Please keep in mind this is not a proposal for the Decentralized Hive Fund. Instead, it is an idea to discuss and to illustrate some of the future paths for Hive. At this point, much of the infrastructure for something like this is still being built.
There is a lot of news of late regarding Kraken and Coinbase. Both those institutions are now determined to transform the financial system. Obviously, they are seeking to put themselves at the center of it, basically replicating the centralized system yet using cryptocurrency.
On Hive, we have a different viewpoint. We are believers in decentralization and, for the most part, distribution. While a revamping of the financial system makes sense, few of us agree that the primary focus should be another centralized system. Therefore, it is crucial we start to consider how we can build the required features on Hive.
Much of this article stems from Introducing The Hive Financial Network.
Placing decentralized finance at the center of what we do is not a bad idea. Hive has a powerful system in that the social media side of things can be a feeder into the world of DeFi.
At the core of this is the Apiary. This is the DAO that would be established from which all could spring. It is a profit center that was funded by the DHF, provide a return to Hive Power holders, along with continually feeding the DHF with a portion of the profits.
If you haven't figured out by now, Apiary is being used in lieu of another term. However, it is no much different than what Kraken and Coinbase are proposing. We are looking at provide valuable financial services in a decentralized manner. This includes the ownership by utilizing a DAO. Hive already exhibits how this works with the DHF.
Coinbase is proposing building a DEX in response to the collapse of FTX last year. This is interesting since this is what we are doing with Honeycomb. While it is starting off limited, the idea is that we can keep growing these at time passes.
Of course, the headline of the article tells us all we need to know: Coinbase and $20,000,000,000 Hedge Fund Backing New Decentralized Crypto Exchange.
A DEX that is funded using venture capital money. How is that decentralized?
What the Hive Financial Network is the idea that all that is being proposed by the likes of Coinbase is possible within this. Hive can construct all of it in a decentralized manner with the community, Hive Power holders, being the beneficiaries. At the same time, the DHF can have a revenue stream as it partakes in the profits of the Apiary.
Larva is just the name of a token that is airdropped to HP holders based upon a snapshot. This is the governance token applied to the Apiary. It also entitles one to a percentage of the proceed from that entity.
$HIVE is a value capture token. That means whatever is create tied to Hive should be captured by that coin. Naturally, markets aren't perfect and we can see price will not always match.
Nevertheless, when looking at a system like this, we can see how financial services benefit the users but the proceeds are directed towards Hive Power. This will enhance the return while also providing incentive for people to hold it.
Why should mega-venture capital companies extract the value from the formation of these services? That is exactly what will happen. Under the scenario they propose, the application might be a DEX but the value flow is anything but. It is going into the hands of a small group of people.
With the Hive Financial Network, those with Hive Power benefit. Of course, unlike VC firms, anyone can get involved. Simply being rewarded in HP or buying it gets one in the game. Here is where distribution is crucial. Hive, through the PoB mechanism has a way to continually distribute coins to newer people.
Driving value to $HIVE opens ups a host of possibilities. One of the keys is the value is the backing for the Hive Backed Dollar (HBD). This means we have a more resilient system with higher priced $HIVE.
Of course, this is a major feather in the system.
HBD would be at the core of the Apiary. Actually, it would be a derivative of this since much of this operates at the second layer, at least initially. If the community decided to integrate the Apiary to the base layer at some point, that could be done.
The HBD derivative would be the pair for any token exchange along with the one used for any financial services. This would be handled by the Apiary as HBD would be locked, creating the wrapped token. In the last article, we called this sHBD.
Having a 1:1 backing means the availability is constant. The value is split between $HIVE and HBD, with sHBD being the transaction token. This helps to create a layer of defense for HBD. If sHBD is attack, the base layer coin is still safely tucked away in savings (or a time vault).
What happens if we need a billion sHBD for financial funding? This might seem absurd but it is not.
Did you ever hear of LUSD? This is a stablecoin tied to a staking project on Ethereum. It seems relatively new. Here is the total value locked in that lending platform.
This is not necessarily to advocate that project as much to illustrate how the numbers can get large rather quickly.
A billion dollars in lending is nothing. That is where the utility for HBD is much greater in the financial realm. While commerce is vital, and having HBD (or derivatives) as a medium of exchange is of greater value, the numbers for finance far outpace those of payments.
With HBD, we want to focus upon both.
What does a financial network that has HBD at the core do for the value of $HIVE? To look at it another way, we actually need the value of $HIVE to go up significantly due to the haircut rule.
To match the amount of LUSD, if we were using HBD, the total market capitalization of $HIVE would need to be $1.7 billion. That is if we use the 30% level where no more HBD is created.
Do you see how financial services of this nature could really accelerate the value of the entire Hive ecosystem?
It is a positive economic feedback loop on steroids.
Of course, we have under 30 million HBD. How would we get 516 million? The answer is obvious.
It is time for everyone on Hive to give serious thought in this direction.
We have an opportunity to really alter the way finance world. By using assets on Hive, both the ones now and what we create in the future, we can see how a DAO type can replicate what is being built by the VC firms yet completely changes the ownership structure.
As stated, we are still awaiting infrastructure being built. However, it is never too early to start working in this direction.
Please give any feedback in the comment section below. Discussions like these have to take place. We know the need is out there and even the likes of Ethereum is not filling it in a way that aligns with the industry.
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