Request for comments: HBD stabilization DHF proposal


I intend to make a proposal with the DHF to assist with stabilization of HBD to the peg. Over the past several months, we have seen the HBD peg restored and the price relatively stable at about $1.

However, I believe we can do even better going forward.

The most recent hard fork added the ability to send HIVE to the DHF fund (previously it was only possible to donate HBD). Using this new functionality, we can create an automated process that works to stabilize the price of HBD. The process works as follows:

  1. On each (hourly) HBD payment from the DHF, examine the price of HBD
  2. If the price is between LOW and HIGH (0.99 and 1.01 may be reasonable values for LOW and HIGH, or perhaps somewhat wider initially and narrowing over time), send the HBD immediately back to the DHF
  3. If the price is above HIGH, use the HBD to buy HIVE, and send the HIVE back to the DHF
  4. If the price is below LOW, use the HBD to convert into HIVE (takes 3.5 days). Upon completion of the conversion, use the HIVE to buy HBD and send that back to the DHF

Notice that in all cases, the HBD or HIVE is sent back to the DHF, either immediately or after a 3.5 day conversion cycle. There will not be any HBD or HIVE accumulating with the payee as a result of the proposal. Trust is minimized because in the event that the payouts are not being returned as intended, stakeholders can vote out the proposal and stop funding. (Reasonable allowance should be made for short interruptions due to technical difficulties.)

As a consequence of this process, any excess demand for HBD (per step 3) is translated into demand for HIVE. All else being equal that would likely increase the price of HIVE. I am optimistic that we can make HBD attractive enough that this may ultimately result in a large amount of demand for HBD (which is then transferred into demand for HIVE), but of course no one can predict or promise actual prices or future price movements. However, for this to happen we first need to stabilize the price and firmly establish the linkage between excess HBD demand and the HIVE price.

In addition, any profits which result from deviations in the price of HBD away from the peg would accrue to the DHF in the form of larger expected amounts of HIVE or HBD being returned (via either step 3 or step 4).

The amount of the proposal funding is TBD. It would likely start smaller and potentially ramp up over time. My initial thought would be to start with 2400 HBD per day, or 100 HBD per hour. Again, this does not represent an actual expenditure because all of the payouts will be either returned to DHF or used to stabilize the peg and then returned to DHF along with what would normally expected to be a profit.

I welcome any comments, feedback or suggestions.

Beneficiary is 100%

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