Embrace HBD! - The Conversation around Stablecoin Status and Utility of Liquid HBD

By @Zestimony

In this post Avoid HBD I made some sweeping statements that didn't go down well with some Hive experts. Nonetheless, I appreciate all the feedback provided, and I learned a lot as a result. So, I feel it would be nice to provide an update to address a lot of the issues raised in the previous post.

In the previous article, I was trying to highlight why Hive users shouldn't be hyped by HBD pumps and price hikes. While my intended audience was the average Hive user, the post's content was somewhat inaccurate, controversial, and, to most pro-Hive users (so to speak), it was a clear indication of my total lack of knowledge on the subject. I accepted all the feedback and promised to do better this time. So, here are the things we learnt from all the debacles last time.

HBD is an Aspirational Stable Coin.

According to @cmmemes, Hive Backed Dollar (HBD) is not yet fit to be called a stable coin, but rather, an aspirational stable coin. This, according to him, is a result of HBD being unable to achieve the sustainable level of stability as desired by a true stable coin, but at least it is approaching that height, and according to @cmmemes, we can definitely make a lot of money off HBD when it pumps by even using it to acquire other stable coins.

However, @Hivecoffee seems to disagree with the use of stable coin in relation to HBD, because, according to @hivecoffee:

"that would suggest putting the fiat feature of instability into a crypto, and calling the dog a cat. HBD is not a stablecoin, but rather a Hive-Backed Dollar. You can hold it, but it is a debt to Hive. You can always trade 1 HBD for about a dollar worth of HIVE, but the peg is only approximated by traders and some trading mechanics. Still, it is great because you can use collateralized conversion to swap HIVE for HBD when Hive goes up, and you'll get the change back in 3 days. Vice versa, you can swap HBD for HIVE anytime, and that would be like trading paper money for silver coins. The HBD is a debt to Hive. Not a dollar. The "price" is only a visual conversion for our benefit."

I couldn't agree more nor could I agree less with the above argument. While most parts were obviously true and inarguable, I made an argument (not exactly a counter argument) that even though HBD is not yet as stable as it is hoped to be, it was designed to mimic a stable coin (I think that was the whole essence of the HBD stabiliser feature he pointed out later). I cited Steem Backed Dollars (SBD) as an example. SBD was never designed to auto-rebounce to a particular value. That was why it could sometimes hit a value of 5 USD or even more. HBD definitely spikes a lot in value, but with its recent implementations and algorithmic backings, it usually finds a way to retrace to around 1 USD at all times.

Additionally, as I highlighted in the previous post, a stable coin must not be backed by fiat but must have a value-backing to it. HBD, as highlighted by @Hivecoffee had its value from Hive as it is, in his words:

"not really a 1 USD peg, HBD is 1:10 HIVE as the HBD market cap will not exceed 10% of HIVE's market cap".

However, I felt there was a need to find a sweet spot with @cmmemes and @hivecoffee, as both positions were hard to fault entirely, so, I agreed that HBD is not a stable coin, but rather, an aspirational stable coin. @Hivecoffee expressed legitimate concerns with the nomenclature "stable coins,", as it was further stated by @hivecoffee that since stable coins will soon be facing some regulatory backlash, it could be safer to refrain from using the term for HBD.

With respect to pegging HBD to 1 USD, that seems to be a logical thing to do, as the USD has become an almost global standard for measuring a currency's worth, and as noted by @hivecoffee, it is "nice to have a visual conversion for our benefit".

Liquid HBD

A lot of issues came up from my previous post, as I failed to properly highlight the utility of liquid HBD other than converting it to Hive for sales in exchanges. Thanks to @sorin.cristescu who first highlighted and reminded me that liquid HBD can easily be traded when HBD increases in price for some quick profits. That was a good way of taking advantage of any spike in HBD value, which is definitely possible if you have liquid HBD on hand.

Liquid HBD is simply HBD that is ready to use and not locked into savings for the 20% APR. So, holding it means that you are missing out on the 20% APR but ready for quick market action in the event of a HBD value increase. So, we can simply take advantage of the internal market to buy more Hive with HBD when the value of HBD spikes.

@leprechaun I also highlighted that HBD could be traded easily on external markets such as Ionomy, which I have confirmed, but not tested yet (proceed with caution).

Finally, @forexbrokr highlighted the need to always dump liquid HBD into pumps so as to quickly take advantage of spikes in HBD value.

So, the take away is this: liquid HBD will help you take good advantage of HBD price hikes in a way and manner that just converting HBD to Hive through the routine 3.5 day averaging process will not afford you.

Final Words

It feels good to have learnt a lot from my mistakes. While the above does not 100% fix the flop I made, I am sure it will go a long way. Thanks to y'all for your contributions, and I promise to do more digging next time before publishing. Nonetheless, it was an excellent conversation with y'all.

Big thanks to all who dropped their comments: @metzli @sorin.cristescu @cmmemes @felixxx @jelly13 @hivecoffee @leprechaun @forexbrokr @scholaris.pob and @jfang003 | The tags are to notify y'all of the update, hoping this is better now!

As usual, do your own analysis before investing or trading | This piece is no financial advice.

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