Approximately three months ago I undertook an initiative to bring back interest to HBD (which as SBD had interest back in 2016, but for various good and bad reasons, did not offer any interest for several years). Witness voting then established an initial interest rate of 3%. At that time, HBD remained somewhat overvalued, and the interest wasn't immediately needed to boost demand for HBD, but the purpose was helping to re-establish HBD as a interest-paying asset to lay the groundwork for stabilizing it and increasing demand for both HBD and HIVE going forward.
This was simultaneous with several proposals to initially fund the HBD stabilizer and then later provide added funding as the DAO fund increased.
Since that time:
- HIVE has increased substantially in value.
- The HBD stabilizer has generated a profit for the DAO and Hive stakeholders of millions of HBD (millions of USD), transmitting excess demand for HBD into demand for HIVE, and removing several million HIVE from circulation.
- HBD has stabilized, albeit for a limited period so far, at around $1.
- The upcoming hard fork is nearing release, which includes a HIVE-to-HBD conversion feature that should further stabilize HBD even in the face of higher demand, and also transmit demand for HBD into demand for HIVE to the extent such demand even exceeds the capacity of the now-substantial DAO and stabilizer budgets.
- Although we can't know for sure, it is likely that some of the demand for HBD is now coming from people who desire a reasonable rate of interest and price stability, rather than unstable "pumping" (this further helps stabilize HBD because such holders are more likely sell if HBD substantially appreciates, and then reenter back near $1).
- The upcoming hard fork will focus the HBD interest function onto "savings", making HBD interest into a form of staking reward.
At his stage, I believe we should now seek to make HBD interest compellingly attractive, and not merely minimally sufficient. The more demand for HBD we can attract, the more HIVE can be removed from circulation, and the more exposure we can bring to the entire Hive ecosystem.
I believe a 7% rate is compelling, while remaining sustainable in the sense that a Hive that succeeds long term will grow its value by much more than 7%/year. If Hive is not successful despite our best efforts, then the added interest doesn't really matter. It becomes dilution of what will be a nearly-valueless token anyway. Suggestions of 10% or even a bit higher are likely okay as well. Since witness voting takes the median value, a range of votes if there are slightly different opinions will work fine.
Once the interest is focused on savings (post-hard fork) we can reasonably increase it even more, because it will no longer be paid on liquid balances, reducing the total cost.
I encourage all witnesses to increase the HBD APR, making HBD into a compelling vehicle for yield-seekers. After the hard fork, this will make HBD savings into a compelling staking opportunity, while unstaked HBD will remain highly liquid, and seek to further stabilize its value and utility for decentralized finance and commerce.
We should also make sure this yield opportunity is widely publicized by the marketing team to attract participation from outside the existing Hive ecosystem.
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