How HBD Gives Everybody An Ability To Print Money

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In this post I would like to make a case how HBD gives everybody an ability to print money and explore how Hive Dollars works. I believe HBD has a feature that makes it possible for anybody to print money legally, ethically, and efficiently. While it may seem obvious, the importance of this mechanism may not be clear at first glance.

HBD is Hive blockchain's algorithmic stable coin and short for Hive Backed Dollars. In recent years multiple efforts by the Hive developers, community and stakeholders finally made HBD peg to USD work, and to this day it continues to work as intended. Hive blockchain promises $1 worth of Hive coins for each HBD, and provides internal mechanism of converting HBD to Hive. There are multiple articles written by Hive community members, how exactly the peg to USD works, and protective measures in place to avoid any potential risks to Hive itself and HBD. This topic is beyond the scope of this post. For the purposes of making the point that HBD give ability to print money, consider 1 HBD is worth 1 USD.

Money and currency are not the same thing. Money is much bigger than currency. However, most would agree that USD is money. It is universally accepted notion. If you showed anybody in the world a $100 bill, and asked if this is money, most likely response would be affirmative. After all, USD has been considered a global reserve currency for decades now, and has a global recognition. Alternatively, if ask people around the world if Bitcoin or Hive are money, we may not get the same results. Those who consider Bitcoin and Hive as money are still in the minority.

Printing money in general means creating money out of thin air. In other words bringing new money into existence. This magical power is only granted to certain entities, who are usually called central banks. For USD, the sole rights to create new US Dollars are given to Federal Reserve. Fed has the monopoly over creating USD or printing this money. If anybody else decides to be creative and try to create USD, that would be illegal and punishable by law. Any USD created or printed by someone other than Federal Reserve would be considered counterfeit.

Paper USD bills do not represent all of the USD in circulation or existence. In fact paper USD bills are only the small percentage of the total USD in existence. When Fed creates money, they don't literally print the paper bills, they just add some numbers in their private database. Printed bills only serve as a representation of the USD created by Fed. Since, government says it is money, we take their word for it and use them in our daily transactions.

Similar to the paper USD bills, HBD can also be considered a crypto representation of USD. They have the same value. Almost. Most of the time. I don't need HBD to be worth $1 every second, I can wait. Good enough for me as representation of USD's value.

There are also other stablecoins like Tether, USDC, etc. They are backed by actual USDs. Supposably, there must be $1 of USD stashed somewhere for each USD backed stablecoin. Since these are controlled by centralized entities, we would have to trust that they actually have the same amount of USD locked for each stablecoin they print or mint. Minting these coins cannot be considered printing money, because they must have USD in the first place, and minted coins merely represent USD that already exists and was created by Fed.

Printing money should also be effortless. Since money is created out of thin air, creating is shouldn't require some skills, knowledge, or work.

There are several ways to obtain HBD:

• Earning HBD for Hive blog posts or comments.
• Receiving funds from Decentralized Hive Fund for work done for the Hive network.
• Converting Hive to HBD.
• Buying HBD in internal Hive exchange.
• Buying HBD in external exchanges.
• Receiving HBD as a payment for product or services provided by Hive community members, apps, or games.
• Receiving HBD as a gift from Hive network participants.
• Earning 20% APR for keeping HBD in Savings.

Out of all the ways that HBD can be acquired, only one comes close to printing money and anybody can do it. That is earning 20% APR for keeping HBD in Savings. Rest of the options to obtain HBD require either putting in some work, time and effort, using USD or something else with value as exchange to HBD, etc.

Only earning 20% APR from HBD in Savings is the effortless way of obtaining HBD. Since no actual USD is created, but only the value representation, in my understanding it is completely legal. I am not a lawyer, correct me if I am wrong. Money and/or value must come from somewhere. It can't just come from nowhere, right? True! Ultimately, there will be some people who make this possible and potentially do so against their own interests. That would be Hive stakeholders. We will talk about them in a minute.

HBD interest payments are newly created money. They do not come from already existing funds in some hidden wallets. These coins have never been in circulation or existence before. Hive blockchain creates and deposits into Hive wallets that earned these interests. The only action Hive account holders would have to take would be to move their own HBD to Savings, to start earning interest payments which are newly created coins. The person who decides that these coins will be created are ultimately the people who use this HBD Savings feature. Nobody else. This is how HBD gives an ability to print money for everybody. Hive is an open and permissionless network that allows anybody around the world to join or leave the network as they please. So, this ability to print money by saving HBD is available for anybody.

Usually, when we talk about interest payments, we think of banks, loans, and credits. Banks specialize in paying interests for money deposited, and they usually do so for long term savings accounts. They don't offer a lot, but that is where earning interest on funds normally happens. Banks are able to pay these interests, because they also lend out these deposits to other customers to earn even higher interest payments. One of the common ways we come across interest payments is for the credit cards we use on daily basis. If the credit card balance is not paid on time, they start accruing interest and we end up paying these banks for letting us borrow their money.

None of this happens with Hive or HBD. Hive doesn't earn anything from having Hive accounts moving their HBDs to Savings. There is no direct benefit for Hive. Hive never has control over these funds. Hive can't lend these funds in Savings to others to earn higher or any interests. In fact, Hive doesn't have any income stream to cover these interest payments for HBD hodlers.

Ultimately it is the Hive stakeholders, those who have HP (Hive Power) make creating of new HBD as interest payments possible, in a decentralized manner. HP gives its holders shares or vests in the network, which determines their influence in the network, governance, and rewards distribution. HP holder are the ones who get to lose or benefit from HBD interest payments. Interestingly, at this time stakeholders seem to like the idea of having 20% APR.

This is decided in a decentralized manner. No single entity or group of people have HP or influence to control the network. On the contrary, we see more disagreements and differences of opinions among Hive stakeholders on various topics, including governance ones. The top Hive stakeholder, Freedom has gone apolitical and has no interest in participating in governance or rewards distribution. Freedom stopped voting for witnesses since the beginning of Hive. Freedom doesn't upvote or downvote blog posts. Freedom is happy with leasing out their HP. The second largest stakeholder (allegedly), Blocktrades who also is a consensus witness does not agree with 20% APR. Blocktrades prefers 12% APR. We can see that look at the APR parameter set by the witness. Another biggest stakeholder, perhaps the third largest stakeholder and also a top witness is Threespeak. Threespeak is also signalling 12% APR.

Clearly, there are difference of opinion in how high the APR should be, but everybody seems to be ok with the current consensus. Even 12% APR would contribute for creating new money.

Witnesses decide which Hive blockchain code to run, which hardfork candidate to approve, and set the APR parameter as they choose. But all of these actions are checked by stakeholders. Stakeholders get to decide who the consensus witnesses are in a decentralized manner. If majority of stakeholders had strong opposition to 20% APR for HBD, they would have voted witnesses who have this parameter set at 20% and perhaps voted with more preferable parameters set. Of course, witness voting doesn't only consider one thing. Responsible stakeholders consider many aspects when casting and revising their votes.

Who pays for this newly created money? Again, stakeholders. Since HBD is a liability for Hive, and Hive promises to pay $1 worth of Hive for each HBD, blockchain would have to honor that. This would increase the amount of Hive in existence, and can potentially devalue the Hive held by stakeholders. Moreover, this HBD converted to Hive can become Hive Power which would dilute the shares and influence of current stakeholders. For example, let's say Hive price goes down to 10 cents tomorrow, and I decide to convert my 8,000 HBD to Hive, I would end up with 80,000 Hive coins. After powering them up I would more than double my HP, gain more influence while other stakeholders lose some influence. At that point, stakeholders would be more worried about the value loss for Hive itself, rather than influence in the network. But they do lost that too.

Why would stakeholders approve such a thing then? Because there are benefits of having 20% APR as well. And the potential of benefits is much higher than the potential loses. First, just like everybody in the world can take advantage of HBD interest payments, Hive stakeholders can do this as well. They probably are in better position to take advantage of this feature, because they may understand how network works better than outsiders, and they already have Hive funds in form of HP to allocate to HBD Savings. Majority of the Hive stakeholders believe in the bright future of high and believe Hive is currently very undervalued and has unlimited upside potential. 20% APR may be good compared to what banks offer, but Hive doubling, tripling or even going 10x is not too difficult to imagine, understanding what Hive has to offer.

HBD is a small feature of Hive. Hive is about innovating web, communities, apps, and gaming. But having an algorithmic stablecoin that works adds great value for such a network. Hive is new as technology, innovation, and a decentralized network. HBD serves as a bridge between Hive network and the real world and offers solutions to the real world problems. HBD transfers are super fast and happens in seconds. HBD transfers have zero fees. HBD wallet is super easy to use, and offer complete ownership of the wallets. Considering the amount of value transfer that happens in the real world and online, while using traditional methods of payments like credit cards, paypal, and other third party companies who charge fees for each transaction, can close accounts as they please, it is not difficult to see how Hive as a payment network offers solutions and improves value transfer experiences.

Hive coin's price may fluctuate and may not be ideal for transitioning to it and using it as a payment system. A lot of accounting for many companies, merchants, people, and even international transactions is done in USD. Offering HBD that holds the same value as USD as a better payment system is a powerful feature for any network. HBD is new and doesn't have a lot of recognition yet. It will take time for people to discover it and learn about its benefits. Offering 20% APR can attract more people to learn and use HDB for online value transfers. Hive people do that already on daily basis. We already know HBD's benefits, Hive's benefits. It is a good idea to share this with the world. While the world is taking its time to learn about HBD, we can continue taking advantage of its feature ourselves and also earn 20% APR at the same time. Why not?

To summarize, HBD interest payments are newly created money which only happens by the wallet owners action of adding HBD to Savings. Since this action doesn't require any effort, receiving HBD interest payments is same as creating or printing new money out of thin air. HBD's peg to USD has proven to work well and it is reasonable to consider that HBD holds the same value as USD. USD is globally recognized currency/money. Those who earn HBD interest payments, are creating new money that easily translates to the universally recognized value.

I would further argue printing HBD may even be more ethical and efficient way of creating new money. Since creating of this new money is done in an open and decentralized network, every step is transparent and all participants of the network are ok with this. If they are not, then network participants can remove APR with a decentralized consensus and make printing this new money not possible anymore either temporarily or permanently. Printing this money is more efficient, because demand for HBD and using HBD Savings determines how much of the new money will be created.

Have fun printing money! Let me know your thoughts in the comments.

Nothing in this post is a financial advice. The post is written for entertainment and opinion sharing purposes only.

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