So, HBD (and Hive) are still "piggybacking on top of USD"? Even though HBD is not pegged to USD, it is derived from 1 USD worth of Hive (1 HBD = 1 USD of Hive). The Hive system is still based on USD as a unit of account. Correct?
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That is 100% correct.
In fact the way that HBD works is actually guaranteed to make Hive even more volatile and unstable than it would be otherwise. We will experience bigger pumps and bigger dumps because all the volatility of HBD is outsourced to Hive though conversions. So in a way Hive becomes twice as volatile. Hive will pump twice as it gets burned to create more HBD during the bull, while dumping twice from HBD converted to Hive during the bear.
I do not think this is necessarily the worst outcome.
There are a lot of perks that are gained by doing it this way. First of all it's a great shortcut that allows us to focus on other important things while still having access to a stable asset with atomic swaps. It also allows us to siphon value from HBD debt holders into Hive just like central banks siphon value into their own pockets. This value drain can easily be displaced with savings account yields (clearly 20% yield is higher than inflation).
It's also very easy to create organic demand for our debt when our debt is pegged to USD and USD is the most stable asset possible. In the event that some miracle crypto becomes superior to USD we can switch the HBD peg to that new asset quite easily. There's a lot to unpack regarding this topic.