I have no idea where to start with this very important topic and to not hurt your feelings... 😃 Certain things in life can bring us good, but in the long term, they can harm us a lot more... It is hard to recognize these things, especially in today's age when people rarely think in the long-term, and even if they do, they think in like 2-3 months "long term"... That's not long-term thinking... I know that in crypto everything over a week is considered as a long-term, but that's more a joke than a real statement...
I remember the time when 20% APR was implemented (and supported) by Hive witnesses... Everyone was thrilled about the news, LUNA was doing the same percentage (yes, it was alive in those moments), and after having the HBD savings percentage at 3% (or it was under?), this was a piece of excellent news!
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As crypto is a volatile asset (everyone says that but sometimes, I'm not that sure about that), people run into the "safe haven"... the good old USD... In our case, HBD... Getting 20% APR on something that's "safe" is AWESOME! Instantly, everyone forgot that HIVE went from 12 cents to over 50 cents in less than a year... yes, it went back to 32-33 cents, but that's still 3x more... or 300%... But, let's be honest, that happened in 2 years, so the APR is "only" 150% (+ 3% HP + 8-9% curation rewards per year)... But, let us forget about that...
What was the main purpose of a higher APR on HBD savings? And what is the purpose of HBD in the first place?
No, it's not to make rich HBD whales even richer, but that's what's happening too... 😃The general idea was to have a "stablecoin" integrated into the main blockchain to make e-commerce and future developments easier on HIVE... It has sense, as it is easier to pay some developer from the outside in USD if the person has no idea about the HIVE... And it's okay to build a game where HBD would be the "main token" and attract more players from the "outside" and lure them to HIVE...
Also, another use case would be the creation of different DeFi platforms that would use HBD as a stablecoin... We saw that with Polycub (in a certain way), or with Dieselpools, but we need more platforms with different ranges of products... And HBD wasn't the highlight of those (current) platforms... It was present, but not as a cornerstone...
Those were good ideas and making a higher APR on HBD was a nice incentive to make them even better... But, did we get that result? I don't want to be pessimistic about this, but the main purpose of higher APR is mostly viewed as "put it in the savings and harvest 20% APR"... Most HBD tokens are LOCKED in savings and rarely used for any of those mentioned ideas... Maybe to sell them to take profits...
Why not 10%? Or 7%? Or 50%?
I mean, I know that 20% APR was decided to counterpart LUNA's 20%, but one of the reasons why LUNA crashed was exactly that as it wasn't sustainable... Today, having that 20% is making people (outside the HIVE) afraid to invest in it... It doesn't matter if it is sustainable or not... People are emotional and react without having any knowledge... Even if that is right or wrong, it is like that...
So why not a lower %, or a bigger %? Let's go back to the general idea... We need more liquidity and that's why we are "printing" more HBD for funding projects, using HBD in transactions, paying stuff, etc... If we want that, and we have only that haircut rule, we can print at whatever rate we want (if the goal is to have more supply)...
At what price are we printing 20% APR on HBD savings?
You know that saying... If there is no product, you are the product... There is no free stuff and always someone pays the price... Now, we are coming to that point which was the main trigger for creating this post... The question from Discord...
Why should you buy (HIVE or any other HiveEngine token) if less than <20% from HBD?
The question sounds confusing, but it's just perfect! Let's start with HIVE... It is the main token of this blockchain (the network is called like that... can't say it's not! 😀) and it's the "engine" of the blockchain! By powering up your HIVE to HIVE POWER, you are getting many different advantages on the blockchain, starting with Resource Credits, which give you possibilities to execute transactions on the chain, to earning additional HP from inflation, curation, etc... But... If you ignore all the "second layer effects" of having HivePower (that many people are unaware of... I mentioned them many times in my previous posts), you get to those numbers that I mentioned at the beginning.... 3% from staking + 8-9% from curating, which leads to max 12% APR on your HivePower... That's less than 20% APR on HBD savings... Why would I stake HIVE at all?!
We have many similar examples on the Hive's "second layer" better known Hive-Engine... We had many tokens that were giving your 50-60-100% APR on staking them, or just by HODLing them in your wallets... That attracted many people as it IS HIGHER THAN 20% ON HBD! What happened to ALL of those tokens? They went down in value (compared to USD, HIVE, or BTC) as they weren't sustainable and people lost money... Even by having 100% APR... 100% of nothing is still nothing!
Lately, I saw some people trying to experiment with different tokenomics in the hope that they can create a sustainable APR for their investors, users, players, etc... What is a sustainable APR? You can create hundreds of % in a hyperinflationary environment, but it is extremely hard to do it in a healthy economy... If you want to "give" value to people, you have to "earn" it somewhere... If you don't do it, you are creating a Ponzi which isn't sustainable in any scenario... So, what are the "real APRs"? In my opinion (you can have a different one), it is around those that we have on HIVE, or other chains, between 4-10%... It is possible to create a project with that APR!
But, we are coming to that famous question... Why should you buy (HIVE or any other HiveEngine token) if less than <20% from HBD? Because of that simple question, many of those QUALITY (and sustainable) projects are not growing and attracting other investors... Higher APR on HBD is killing small projects on the second layer...
The third aspect is that, if we move the focus from people to HBD/USD, we lose price movements of crypto, moving attention back to stablecoins, USD, and all that we have escaped... The question is... Did we move to crypto as we want to change things, or we moved to earn more fiat money by speculating?
I suppose that I could write a lot more about this topic, but I doubt that it would keep your focus... 😃 So, let's leave it here with one thought...
Are we shooting ourselves in the foot by having this high APR on HBD savings?
Tell me what you think in the comment section... Maybe I got it all wrong...
PS. I will skip this week's #MyHiveGoals post as I don't want to dilute this important topic...
Thank you for your time,
ph
PPS. This isn't financial advice!
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