I definitely think there is a tremendous potential behind HBD that we are not utilizing. I think that if mass adoption and shift to cryptocurrencies is to occur, regular people will use and put their money in stablecoins.
As you say, we need far more HBD printed for this to happen.
One thing that concerns me with the bond proposal is that it creates complex mechanics where there can be a lot of gambling into the future that creates systemic risks for the entire network. We see this in economies. Huge amounts of capital locked up in assets that are seemingly very secure, but at one point it turns out they are not, so a domino effect happens. It bothers me that these scenarios can be brought into crypto, and especially into Hive which I would like to see as a far superior and more stable economy than the other ones out there. Gambling with buying and selling bonds (debt) for a year or many years into the future, which is where I think you are going with this, creates that speculation where everyone gets in on the high-paying asset and all of a sudden there is a huge amount of outstanding debt and this creates systemic risk.
With that said, I am all for the spirit of what you are going for here, I just don't think buying and selling debt will serve us well to get there. I think we can get there (print tens and hundreds of millions of HBD in the next 2-3 years) by using what we already have in place. I really like the system we have where witnesses can set the HBD interest rate at will. This creates a highly intelligent (far better than code) and responsive (in pretty much real-time) system. So, when the haircut rule is increased to e.g. 30%, might the witnesses not increase the HBD interest towards 20%? What about 30%? And go even higher, 50%. What would this accomplish? First, it will print more HBD. Then, it will increase demand for HBD, which will increase its price. As HBD's price goes up, the moment it reaches $1.05, it will start to make sense for people to convert Hive to HBD, which will begin to greatly increase the amount of HBD in existence. The higher the APR, the higher the demand, the more HBD gets printed. This will also create a large demand for Hive, increasing its price as well. And also, it will serve as a great marketing tool to make the name of Hive reverberate around the crypto sphere - who the hell gives a 50% APR on a stablecoin? It will also be a chance for us to point out the advantages of Hive, so many people who care about those core principles will discover what this place offers, besides having incentive to move capital here.
What's great about this is that the witnesses can keep increasing the APR gradually and seeing the effects of each increase. Are things going how we want? If so, keep increasing. If not, then revise. The goal would be to print hundreds of millions of HBD (or more), push Hive's price up a lot, and make Hive's name become very popular. Then the witnesses can start bringing down the APR when they see it is at a level that's not sustainable and that's not resulting in the additional printing of HBD.
Again, the goal of this would be to print a huge amount of HBD in the next 2-3 years. When accomplished, there will no longer be a need for such a high APR.
And then, we would have to ask ourselves - if there is this much HBD in existence, will it stay that way or will people convert back into Hive? I guess this depends a lot on what use cases for HBD there are. If there are good use cases, the HBD will stay there and be used. With a lot more HBD in existence, this will open up new use cases, for sure. The high APR and demand will create new exchange listings. So people will be highly incentivized to buy HBD and simply keep it in savings for a nice APR like 12%. Everyone with a lot of money will love this, and the popularity, stability and amount of HBD in existence (if we achieve it) will give them the confidence to put their money into HBD savings.
But this is just one idea, I'm sure there are other, better ones. The point is however that we aren't even scratching the surface of what we have - a decentralized system where the witnesses can specify, in real time, how the HBD system functions. I find this far superior than hardcoding any ruleset. We could easily increase the APR the more time a person keeps their funds into savings, or incentivize any other kind of behavior.
That is true that the witnesses can raise the APR on savings. They can do the same with the bond.
The difference is that HBD created through savings is still a threat to the system since it is basically liquid.
With the bond, there is a lock up, creating more HBD yet not having as a threat to the stability of Hive.
As for trading bonds, you might be right. That would be a layer 2 solution that would be technically outside of Hive. Would it drive more people to speculate and get involved, I dont know. Nevertheless, the base layer still operates the same with or without that step: lock up HBD and get an increased return.
All interesting ideas and there is the flexibility being built in. For example, the witnesses, if they desired, could push the bond to 50% and savings to 30% (or whatever numbers they choose) based upon the success of pulling money in versus not.
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Hmm, don't we want to create more liquid HBD instead of locked up HBD? What would the value of locked up HBD be? People can't use it to buy and sell things.
And why does more HBD pose a threat? If it does pose a threat, then locking up the threat just postpones it a year or more, so the threat is pushed into the future but the time will come when the HBD will become liquid, and then what would happen? I would be unsettled holding my money in a network that has huge future debt.
Maybe we can find a way to mitigate the threat (If there is one) in the present time instead of pushing it into the future.
The blockchain has the haircut rule which stops printing HBD once a debt threshold is reached, and to me this sounds like a good preventive mechanism - if we go above the haircut, no new HBD is printed, so the only way to print new HBD would be to increase the price of Hive or to reduce the HBD supply. From your proposal, though, I am guessing you don't think the haircut serves as enough of a protection against creating too much HBD that can't be paid back in Hive.
The haircut rule does provide the buffer. This actually enhances that since there is more HBD out there yet cannot be used as an attack vector since it cant immediately be converted.
That is true, if the dynamics stayed the same over time. However, since they change, we would not be in the same situation. For example, there demand for HIVE is likely to start increasing over time as more applications and games start to be developed here. Hence, the delayed period might have different ratios as compared the first time period.
Ultimately, you will end up creating more liquid HBD. As more people get involved, the amount in the "bond fund" will grow, throwing out more HBD. This will come out as liquid, which people than can decide what to do with after they receive it.
The biggest difference is what comes after the introduction of this. What innovation follows suit? There is still the liquid option in the savings (well 3 day lockup technically) and one that is longer term. The witnesses set the rates and can adjust them.
However, from an investment perspective, I cant lock in anything in savings. If it is 12% today and the witnesses move it to 10%, then as soon as I claim my rewards, I am at the new rate. With this, people can lock in their rate for a year.
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I of course also see a lot of increased demand for Hive in the future but to create huge oustanding debt, betting on a large increased demand is another thing altogether. There could be crypto winters, all sorts of impacts from regulation, geopolitical events, unknown security vulnerabilities discovered, who knows what. What if the bonds are very successful and we have e.g. $100 million or more in outstanding debt? People will expect the HBD to become liquid after 2-3-5 years (or however many), at which point it could be converted to Hive and sold, which would push Hive's price down. So we'd have a situation where the price of Hive is expected to potentially go down significantly as the HBD becomes liquid - not a stable situation, in my view. We need stability if many apps are to be built here.
Sure, if the bond interest rate is fixed and not changeable by the witnesses. But such a fixed rate will probably create another vulnerabilities. In addition, the savings locks up my money for 3 days only, so if witnesses move the interest rate down, I can just pull my money out and put it somewhere that suits me better. The bond locks up my money such that I can't reallocate it to great new opportunities, which there are many of in crypto.
Savings has all the advantages of the bonds but without the disadvantages. Am I missing something? The main disadvantage of savings you mentioned was that the HBD is locked only for 3 days so it can be taken out and potentially create instability if people rush to convert all that liquid HBD for Hive. So maybe we can look more carefully at the protection the haircut rule creates and whether we consider it sufficient. I guess you are going for enhancing the haircut rule by locking up the HBD for long. Maybe we can enhance it in some other way that doesn't have the abovementioned disadvantages.
I guess we are both talking about increasing the inflation of the virtual supply (Hive + HBD), which can result in a downward pressure on the price of Hive if people come in with capital, reap the interest and sell it. You want to counteract this tendency by locking up their capital for years, so there wouldn't be much downward price pressure on Hive except coming from the interest, and betting that in the future the demand for Hive will be greater so the unlocking of the HBD would not be a problem. Well, what if instead we thought of a way where people can put their capital here and reap a big interest, but as they do so they immediately help the ecosystem. In other words, instead of locking people's capital in order to prevent them from simply harvesting and selling the increased inflation, which creates a benefit for them at the expense of the network, how could we put their capital to work for the benefit of the network? This way there is a win-win instead of sucking value out of the network. Any existing financial instruments that create a substantial use case and benefit from people bringing in their capital?