How much of an impact could the Hive Backed Dollar (HBD) have on Hive? What could it do to the market capitalization of the value capture token?
Over the next few articles, we are going to delve into this coin a great deal more. Some things are taking place that should excite the community. It is also one area where we can see a direct correlation to the HIVE coin.
The time has arrived to really start emphasizing this. We have some of the best technology within the blockchain world. At the same time, there is infrastructure being constructed which will have a direct impact upon this discussion.
So let us dive into the numbers to see what we come up with.
The table above comes from Coingecko. It is the latest market capitalization of all cryptocurrencies.
When we look at the total of $3.3 brillion, we can see where it fits in right now. Of course, things are apt to change, but it illustrates the point.
Some might be wondering where the number $3.3 billion came from? This is the required market cap with 1 billion HBD to remain under the haircut level. If there are 1 billion in circulation, the value of HIVE must be in excess of $3.3 billion to remain below the threshold.
Here is the first lesson in HBD tokenomics.
To figure out what this would be per coin, we simply do some division. There is a circulating supply of 371 million HIVE.
By dividing $3.3 billion by the circulating supply, we get a price of $8.89.
Would HIVE at $8.89 make everyone happen?
Simple math yet somehow we got it wrong. This vastly underestimates the price of the coin. The market capitalization conversation is still valid. What is overlooked is the change in the number of HIVE.
How do we go from 10 million circulating HBD to 1 billion? Even at 20% interest, we are looking at more than a decade before that is reached. Hence, this will not work.
That means HBD will be created. Fortunately, there is a simple mechanism on Hive that allows this.
The conversion mechanism allows anyone to take HIVE and convert it to HBD. Each $1 worth of HIVE will generate roughly 1 HBD.
It is through this process that HBD will have to be generated. There is no other way for it achieve the quantities we are discussing here.
What this means is that HIVE likely becomes deflationary. For all the discussion of Ethereum trying to operate in a deflationary manner, Hive has it built it.
There is one major exception as compared to what Ethereum is doing: the value is not being destroyed, merely transformed.
Basically the value that resides in the HIVE coins is move over to HBD. It is not being lost or destroyed. The allows for the utilization of the value in a way that is preferred by the community. As we start to look at the potential utility of HBD that is being discussed, we see how the market (community) is going to decide where that value is required.
We are saying that HBD utility directs where some of the value of HIVE goes.
The goal of everything tied to Hive is simple: create a greater need for HBD.
With this focus, the need for this coin will expand. As it does, more is required. While the interest generates some, it is really an insignificant amount. We are talking hundreds of millions, not thousands.
We will cover HBD utility in an upcoming article but a few things to highlight:
These are some examples of developments that are being worked on as this article is written. None of this should be foreign to anyone reading this. We discussed all of these in detail over the years.
What is so beneficial about this list is the fact that we are dealing with diverse use cases. All bring different parameters to the ecosystem in terms of the coin. This provides resiliency since it reduces the attack vector.
HBD, at that point, is no longer a 1-trick pony. People have varied reasons for holding it. This reduces the amount that can be acquired to utilize against the chain. For example, if someone is using their HBD to purchase real world goods and services, they are not going to swap it for HIVE. In other words, a circular economy means currency is always required for commerce (and finance) to occur.
This was the downfall of UST.
Of course, by creating the need of HBD, we do the same for HIVE. Here is where the price per coin mentioned earlier is off.
To create 1 billion HBD, we basically need a market capitalization of $3.3 billion. At the price of $8.89, we would have to convert every HIVE that exists. Of course, we have to account for what is staked.
According to Hiveblocks, we have around 170 million Hive Power. This means it is removed from the circulating supply. With a 13 week Power Down (another security feature), we can see how this is having an impact.
Here is the kicker: the more activity related to HBD that takes place, the more HIVE that is required to be staked. We cannot have HBD without HIVE being locked up. This is how one engages with the blockchain.
Again, going back to the circulating supply, we acknowledge that some HIVE can be unstaked as the price goes higher. To reach 1 billion HBD, we are going to need a lot converted. If every single liquid HIVE on the market was converted, we would have roughly 170 million left, or a price of $19.41 per HIVE.
Naturally, we can run many different models altering the numbers. The point being, to generate 1 billion HBD, a lot of HIVE is going to be converted. This will reduce the circulating supply while not destroying the value. The transfer of that value for utility that is more desirable to the community enhances the ecosystem. With varied utility, this provides more resiliency to the chain, reducing the ability to attack.
As the HBD transactions grow, the need for resource credits, which comes from HIVE being powered up also increases. This means the amount of HBD along with the use of it increases the need for HIVE.
It is a circular system that is in operation. We simply need to establish the utility for HBD and watch the rest fall into place.
This is why some are calling HBD "Hive's Trogan Horse".
