I made the mistake of writing down what I really feel about the absurd interest rate on HBD. I am now seriously depressed.
The HIVE Blockchain uses HIVE to guarantee the price of HBD. This guarantee places a huge weight on the price of HIVE. I asked DALL-E to produce the image above of an old man being weighed down by an anchor to emphasize this point.
This weight is not theoretical. The name "HIVE Backed Dollar" tells the world that the value of HBD is derived from the price of HIVE. HBD derives its price because the conversion utility will convert HBD to a dollar equivalent of HIVE after a three day wait.
If you are wandering. This game where the price of one entity is derived from another entity is called a derivative.
If you are interested derivatives I suggest you look up Enron. Mortgaged Backed Securities, Lehman Brothers ... the list of groups ruined by derivatives is huge.
Currently, the witnesses are using the HIVE eco-system to fund an absurd interest rate on a derivative.
Geek Girl reports that the system paid $115,907 HBD interest in May. This come to $1,390,884 if carried over a year. The page shows that HIVE has paid over $1,185,853 since the beginning of the interest rate experiment.
CoinGecko says the HIVE market cap is currently $109,851,318. We currently paying over a percent of the marketcap reported by CoinGecko.
The Ausbit Bank HBD Monitor said the HIVE MarketCap was $150,389,227.196 and the HBD MarketCap was $11,127,561.333 a second ago. The page said "HBD Marketcap is currently 7.399% of HIVE Marketcap"
I watch the Ausbit page daily. I wish that it would showed historic data.
What I've noticed is that everytime there is a drop in the price of HIVE there is a drop in the HBD marketcap. There have been three big dips since Christmas. In each of these dips, users convert over a million HBD to HIVE.
Converting a million HBD to HIVE at $0.3 produces 3.3 million HIVE. We've seen over ten million HIVE produced during the last three dips.
To put this in perspective. The HIVE dolphin level starts at around 5,500 HIVE. HIVE would need to attract about 1,800 dolphin level accounts to absorb the ten million HIVE produced by the HBD conversion formula.
The HBD guarantee floods the market with newly minted HIVE every time the market gets weak.
BTW: If you think that the price of HIVE is low. The smart move is to withdraw your HBD from savings and convert it to HIVE. If the price of HIVE rises; then you could buy back the HBD and make more than the 20% interest.
The HIVE algorithm backs the price of HBD with HIVE. There is an incentive to perform this conversion when the price of HIVE is low.
The HIVE algorithm has a strange feature called a "haircut" that will kick in if the reported marketcap of HBD rises to over 30% of HIVE MarketCap. This used to happen at 10%. The price is current at 7.399%
HBD investors fear the hair cut. I suspect that serious HBD investors will start dumping their HBD when if the marcap ratio was above 15%.
The witnesses claimed that the rise in HBD interest would bring in a flood of new users.
I think it is worthwhile to ask: Has this happened yet?
The Hive Statistics by 
I have watched numerous companies fall into bankruptcy. What often happens is that a company will take on debt during a period of irrational exuberance. This irrational exuberance and influx of cash leads to a financial flurry that appears to justify the debt.
In most cases, the period of exuberance lasts for a year or two. It is usually in the third year that the weight of the debt really starts kicking in.
This is why I am depressed. We are still a good year away from the time when the weight of the HBD debt really kicks in.
Every word I say against the debt will be put down by people still floating on the high that they get from the narcotic effect of debt.
"Don't be a downer. Just let me get one more toke of this beautiful, beautiful, beautiful debt."
Unfortunately, too many people fail to understand the cost of debt until they are in bankruptcy and all is lost.
I suffer from a streak of honesty. I could never sell used cars.
Anyway, I've brought up HIVE to a few business. In every case, I've been put to the door the moment that I show them the 20% interest on the HBD debt.
I am told that the high interest on HBD will attract millions of new users into HIVE.
I pointed out above. These millions of people did not show up. There are fewer users on HIVE than when the witnesses began their stupid experiment with 20% interest on our debt.
I contend that debt is a double-edge sword.
Yes, some people are attracted by debt. More people are repelled by debt.
The people who are repelled by debt tend to have more money than those who are attracted to debt.
I've been told that we need to have billions of HBD in play before HIVE will be considered a contender by the big guys.
Sorry to burst bubbles ... but the current HIVE marcap is $150; So, the theoretical marcap max for HBD $45 million. We are a quarter of the way there.
We can't have the billions of HBD needed to become a contender because HBD depends on HIVE for its guarantee.
HIVE is a cryptocurrency. The way one adds value to a cryptocurrency is to create mechanisms that encourage use of the currency.
For this reason, I believe that Hive Engine should be the primary focus of the platform.
HIVE Engine is the marketplace where people use HIVE.
One can prove this by following the transactions of honey.swap. Prior to the raise in interest rates, many HIVE users were moving their HBD earnings into #hive-engine.
After the interest rate increase, the flow of funds stopped. In some cases it reversed. That is: people started selling their HE coins in favor of HBD. The change accelerated the decline of the HE coins.
Yes, most of the tribal web sites are marginal. But the developers were depending on the value of the coins to fund the development of the sites.
Development on HE has slowed dramatically on HE.
The high interest on HBD is driving developers from the Hive and #Hive-Engine platforms. This is a huge cost!
BTW: If HIVE wanted to do something innovative. The system could start offering SWAP.HBD pairs on Hive Engine. If there were SWAP.HBD pairs on HE, then we would see people wanting to buy HIVE to participate in the the trades.
The solution isn't simply to lower the interest rate on HBD. The solution is stop paying interest on HBD altogether.
The witnesses could declare that the high interest rate failed to have the desired effect and that they want to try other things.
The value of HBD comes from the conversion formula and not the interest rate. The historic price of HBD reported by Coingecko shows that the interest rate did not dramatically change the peg.
NOTE: The conversion used to be one way. One could convert HBD to HIVE. There was a spike of HBD. The developers corrected this by creating a two way conversion.
There is nothing creative about a high interest rate. Raising interest rates is the type of things do in ecosystems that lack creativity.
I would prefer to invest in a creative platform than one that uses financial shenanigans to attract interest.
I think that the conversion formula is extremely interesting.
One could use that formula to create pegs to any currency.
hhhhmmmmm
Instead of doing something dull like funding a stupid interest rate, HIVE could do something innovativge like create multiple pegs.
HIVE is an international formula.
Instead of just having a peg to the US dollar. HIVE could use its formula to create pegs to different currencies.
Imagine if HIVE had formulas for a Hive-Backed-Euro or other currencies?
If we had conversion formulas for different currencies, then HIVEans around the world could start using the platform for their daily transactions.
HIVE could create pegs for precious metals. We could have a HIVE-Backed-Gold which would peg to a troy ounce of gold or Hive-Backed-Silver which pegged to a troy ounce of silver.
Creating Hive Backed Currencies would allow #hive-engine to offer different trading pairs.
This would make HE a mini foreign exchange market.
If I had influence; I would eliminate the interest on HBD and start offering conversions to different currencies.
Unfortunaly, many of the whales on HIVE are married to the high interest.
My experience with debt is that people often have a honeymoon period with debt. The real cost of debt doesn't start kicking into until three to five years into the experience ... at which point is too late.
I suspect that many HIVE users are staring at their portfolio. They see HBD as the only positive thing in their portfolio.
How could the only positive thing in my portfolio be bad?
The reason HBD is the only positive thing in your portfolio is because the interest is guaranteed by the other of the things in your portfolio.!
It will take another six months or maybe a year and maybe some people will realize that 20% interest on HBD was a bad idea.
The high interest accelerated the decline of the tribal coins on HE and puts a downward pressure on the price of HIVE.
BTW, I am not opposed to stupid ideas. People grow through the process of missteps and corrections.
The question is what should a person do after making a mistake. The witnesses could say: The interest rate did not do what we wanted. Let's eliminate the interest rate altogether and try adding pegs to different currencies instead.
I will end with my DALL-E picture of an old man. What is his best option?
ahem, the best option is to lose the anchor. Of course, he won't. He is attached to it.
Sorry about the depressing post.
