Why I set my witness HBD interest rate parameter to 3%

If you are reading my blog, you are aware that I recently submitted the HBD stabilizer proposal to the DAO, both the original proposal as well as supplemental funding have been approved, and for much of the last week, the stabilizer has been buying nearly 10K USD worth of HIVE (almost 30000 HIVE) per day, taking it out of the liquid market, and sending it to the DAO. In the process the HBD stabilizer also performs its namesake function, helping to stabilize the price of HBD by selling HBD when it is trading for more than the 1 USD worth of HIVE that it costs the DAO to create it, and not selling (or occasionally buying) HBD when it is trading for less. Both of which result in an immediate profit to HIVE stakeholders.

In addition, I am encouraging witnesses to set their HBD interest rate parameter higher than zero for the first time since shortly after Steem (Hive's predecessor chain) launched in 2016. The goal is to encourage some additional holding of HBD, which will reduce the potential for HBD to drop below $1, in turn keeping the HBD stabilizer operating in a mode where it continually buys HIVE and sequesters it in the DAO. This, in effect, transmits demand from investors looking for yield (of which there is ample and widespread demand in the world today) into buy pressure for HIVE. This interest is sustainable, and indeed profitable for Hive stakeholders, to the extent that HIVE appreciates, over time, at a higher rate than the interest. To the extent that Hive is successful, this should be self-evident, and in some sense may also be self-fulfilling.

I have set the HBD interest rate on my (backup) witness to 3% and I encourage other witnesses to do similarly. A moderately lower rate, of say 2% might also be appropriate, it is hard to know for sure (and market conditions are sure to change, meaning the best rate will change as well). But, in general terms, the rate should be high enough to encourage holding HBD which means offsetting the costs of USD inflation, as well being attractive to investors given the risks of holding an investment in any blockchain (all of which are properly viewed as experimental in some sense). At the same time, it should not be excessive beyond what is needed to create robust demand for the entire, currently limited, supply of HBD, which would be an unnecessary cost. I believe 2-3% is appropriate at this time.

100% beneficiary to @hbdstabilizer (which in turn donates 100% to the DAO)

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