Before I jump into my rant about HBD, I would like to emphasize that HIVE needs more users.
We don't just need casual users that peruse posts. Nor do we need social media mavens who want to milk the forums for free crypto. HIVE needs users who want to buy HIVE; so that they can actively participate in the platform.
Investment in HIVE works as follows: The system creates a rewards pool from interest on HIVE. Users can mine the reward pool by writing or curating posts. Witnesses get part of the rewards pool for hosting the blockchain and there is a pool for creating programs.
To recap: HIVE has a pool of crypto currency that expands at a given interest rate. Users can get some of the interest by actively engaging in the platform.
This is a fun formula. But it is also marginal.
Unlike traditional companies that hold assets and generates a profit. HIVE simply creates a cryptocurrency and allows people to mine the crypto.
HBD is a scheme to generate large amounts of passive income from the HIVE blockchain. The system currently uses HIVE to guarantees a 20% interest on HBD.
Before talking about HBD, I want to show you a graph that I scraped from the daily stats page produced by 
As you can see, HIVE has been hemorrhaging users since this decision to raise the interest rate.
We had over 600,000 active users at the time of the decision. Active users have fallen to around 123,000. Many of the "active users" are bots or curation accounts.
Anyway, HIVE has suffered a 80% drop in active users.
The chart from CoinGecko shows the price of HIVE.
Before explaining why the interest on HBD drives away investors in HIVE I must parse the acronym HBD.
"HBD" stands for "HIVE Backed Dollars." As the name implies, the price of HBD is backed by HIVE. The HIVE blockchain includes a function that converts HIVE to a dollar amount of HIVE. There is a three day gap to fulfill the order.
I like the basic conversion formula. HBD serves as a cash account. Users can put their funds in HBD when they feel that HIVE is over valued.
More importantly, one can use HBD as a semi-stable currency.
Of course, there is a cost to the formula. Imagine that a person put $100 into HBD when HIVE was trading at $0.4 . That is they buy $100 of HBD for 250 HIVE.
Now, imagine the price fell to $0.3. The user could convert the HBD and receiv 333 HIVE. They would have made 83 HIVE on a speculative investment. That is a 33% return.
I said speculative because they would have lost money if HIVE grew in value.
I follow the price of HBD and HIVE on Ausbit Bank. This page shows the current market capitalization of HIVE and HBD.
I really wish that the page showed the history of the tokens.
My notes show that the "marcap" of HBD was well over $14 million last year.
What I noticed is that users put funds into HBD when they think the price is high. They then remove funds and convert the funds to HIVE when the price drops.
The interest that we are giving on HBD is converted to HIVE when the price of HIVE is low. The HBD interest is costing us over 20%.
Her recent report shows that HIVE has paid over $2 Million HBD in interest. That would be over 6 million HIVE if converted to HIVE at today's price of $0.3 . It looks like we are on track to paying $1.4 million in HBD interest this year.
Since the price of HIVE is dropping, I suspect that we will see a good number of people withdrawing their HBD at the low price and converting it to HIVE.
For that matter. If you think the price of HIVE is low and that HIVE will outperform HBD; then you should withdraw your HBD from savings at a low price and convert it to HIVE.
I thought that $0.32 was low price for HIVE; So, I pulled my HBD savings and converted it already.
I guess I am more optimistic about the future of HIVE than most HBD holders.
Now to the main point.
People are not as stupid as we believe.
The people who have money are smart about money.
People who are smart about money know that debt kills.
People who are smart about money see that we are on track to paying $1.3 million in interest this year to service the HBD debt.
The system guarantees HBD with HIVE.
Yes, the "B" in HBD means that HIVE guarantees the price of HBD with HIVE.
HIVE curation is a marginal game. In the financial world, people call the interest on HIVE a margin. The curation rewards, the author rewards, the witness rewards and the developer rewards all come from this margin.
HIVE is using the same margin to pay an outrageous interest rate on HBD.
The witnesses justified the high interest rate with the claim that it would grow HIVE.
It didn't.
Seriously, in the internet world, 3341 users is a failure.
I worked with internet companies that failed because they could only attract a few hundred thousand users. Most banks have more customers than that.
3,341 active monthly is a pathetically small number.
It is small compared to the 600,000 monthly users that HIVE had when it raised the rate.
The 20% interest on HBD had a terrible effect on HIVE Engine.
HIVE Engine is a market that uses HIVE as its base currency. HIVE-Engine is the place where people use HIVE as a currency.
The primary products on #HIVE-Engine are games and tribal coins.
Just like HIVE. Most of the coins on HE are marginal plays. One gets curation rewards, author rewards and activity rewards for playing games on HE.
The HE coins were all dependent on people transferring funds from HIVE to HIVE-Engine. The decision to raise the interest on HBD to 20% stopped this flow.
There is not a single coin on HE that can match the guaranteed profit of HBD.
All of the little tribes on HE have been left there to flounder as the witnesses play with their stupid HBD interest rate.
HIVE and HE needs smart, moneywise investors.
HIVE needs those users who understand that the term "backing a loan" means guaranteeing the loan with one's assets.
If the HIVE interest rate was attracting users, then we would see hundreds of thousands of people clamoring to get a piece of the HBD.
What we are seeing is hundreds of thousands of people who come to the platform then leave.
The beauty of the original formula of HIVE was that it reward people with active brains. People engage in #ProofOfBrain activities when they write posts, curate posts or maintain witness nodes.
Backing the passive income of HBD with HIVE destroys the beautiful #POB concept.
Sadly, I fear that it will take another year for the witnesses to realize that they made a big mistake with the HBD interest rate and by then it might be too late.
I generated the image with DALL-E.
