Let us be honest, the Hive Backed Dollar (HBD) is not on the radar of anyone. At this point, the use cases are rather limited. This is a situation, however, that could change rather quickly.
Most of us do not realize how a currency can go exponential. Obviously, we are not discussing price and market action. That is not important here. Instead, we are focused upon the ability for HBD to grow exponentially over the next few years.
I often stated that we are going to have to go from millions to billions if we are to be a legit player in the stablecoin market. The advantage that Hive does have is that we are builders. Hence, we are in the process of creating the utility for the coin. This is a stark difference as compared to Circle developing USDC and depending upon other project teams to create the use cases.
What is often overlooked, mostly due to our linear thinking, is the exponential nature of what could take place. This all can be summed up with the concept of "more".
Ultimately, it is more that will lead to the establishment of HBD as a thriving currency.
In this article we will discuss the path this could travel and how it could really grow.
Everything starts with more users. This is no secret. Currencies, like social media applications, depend upon network effect. This requires distribution, one of the keys for a currency. Hence we have the situation where the currency needs to be in more wallets.
HBD can be distributed in the following ways:
As more people join the ecosystem, they are able to get a hold of HBD. This can be through their activity, accessing the base layer reward pool. At the same time, different communities often host contest and games which payouts can come. This helps to move the coin around, entering different wallets.
A key is for people to discover what is here and seek it. Over the last year, we saw more people seeking to amass it and put it into savings. This is a good step forward.
This might sound odd coming from someone who spent so much time writing about time vaults and locking up HBD. That said, there has to be a certain level of need for liquid HBD.
Along with distribution, one of the keys is access to the currency. In other words, people need to have it when it is required. When would this be? Perhaps someone needs it to pay the entry fee into a Ragnarok tournament. Or maybe they want to buy a Hive hoodie from the Hive-Shop. Of course, lunch in Sucre at certain places can be paid with HBD.
There needs to be more reasons for people to keep HBD liquid. It is wonderful to have people locking it up. Nevertheless, HBD is a medium of exchange. If the Hive economy is to thrive, we need HBD moving around. That is what commerce and trade is.
We need more use cases for HBD. Paying for subscription using HBD, coupled with the recurrent payment feature on Hive is path forward.
Therefore, we need more commercial applications that are tied to HBD. This will increase the number of transactions, enhancing the utility.
We recently saw where the Cubans are able to pay their electric bill using HBD. This is a prime example of how utility can grow. For those who are opting for this, it is something that comes up monthly. At the time of payment, liquid HBD is required.
This is another way of focusing upon financial utility.
Since this is going to have to be on a sidechain or layer 2, the coin will have to be a wrapped token. That said, mirroring HBD with a wrapped version is a powerful step forward. We discussed this is great detail over the past 6 months so no need to delve deep into it.
The key takeaway is that HBD, at the base layer, is placed in a wallet and the derivative is created on the sidechain. This provides defense for HBD since the second layer applications is where the vulnerability can occur. With this, if an attack takes place, the HBD on-chain is not affected directly.
It also enhances the reach. If some of these sidechains have smart contracts that developers can use to create a host of financial platforms, we could see the wrapped version of HBD as the pair for all trades and swaps. It could also be the token used for payment of all financial transactions.
As you can guess, we need more financial use cases, i.e. derivatives, for HBD.
Now that we listed a few of the areas of focus, let us get an idea of how quickly this can spread.
To get an idea, we focus upon:
Here is where we simply summarize with more.
Imagine there were 500K daily active users on Hive. This would be roughly a 50x from the present estimated human user base. Logic says, all things being equal, we would require 50 time the HBD to keep the present ratios of holdings in place.
After all, newer people are going to want HBD in savings, as an example, too.
Then we can consider commerce. What is we take the transactions where goods or services were purchased and 25x them? We obviously have no way to uncover how much HBD is being used for payments on Hive, but, for the sake of discussion, we will multiply it by 25.
It is not a level that should be difficult to attain since there are only a handful of places where HBD can be spent. As of now, the number one purchase made with HBD is $HIVE on the internal exchange.
Here we can see the need for liquid HBD jump significantly as people are paying for goods and services.
Time vaults will require another batch of HBD. This is hard to estimate since a portion of the savings would be moved over. However, due to the creation of other applications tied to this, such as bonding, we could say a 2x jump (and that is conservative).
Finally we have derivatives. This is where things could really explode. Having a platform of financial applications which is built around a wrapped version of HBD, with a 1:1 backing at the base layer could be enormous. Since there is so many variables with this, we will keep it simple and say a 5x from the present levels. Depending upon the structure, some of these could end up in either savings or the time vaults.
Therefore, we have 50x, 25x, 2x and 5x. When we multiply them together, we get 125,000. If we apply this 12 million HBD that is free floating (not in the DHF), the result is 1.5 trillion HBD required.
How many times did we say that we are going to need a lot more HBD?
Obviously, we took liberties with the numbers and compartmentalizing like this does not happen in reality. There are many factors that go into utility with a currency.
Therefore, we can back off the 125,000x a great deal. Instead, lets focus upon a more rational number, like 1,000. Here we get a need of 12 billion HBD.
This is where we see the exponential growth of HBD.
Do you think anything that was listed in this article is outlandish?
How realistic is:
The last one is already being worked on by a few different teams.
Hopefully people realize how HBD's growth can truly be exponential. There are so many areas where utility can arise that we see how more in each area will have a compounding effect.
It will also put us in the position where a lot more HBD is required.
This all feeds into demand. It is also, in my opinion, one of Hive's greatest hidden gems.
What are your thoughts?
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