I'm actually not 100% sure where the inflation for HBD comes from. I know the witnesses set the target, but I'm not really sure if this money appears out of nowhere or if it comes from somewhere else. Any help on that front would be appreciated.
i also strougled to understand this, and this was blocktrades answer to my comment:
The interest is generated from inflation.
The effect of any particular interest rate payment on total Hive virtual supply (the figure which includes both Hive and "HBD if converted to Hive) inflation rate would of course depend on amount of HBD held in savings at any given time (and whatever interest rate was currently being paid).
so if i understood it correctly it would be taken from the daily inflation. so it would be redistributed. I could be wrong, because i don't really understand how it all works :)
now if i am correct in my understanding that would be less inflation for HP? and if you have 15% APR on HBD saving would you still hold HP that could give you 15% if you are lucky with your votes?
But Dan also said that the % of interest is not set, so they don't know what it would be.
The interest paid on HBD is not part of the regular inflation. It is in addition to it.
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If true this is unfortunate because as more HBD enters the savings accounts there would be no penalty for higher competition. It almost guarantees that we would be constantly pushing HBD up to the haircut, making Hive >> HBD conversions moot and once again destabilizing the peg to both the downside and upside.
Eh we'll figure it out when we get there.
One of the largest sources of inflation in Hive/Steem historically (possibly the largest overall) is the excess inflation created by HBD/SBD conversions while the feed price is low. HBD interest may actually lower inflation overall if it is sufficient to discourage conversions at low prices.
The interest will need to be balanced against the debt burden and rate of conversions. If witnesses can be trusted to be actively involved, they can adjust the HBD interest up or down depending on if we're getting too close to the debt limit, or too much conversions etc.
Very good point, HBD is not pegged by fiat but algorithmically by HIVE, it is more like debt, leading to increased inflation during a bear market, to maintain the peg, more HIVE need to be created through the conversion function. While many users believed that the inflation of STEEM was below 10%, it was actually above 20% p.a. in the bear market because of the SBD debt, which was devastating especially in a bear market. Without the haircut rule that limits the amount of HBD and the conversion rate, HIVE would get hyperinflated during a bear market.
i was not sure about that. i thought it is the part of the regular inflation because there was a lot of voices complaining about the high inflation that goes to creators.
I haven't personally inspected the code, but it's always been my understanding that the inflation paid to HBD is in addition to all other existing forms of inflation, not a redistribution.
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It is something that the witnesses and others will have to discuss to play around with the different scenarios.
The 3% is the initial what was set and it will move from there. To what, is guess.
At least they are addressing it.
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There are a number of tradeoffs between HBD and HP, not just comparative yield. Mostly that HBD offers stability and greater liquidity, but limited upside and HP has limited liquidity but more upside. How those play out in terms of demand is really anyone's guess but it isn't hard to believe that HBD might offer higher yield, but people still want to invest in HP for the chance of (potentially large) price apprecation.
Now historically Hive/Steem has not done very well in terms of overall price appreciation but I guess anyone investing in it must think that is likely to change going forward.
the price speculation makes sense. especially if we manage to hold hbd to 1$
I don't know if I fully understand how will be those HBD savings rewarded but if I wanted to take advantage of this, i would power down, change the Hive for HBD and send it to savings, because i haven't much activity lately on Hive, apart of make some comments.
When i saw the proposal from blocktrades was waiting for Edicted's post, hoping more explanations about it and more details, now i have the feeling that the proposal leaves me more uncertainity.