Room to breathe.
Hive has been somewhat crushed under the weight of its own debt up until this most recent pamp. Or at least that was the perception. I tried to tell the worry warts that everything was fine but they were not having it. I have yet to see a single person come forward thus far and be like "yeah I was wrong it worked out fine". Still waiting on that apology tour.
Hive has essentially made it a full 4-year cycle doing the impossible.
We were told offering high yields on HBD was a fool's errand doomed to failure that would implode the entire network. At first these doomsayers came from outside the network; people that have no idea how any of this stuff actually works. When we started feeling the squeeze in 2024 people from inside the network decided to jump on that boat at the literal bottom. Lot's of discussions about this at the 16 cent bottom. Most of them based on panic and vibes and not rooted to any kind of data or on-chain analysis of the situation.
However...
Now that this is mostly behind us and we've achieved this new milestone, having gone full circle, I'm feeling more confident that I can speak on this issue without getting visceral irrational responses based on the fear that number is going down forever. HBD is in a pretty good place but I'm quite certain we could make a few small changes that make it exponentially better.
Hive/HBD AMM
The main feature that Hive requires is a swap farm to compliment our traditional orderbook model. This would add exponential liquidity to the entire ecosystem which we desperately need because so many tokens are powered up for governance. This would require a hardfork to put in on the main chain and has thus far been a tough sell for whatever reason even though it has remained a proven concept since DEFI 2020.
In fact the tech has already existed on HiveEngine for quite some time under the Diesel Pools brand, but the fact that HE is centralized and we can't move in/out of it without paying a fee to a centralized agent makes it an invalid solution for our purposes. Of course there's still hope on other fronts like VSC, Honeycomb, and HAF. We shall see!
Ideal outcome:
The ultimate goal is to have an AMM on the Hive base layer with a huge amount of liquidity for the cheapest price we can get. There should be a way for witnesses to print inflation into the AMM to further incentivize more liquidity, but on day one that number should be zero while we are testing it out.
The only other source of income for liquidity providers is the trading fee, which should be in the range of 0.1% to 0.5%. 0.1% being extremely low friction and comparable to Binance fees, and 0.5% being relatively large amounts of friction comparable to Coinbase. Again, if something like this were to launch we should set the friction to the lowest level and see how many people will participate in providing liquidity "out of the kindness of their hearts" without needing a large financial incentive. 0.3% would be more on par with what other decentralized protocols are offering.
optional time lock on AMM
Because account recovery on Hive is so important we need to start thinking about implementing optional timelocks on value that's just sitting around unlocked. Traditionally AMM LP tokens are liquid and can be converted back to the underlying asset (in this case 50/50 Hive/HBD) and be available immediately. However there needs to be an option for whales to lock their money in a vault so if their account gets stolen they have time to recover it. Without this feature, big liquidity providers put their bags at risk for no reason.
static vs variable yields
It is unacceptable that Hive provides static yield on the savings accounts and let's everyone farm a base rate no matter how crowded the trade gets. Thus far it hasn't mattered very much because the amount of HBD in the bank accounts hasn't been very volatile and can be easily monitored on-chain.
The problem is doing it this way completely undermines the free-market economy. Either the yield is static and the overall inflation is variable (now), or the inflation is static and the yield is variable. It's very obvious to me that the inflation should be static and the yield should be variable... that way the free market chooses the yield based on how crowded the trade is. This is a self correcting system where if people leave the trade yield goes up and incentivizes someone else to enter, while if it's crowded in incentivizes people to leave. The way it is now we are constantly just guessing as to what supply and demand are and hoping it works out... and basically writing a blank check with variable cost.
In fact providing yield at all to the savings account is a mistake.
There is very little value in rewarding users for taking liquidity off the market and locking it up in a smart contract. Hive needs as much liquidity as it can get. This false idea we have in our heads where if we take all the liquidity away it will make number go up because there's less supply... is a fantasy not based in reality. Whales don't want to buy an illiquid token and trap themselves into a trade they can't escape from. Artificially reducing supply doesn't make number go up because the returns are diminishing while lowering demand at the same time. The system has to have a certain organic materialization in this regard, and a free market system will work best.
The ONLY reason to incentivize a single asset staking pool is to be able to provide elasticity to the market. When price is low we increase the incentive to inject liquidity up and push up the floundering price. When price is high and we want to incentivize selling we take the yield away so we can flush our debt, selling it off at the peaks.
The Hive community has already very much shown they do not have the financial discipline to make Chad moves like this. How many of us were calling to rugpull the yield at the literal bottom? That's exactly the opposite of what needs to be done to provide the elasticity required to justify the existence of this incentive in the first place.
I'm not joking when I say we could have jacked up HBD yields to like 50% when we were sub 20 cents. It would have helped bring in liquidity from the outside and gotten us out of that hole faster. Of course we have to trust that it will be brought back down very quickly after it works... which can be a problem when a handful of people are in charge of it; none of which are economists. We need to create some kind of algorithm using basic statistics to show us how far we are away from the standard deviation so we know what kind of rates we should be setting.
Hive Bonds: terrible idea
I have had over a year to figure out the mechanics of bonds and such. I went from being opposed to the idea, to warming up to it, to snapping back and being sharply opposed to the prospect all over again. Again, locking up stake (especially dollar denominated assets) for longer periods of time not only has zero value: it has negative value, and I'll try to explain why that is as simply as I can muster.
Well what if we have a 1 year bond? What kind of yield should we offer on that? Clearly we can't do significantly more than 20%. Once you realize that you realize we need to refactor this system.
Begging the question much?
I've heard this argument like a dozen times on Hive when it comes to bonds. It's a logical fallacy called begging the question where the question itself assumes the answer to be true. Yes, if 1 year bonds had value what you said would be true. But they have a negative EV and are terrible for all parties concerned.
Hive bonds take power away from both the user and the network.
From the user's perspective the network is asking, "Hey how would you like to lock up your HBD for a year instead of three days? No, I won't pay you a better rate than the current 15%-20%. Deal?" Yeah how about no deal that's a garbage deal that makes HBD worse for the user. It's especially bad for the users with less money, because richer users have more tools and tricks they can use to exploit the timelock with various sources of liquidity that exist elsewhere, again making the timelock totally pointless and nothing but a drag on the entire network.
From the network's perspective the user is asking, "Hey how would you like to offer me a fixed interest rate for a guaranteed amount that you have zero power over?" So bonds are also a terrible deal for the Hive network. It takes the network's power away to manipulate rates immediately on demand given current market dynamics... and then we have to start guessing as to what's going to happen in the future in order to make a decision today. Just awful.
Copying legacy finance is a mistake
It should be obvious but apparently isn't.
The entire reason we got into crypto was to get away from legacy finance.
History of bonds.
Why are bonds even a thing that exists in the first place? Well, institutions like the government needed money to fund things so they asked for a loan and called it a bond. So then people had these bonds that were totally illiquid and not going to be paid back for 10, 20, and sometimes even 30 years!
However the promise that they would eventually mature and be paid back was a good one, so people started trading those promises on a secondary market, which was a much needed service. Everyone got what they wanted. The government gets their loan and the people that buy them can get immediate liquidity whenever they want on the secondary market. Win/win.
Now the question we need to ask ourselves is simple: wtf does Hive need a loan for? What is Hive going to do with that money? Oh, that's right, it's just going to sit there and do nothing. Absolutely nothing and then we have to pay a high rate when the bond matures and we did nothing with the money during the interim.
Hive doesn't need a loan because Hive can just print the money just like it does for everything else that it needs. Unless of course it's the bottom of the bear market and we don't want to print money... which is why we need unilateral control of the interest rate that can be manipulated in real time for everyone all at once to make the biggest splash possible... and not bonds that we've been issuing for months that we have zero control over during the darkest hour.
People on Hive have been looking at that legacy Frankenstein system that's been evolving over 100's of years thinking we should copy it like it's going to magically create more liquidity because that's how it worked out for the greatest military power of the world who just happens to also control the reserve currency. Yeah, that's not happening. Copying the broken legacy system is not a win for anyone. AMM tech is already the superior option for creating liquidity. It's been around 4 years and the equation that governs it couldn't be more simple (k = y * x) and we still don't use it on the main chain. It's embarrassing at this point.
If Hive simply increases its liquidity with a basic AMM it's going to create indirect liquidity on every other exchange. Hive price spikes on exchanges? Well guess what the price on the internal market is still the same and it has better liquidity. Hive will move off the internal market and onto the exchanges to stabilize the price. Especially true because HBD is pegged to dollars, and the LP is half Hive half dollar-denominated.
The opposite is also true. Hive dumps on exchanges? No problem, as our internal AMM market has exponentially more liquidity. Now cheap Hive on the exchanges can be bought and exchanged for HBD at a discount, which can then be converted back into Hive for bonus money that once again stabilizes the price. Again, it's embarrassing we've gone an entire cycle without doing this, and instead opt to pay users to purposefully do the opposite and take liquidity away from the market. It's beyond cringe at this point. I'm over it.
Conclusion
Hopefully this post makes sense because it's the longest one I've written in a while and the topic is complicated... although it's pretty par for the course in terms of my HBD rants. Hive needs DEEP liquidity pools to its own source of debt, and shelling out interest rates to the savings accounts or a bond system is going to be highly counterproductive. The solution has already presented itself in the form of AMM.
Should the witnesses continue to refuse to implement such obviously viable tech it can still be outsourced to the second layer... the only disadvantage being that it can not be directly financially incentivized with inflation and has to rely on trading fees. Maybe that will be enough. Perhaps traders would even be willing to pay a high fee, something like 1% would do the trick if the pool itself could get enough volume without seizing out from the high economic friction.
At the end of the day Hive needs as much liquidity as it can get which is difficult to achieve when our entire governance structure is based on locking liquidity into staking and voting contracts. AMM is the magic solution we can implement to enhance and counterbalance this tradeoff. We should not be doubling down on longer timelocks. That's what Hive is for. HBD needs to compliment the system rather than mimic what's already there.
This was YOUR idea. I liked it because it enabled ROI to be predictable, and not dependent on curation, which is extremely difficult to undertake with substantial stake to attain nominal returns. A whale can't read 500 posts a day and upvote enough to generate ROI, and even if they could they couldn't do that without skewing content and imbalancing author rewards towards their biases. We need to let ordinary folk curate the content per their common biases to attract the biggest userbase thereby to grow Hive. Biases of extraordinary coders, or financial wizards, aren't biases the general market tends to share, and draws users from those limited corners of the market, preventing the broader growth of the Hive community. We need more cat pics and memes. We want Hive to corner the market on cat pics and memes, ayliums and conspiracy theories, foodie pics and travelogues, and financial advice and coding help, to actually grow. Fakebook, Youtool, Twatter, Plebbit, all these Web2 platforms are in trouble, reeling from dissatisfaction with their ever worsening censorship. Let's give those folks a home.
If we could move to AMM liquidity pools instead of curation for ROI on stake, I could get behind that. We need to be rid of curation rewards as THE mechanism for ROI, which is the main reason I was for the HBD savings accounts at a yield comparable to curation rewards (15% is too low for that). Now you say you're over it and want to move to AMM liquidity pools. I'm ok with that too, even if it's less predictable than savings accounts. We need to stop replacing curative intent with financial interest to do good content curation. You say we need liquidity instead of savings accounts. Ok, I'm game, but those liquidity pools need to prevent curation rewards like savings accounts did. Hopefully better.
Thanks!
Pretty sure that was my idea in 2019 before AMM even existed.
Time flies.
Yes. The nimble adapt.
Carving out a place for mainstream social media is fine by me... but I view Hive as far more than that considering the utility of an immutable text database. Does a cat video need censorship resistance? Does it need financial incentive to keep the party going? Maybe I guess. Maybe not. There's a lot of shit we need to do off chain on potentially centralized systems.
What I have really been saying for an age now is that inflation is an investment and we can print to infinity if the investments are good. We don't have to choose between savings accounts and AMM. We need to verify individually that savings accounts and AMM are independently profitable. As I already pointed out the savings yield can still be used wisely to create market elasticity. And AMM can pay for itself with trading fees which is the zero risk option.
I do agree with you generally, and often specifically.
The problem of centralization financializing the content of posters neglecting to share that financial return with the content creators was the basis for the creation of the chain we are on. It is an ENORMOUS opportunity to replace Web2 with Hive.
Hive needs to provide that financial incentive. Grandma seems to continue posting cat pics without it, but making it available to creators here will bring them here, because everyone likes money. I learned that from 'Idiocracy'. You like money. I like money. Everyone likes money. That's Hive's secret weapon to conquer the social media financial sector that has grown to become the largest financial sector in global markets in the last ten years - while this chain has failed to capitalize on that. We can do better. I hope we do.
The interesting thing is that Hive isn't earning any of these financial returns you're talking about. Social media financial return comes from collecting data and serving targeted ads to people. The value doesn't come from the cat video: it comes from the people paying attention to the cat video. Subtle details like this matter going forward. LEO tried to implement ad-revenue sharing and it was a complete disaster because the platform is small and there was no money to share in the first place. And also ads are annoying and crypto users are abnormally frugal on aggregate.
Lot's of things to unpack here... like how do we outsource some of this stuff to layer 2 but continue to reward it. How do we implement revenue-sharing when revenue-sharing is an inherently centralized business model?
That's my point. Hive isn't Web2 centralization milking content creators like the other platforms I named.
Hive doesn't need to share in the revenue from people sharing content, because Hive isn't a business. The community can upvote posts and enable the content to earn, while the inflation model enables funding the witnesses that make it all possible.
But, you know this.
There is so much wrong in this blog i dont know where to start.
AMM for HBD on base layer is a great idea, i'd implement it tomorrow and run the code on our witness if you built it.
but this idea from you that bonds aren't the best mechanism in history for creating liquidity is so far off the mark, i really really dont know where to start.
bonds are sold via reverse auction. so the market sets the rate. witnesses will do it initially, but over time the market can set the rate via monthly auctions.
copying the old system is exactly what we should be doing. they invented an insanely good liquidity provision tool. have you ever traded national level bonds? then you would know how big a size that you can get in and out of with one click. billions, with one click and you don't even move the market.
we just don't copy the legacy system's mistakes (covering up mistakes, not being transparent about when fresh money is coming due from bond maturity) the whole point is that hive can do this, since it is by default transparent. So yes, we can copy exactly what the old economy was trying to do, create the most liquid market in history doing it, have the lowest possible interest rates for the ppl requesting loans and out compete everyone else by a country mile.
they idea of bonds is using them as collateral and this is what creates the liquidity. above you said that nothing happens when the hive is locked into bonds to create HBD bonds, but you cannot be further from reality thinking this. once you have bonds the whole point is that you can use them as collateral for loans to make much much higher interest rates than any high APR that you can fantasise about on the base layer.
This also removes any risk off of the base layer and puts it into the hands of the bond traders, loaners and passive income earners. it takes it away from hive holders. so not only can we drastically lower the APR on the base layer on HBD by letting the market reverse auction compete for the lowest rate to get hold of the bonds, thus deleveraging risk on Hive LI, but we can also earn far far more than 20% APR passively on our HBD bonds by using those low rate bonds on an LII collateralized loans system and putting the risk on the passive earners and their counter parties on LII. this is great for hive and it literally replaces the whole Euro Dollar international banking system with a better alternative. do you have any idea how many trillions per day of liquidity moves through that market. it basically invented liquidity. The addressable market is so big it is difficult to comprehend. if hive were to capture just 0.1% of that by mimicking it with a more transparent model it would be the most liquid asset in crypto by 100x
U bring the big boys by having an ultra low rate, reverse auction market driven stable LI bond. AMM liquidity pools on LI can be a great addition to this too. then you offer them insanely high APR's on LII systems that use their stable LI bonds as collateral. this makes a low risk LI with a higher risk LII where higher APR can be earned passively without putting risk on the LI bond holders who are not loaning out as collateral for higher passive APR on the LII loans system
Now that we are getting so many listings on CEXs it's time to implement this idea to avoid Hive outflowing into centralized systems. At least VSC is around the corner which should implement it as an L2
Yes the VSC solution is promising and maybe I should be focusing on it more... but it also feels weird to count the chicken before it hatches and depend on vaporous code to save the day.
Don't you think the only reason Hive has the value it has today for the most part is because so much liquidity is locked up in the first place? Opening up too much liquidity too fast I would think would just tank the price.
If all my powered up coins were unlocked right now I would not sell them.
The delay has zero affect on me selling coins or not.
Again the delay greatly poor people while hardly affecting the wealthy.
If I want to sell $8k worth of Hive I only have to wait a week to unlock it.
For others that would but their entire stack and take 13 weeks.
I am also not suggesting we "open up liquidity", as a large AMM pool would suck up the liquidity into it and pump the price to the moon if the incentive to be there was decent.
I agree with everything you have written here, and that doesn't always happen, so good job my man, lol.
We definitely need a base level AMM liquidity pool instead of bonds. I get the idea of a time lock, but it would HAVE to be an option. Say something like a higher APY or something for staking longer, but certainly have an option to get out immediately. I get the 'security' aspect of it, but I was also locked into 14 day pools with LUNA/UST, ATOM/UST, and OSMO/UST earning some crazy yield when that ponzi bubble popped and I lost over six figures, so I would say it's more of a PTSD thing for me, lol.
Hell, I am one that really doesn't care for the 13 week power down model of Hive. I would like to see an option for a 4 week or 1 week power down with a fee or something. But I know, I am going down a whole other rabbit hole there.
The timelock on LP tokens is just for security purposes.
In case the account gets stolen so you have time to recover it.
Like you said it would be optional so a timelock somewhere between 0 and 1M blocks (0-35 day lock)
I was considering implementation of bond idea only because everything is better than current system. Current one is horrible on technical level as well as the "correct interest rate" discussions are always political and emotional. If we are to have interest on HBD, the rate has to be subject to market forces, which would be possible with bonds. However if there is a better way to achieve the results I'm all for it. Devil is in the details though, so I'll wait for the opinion of someone with experience in the matter (I think BitShares had AMM implemented, no? @abit).
The solution to variable free-market yields is in this post.
It's the same as every other DEFI protocol that's been doing it since 2020.
We should not be providing a guaranteed flat APR.
We need to provide a guaranteed static inflation amount.
And the farmers compete for the yield in the free market.
Less farmers = higher yields... which coincidentally how bonds work as well.
I'll be honest a lot of it was over my head. I probably didn't try as hard as I should have though. I just like the idea of passive income, so if there is a way I can do that better and safer than holding HBD in savings, I am definitely not opposed to it. Do you think things are going to become a bit more relaxed for us in the US with the new administration? Having access to some exchanges that have HIVE listed would be kind of cool...
Yeah it would be badass to get my Binance account back.
I think it will happen but it could take a year or two.
It might not be better or safer than earning 15% in the savings account.
But it's better and safer for the network.
It would mean you'd have to pair your HBD with HIVE and provide liquidity to the internal market.
So Hive price goes up you're selling a little and getting more HBD.
Hive price goes down you're buying a little and getting more Hive.
All the while earning some kind of yield (maybe like 35% if lucky).
But yeah I think tons of regulations are about to be rolled back... there are going to be so many scams lol... price of doing business.
I'd be cool with 35% for sure. I really miss my original Binance account. Like before Binance US was even a thing.
Binance global is awesome I was using it until they got captured by the SEC... I never even looked at or considered Binance US for one second.
They wanted to switch me over when they started doing KYC for Binance Global.
I had a pretty level headed rant in August /s
https://peakd.com/hive-196233/@mrtats/15percent-hbd-apr
great stuff mate, I am redoing my goals. I am buying up $LEO going for Lion rank at 15,000 HODL this year want to do it relatively fast
Another way that we can make some hive action is a good thing. Especially if it increases liquidity considerably because we know we need that to compete with some of the other assets out there. I partially get the AMM stuff here but it’s still a bit fuzzy. I’ll have to read this again!
Yeah it's honestly annoying that I have to operate on this level where I need to talk about all this stuff as if everyone already understands it. But that's how it has to be otherwise the 2000 word post turns into 10k words. I do try to link back to old posts but still it's a lot to keep up with.
Ya that's all good man, splitting it up is best otherwise nobody would be able to read it all lol but I get it!
Backlinks is the only practical solution.
Perhaps you'll get some of those apologies in due time.
sounds practical, I guess the reason why implementation might be slow is how we take time to agree on issues
I actually don't want any recognition I don't need to be saying "I told you so" any more than necessary... assuming there is a necessary amount to begin with.
I think the concept of locking up liquidity comes from the idea of hodling Bitcoin. Except Bitcoin and HIVE/HBD are not the same.
Yes but the entire reason HODL exists is because none of the tokens are locked and anyone can sell whenever they want to... so yeah you're right they are two very different assets.
Do you think instead of 10% HBD returns is it reasonable to offer Bond like structure for Hive assets?
The idea was laid out nicely and I agree with your conclusion
When it comes to locking down Monroe virtual assets, just as said it is only those with large stake that benefits. Nevertheless, it seems on the other hands those bonds serves as liquidity provision to salvage a scrambling market. How do you see it?
Also, I think this the first time conversing with you this year. Happy new year Mr Edited. I know your market longing strategy will continue, hahaha, keep it up.