Proposal to make HBD interest payable only to savings accounts

During a recent discussion in the mattermost dev channel for Hive, @therealwolf suggested that Hive should have a staking mechanism for “mostly liquid” funds. Currently, Hive only provides staking rewards for vested Hive (hive power) and it takes 13 weeks to fully unstake hive power. His comment was mostly made in the context of an argument for lowering the unstaking time for Hive power, but the discussion in this case took a turn towards another idea that’s also been around for a while.

Staking Hive dollars (HBD)

During the discussion, @smooth pointed out that Hive already has a liquid staking mechanism: Hive dollars (HBD), which pay an interest rate set by the median value voted on by witnesses. But currently Hive dollars pay a relatively low interest rate of 3% (low relative to other crypto staking opportunities), so it’s not a particularly competitive staking opportunity right now.

It’s been suggested that this interest rate should be increased to something more substantial (e.g. 10-20%) once the upward side of the peg for HBD has been stabilized(hardfork 25 includes a Hive→HBD conversion operation that is designed to stabilize the upward side of the peg).

Using savings accounts as the staking mechanism for HBD

To make staking of HBD more familiar to the average cryptocurrency investor, it seems likely that it would make sense to make a change to the current interest payment mechanism: instead of all HBD receiving interest, only HBD in savings accounts would receive interest. In this case there would be a clear “staking” and “unstaking” mechanism (moving the HBD in and out of the user’s savings account). And the unstaking time is relatively short: 3 days.

There’s also a couple of other important benefits to this proposed change:

  • it encourages movement of HBD from exchanges to wallet savings accounts which lowers the risk profile for users
  • exchanges won’t be receiving interest payments just for holding their customer’s HBD in custody (unless the exchange puts it into a savings account, of course, but in that case it seems likely that they would have to offer some staking reward as part of such a change in order to avoid looking bad in the eyes of their customers).
  • not having to pay interest to every HBD holder means that the interest payments can be “concentrated” on the stakers without necessarily increasing the amount of overall interest being paid.

This proposed change is also not a new idea, it’s been discussed in the past, on and off chain, for a long time. And to my knowledge, the idea has generally always received a positive reception from participants in those discussions.

As the change seems pretty simple and so far only has supporters, I decided to make this post to propose including this change into hardfork 25, since HF25 will have the prerequisite stabilization of the peg for HBD that can make this staking mechanism potentially attractive.

Costs of the proposed change

As planned, the change to only pay HBD interest to savings accounts is relatively straightforward, and I’m estimating it can be completed in about two days (including allowing time for creating tests for the new behavior). So the implementation cost is very low.

Today was the date for the planned code freeze for HF25, so including this change would push the code freeze date into early next week. But there was nothing magical about today’s date for the code freeze, and I think it’s a small cost to push the code freeze date into next week.

Computationally, I don’t expect any increases in CPU or memory usages as a result of the change. In fact, it’s possible that it will be negligibly faster than it was before to compute interest payments.

Feedback wanted

Personally, given the low cost of this change and its potential benefits, I’m in favor of making this change in hardfork 25. But my main concern is that it is a proposed change that is late in the development cycle for hardfork 25 (in the best case, the hardfork could take place in as little as 1.5 months).

So, while I have no technical concerns about introducing this change this late, I want to be sure that most people are OK with what might be considered a “last minute change”. If you have either a positive or negative opinion on the proposed change itself, or the idea of including it into hardfork 25 versus at a later date, please leave a comment.

144 Comments