This is not financial advice. It is for informational purposes only.
I am going to do something that I rarely do. Here is a price prediction for the market capitalization of the Hive ecosystem within 5 years.
My forecast is that we will see $100 billion. This is through a combination of HIVE and HBD.
This is based upon development that is taking place which we will cover in this article.
The point here is to stimulate people to stop thinking small. We are dealing with something very powerful and yet people focus, as they say, on the small stuff. Things are coming together in a major way, one that is going to, in my view, keep driving tremendous value.
So let us dig right in.
Thus far, Hive is pretty much as island. It is really separated from the rest of the cryptocurrency world. We do not garner much attention, which, in the long run, is a good thing.
This is not going to be the case within a year. Over the last 18 months, we saw a number of initiatives that is focused upon infrastructure.
We have SpkNetwork, VSC, HAF, and Leofinance all working on things that will allow Hive to bridge further out. More importantly, it is going to allow them to bring the outside world to us.
Infrastructure is crucial. Repeatedly we discussed the need for smart contracts tied to Hive. They are coming. This opens up a host of possibilities, some of which are mind blowing.
The Hive Backed Dollar (HBD) is going to bring enormous value to Hive.
One of the key concepts is money transformation. This is basically money that exists in a few different forms. Thus, the value is moving around but still present on the ecosystem.
A great analogy is water. This can exist in three forms: water, ice or steam.
The important question is which is more valuable? Of course, this is foolish because the answer depends upon individual needs. If steaming vegetables is required, ice is not very helpful. In this instance steam is the valued choice. On a hot day, the opposite is true.
From this we can see that value is based upon utility. Whatever form of water is needed, it is covered.
The same is true with Hive. We discussed Hive Bonds at length. The idea is to create three forms on Hive: HBD, Hive Bonds, and HIVE. All have utility based upon the needs of the individual users. This draws in value from the market as applications (and infrastructure) incorporates this.
This is crucial to understand. Anyone who is looking at Hive has to grasp the relationship between HIVE and HBD.
The only way to generate HBD in any significant quantities is to buy HIVE and use the conversion mechanism. This transforms the value in the latter coin to HBD.
What this means is that any value generated by HBD will be recognized in the value of the other. Increasing demand for HBD (in any great number) provides the same for HIVE.
Here we see one of the most powerful designs in cryptocurrency. Fortunately, unlike Terra Luna, there are safeguards in place to protect the chain.
More importantly, we are looking at the biggest safeguard of them all: development in the utility of each coin. Instead of engaging simply in a game of tokenomics, which can be subject to market manipulation, we are seeing use cases being constructed that provide people with incentive to hold the coins. This is not in the form of a return per se but, rather, as utility.
If one needs HBD to pay for lunch, there is the incentive to hold. When currency is tied to economic productivity, the value grows.
This is a topic that is boring to most people. For most of us, it is something we do not understand. It is dry, techie, and takes a long time to build.
In other words, it is like watching paint dry.
That said, it is crucial to the foundation of Hive. This is what is removing the isolation aspect of this ecosystem. A number of projects are rolling out systems that will allow for some interesting features to be built.
Without going into too many details, there is one thing to highlight. Due to the design of some infrastructure, HBD is required. In other words, for a node system to operate, HBD is posted.
This is a direct correlation to the value of the transactions that can occur on the network. If $100K worth of transactions is to go through the different nodes, that amount of HBD is required.
Here we see a massive shift in HBD. This is no longer kept for speculation or generating a return. It is not even held for payments. Under this scenario, it is required for a node to operate in a legitimate manner.
Two things happen here:
Of course, here we see the relationship between HBD and HIVE. The infrastructure need for HBD will equate for the same with the latter at some point. We simply cannot have a system doing $20 million without the conversion of coins.
Infrastructure means nothing unless something is built upon it. This is what the average person is concerned about.
Here we will simply use the Hive Bond concept as an example. There are others we could use with upcoming projects that will do the same thing.
Let us take 1,000 HBD placed in a 1 year time vault. On the second layer, a bonding application allows me to create a token that is reflective of that transaction.
Since it is tied to a DEX that allows me to swap it, I can sell that bond. That means I can put it out there for, let's say, 950 HBD, to ensure it sells.
Here is the question: How much HBD is utilized?
The answer is 2,900.
These of course, are peanut numbers.
What happens if we have a lending platform and someone does this with 100K HBD.
Now we have a situation with there is 300K HBD required.
The key to takeaway is the infrastructure is starting to roll out now. This is being built. We are far past the planning stage. Developers have coded much of what is described here.
Another major piece to this puzzle is the fact that HIVE is an access token. This means it is required to write to the blockchain.
Actually, this is not correct. Hive Power is required which is created when one stakes the coin. This mean we need to watch the staking rate in relation to the growth of the circulating supply.
Here is what it looks like at present.
We have roughly 409 million HIVE. The amount of Hive Power is 169M or 41.3% of the total. It is crucial to keep in mind this is a 13 week power down meaning it is not easy to remove the coin. In addition to security, it ties into the utility.
Hive Power allows for engagement with the blockchain. Every transaction, regardless of what it is, requires this. The activity taking place on the layer 2 nodes that was just described, all of that is settled using Hive. That means each node has to have HP in the account to write to the chain.
Why is this important?
This is best answered by an example.
We will presume the price is $1 to make the math simple. If this node system requires 50 million HBD, where it is going to come from? The only way to generate that amount is through conversion. Under this example, we are going to take 50 million HIVE and turn it into HBD.
The numbers would look like this (based upon the present ones shown above):
Now the amount of liquid HIVE available is 189 million. This means we have 47% of the HP locked up without adding any more. Of course, as applications see more activity, they are going to require increased HP to keep their users engaging.
What happens when the staked percentage gets up near 60%? Again, more activity equates to the need for more HP. It doesn't matter whether it is individuals, investors, or applications, the coins are going to be needed.
We can see how the design of Hive puts a great deal of buy pressure on the value capture token (HIVE). Even HBD drives value there simply due to how it is created in volume. Stablecoins offer enormous potential for ecosystems and we are just scratching the surface with the example in this article.
Consider the trading that takes place on exchanges. Imagine just a small fraction of that occurring on the infrastructure being developed. Each node is going to require some HP and HBD locked up.
Social media, finance, and commerce all are driving value. The numbers are small now but they are growing. People are working to get local merchants in different regions to accept HBD as payment. Social media (and games) are developing and growing. And finally, with smart contract platforms, we are seeing the entry into decentralized finance (DeFi) in a much bigger way.
Therefore, in 5 years, we will see the Hive ecosystem with a market capitalization, on both coins, of over $100 billion.
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