so sure that this kind of internal mechanism can actually help keep the price pegged when these issues usually arise due to pumps on exchanges that lack liquidity. The recent price increase appears to have begun on Upbit, one of only a few exchanges that even offer HBD pairs. The other major listing is Bittrex, which currently has wallets offline again.

The small market for HBDs is too easy to manipulate in either direction, especially when the pairings at the exchanges that carry it are seldom traded. So while this might help with the internal pricing mechanism, it doesn't do much for the more visible external exchange pairings and prices.