RE: HBD: The "Safe" Stablecoin?
You are viewing a single comment's thread:
I think central banks have it wrong. Their main purpose is to manage the money supply. Unfortunately, they rely on data collection, analysis, and meetings to decide what the monetary policy shall be. Even politics plays a role. It is retrospective in this regard.
Stablecoins introduce an efficiency into capital markets in that as money is needed, money is “created”. In the case of DAI, the creation and destruction of tokens is managed as needed on a continuous basis. In this regard, stablecoins are better at monetary policy than the geniuses at central banks. Unfortunately, the scale is only large enough for the crypto market, not the economy as a whole. This is something remedied in time.
Centralized stablecoin has a disadvantage that it requires dollars to be deposited to mint the equivalent in tokens. There is no net expansion or contraction of the money supply.
Decentralized stablecoin like DAI and HBD, mint new coins through overcollateralization of underlying assets. The power in this is that, unlike central banks that print money out of thin air, stablecoin prints money that is backed by other assets. And if the money supply is too big, causing the peg to slide, burning tokens releases collateral back into economy.
Tether, it’s hard to say. Tether is a mess. They have some cash and other assets supposedly backing their stablecoin. Yet, like with Doge, good sense evades holders of USDT.
Coming back to HBD, the market cap of Hive will be a wall that we would hit if HBD gains traction, as HBD is limited to 10% of Hive. The workaround is to buy more Hive to convert to HBD, which simultaneously increases the market cap of Hive as the blockchain switches off HBD rewards. In other words, we would have to add capital to Hive to be able to mint more HBD. That could drive up the price of Hive.
I still don’t know if HBD paid in interest comes out of thin air, or if it is subtracted from the reward pool and paid out to savers.
It is just created and is separate from the rest of the issuance schedule. It has been there from almost the beginning of Steem, initially 10% APR, but it was largely ignored after witnesses set the interest to 0 because SBD was overpriced, and then never bothered to increase it again when it went below.
Even being outside of the normal inflation schedule, it is an extremely small source of inflation, there is no reason to expect it to become a large source of inflation, and the rate can be managed downwards again if it ever looks like it was somehow a problem.
If it becomes a lot more, than it means we have a major success on our hands. There would have to be a ton of HBD created and entered into savings.
Posted Using LeoFinance Beta
You nailed it with this comment. You are right about central banks. There are many things that influence their decisions, many of which takes them away from concentrating on the elasticity of the money supply. And yes the Fed has become politicized.
HBD's greatest value is that it can expand and contract as needed. With the ability to convert, we will see the value of Hive potentially moving due to this.
If HBD can increase in value, through creation and economic activity, we could see it push the value of Hive higher.
Posted Using LeoFinance Beta