How did Hive did in August 2024 from an inflation standpoint? Let’s take a look!
The projected inflation for Hive for 2024 is 6.0% on a yearly basis, or around 0.5% on a monthly basis.
Hive has a double currency system, HIVE and HBD, with conversions between them that add or remove HIVE from circulation on top of the regular inflation. Furthermore, the decentralized hive fund DHF, that serves as a DAO converts the HIVE that is in the DHF into HBD.
The @hbdstabilizer has also grown and it is playing an important role in the overall tokenomics, making conversions and trading on the internal market.
Because of this additional mechanics the HIVE inflation and supply can be drastically different in real time than the regular/projected one.
To be able to follow the HIVE supply we need to take a look at all the different ways HIVE is created, author, curation, witness rewards, conversions etc, then net that out with the HIVE burned from conversions, accounts fees, null transfers etc. To get the virtual supply we need to do the same for the HBD supply as well.
HIVE Created
Here is the chart.
The chart above includes:
- Author rewards
- Curation rewards
- Witness rewards
- Staking rewards
These are the regular ways new Hive enters circulation, and all of them are through vested HIVE, aka powered up. The regular inflation is around 80k HIVE per day.
We can notice the increase in the daily HIVE issued because it is dependent with the virtual hive supply, or the base for inflation. When the price of HIVE is low, the virtual hive supply increases, and when it is up, the virtual hive supply decreases.
The thing is the conversions are playing a major role in the ecosystem. Here is the chart again, including conversions.
We can notice that the HBD to HIVE conversions are the dominant in the chart. This works in both ways and a big part of them is converted back to HIVE, especially through the work of the stabilizer.
We can notice the spikes in the recent months because of the drop in the price of HIVE and some users taken advantage of this and converting HIVE to HBD.
HIVE Removed from Circulation
Here is the chart.
The above takes into consideration six different ways of HIVE removed:
- Ninja Mined HIVE To HBD Conversions In DHF
- HIVE transfers to DHF and converted to HBD
- Transfers to null
- Null as post beneficiary
- New accounts creation fee
- HIVE to HBD conversions
The HIVE transfers to the DHF are now dominant. These are transfers made by the stabilizer. We can see a few spikes in the HIVE to HBD conversions (blue), with one occurring just recently. These were due to the increase in the HBD price. We can also notice the drop in recent months, same as the opposite conversions due to the low volumes that the stabilizer is doing.
Historical HIVE Supply
When all the above is added and removed, we get this chart for the all-time HIVE supply.
Up until August 2021, the supply was almost steadily increasing with a small fluctuation. Then a drop in the supply in September 2021. Since then, from time to time we can see some drops in the supply with the recent happening in February and April 2023. In the last months the supply has seen an uptick.
August 2024 ended with 447.7M HIVE in circulation.
HBD Supply
Here is the chart for the HBD supply.
The light color is HBD in the DHF. The HBD in the DHF is not freely circulating HBD and only enters circulation when payouts to the DHF workers are made.
HBD is being created and removed in various ways, but the conversions play the major role here in both directions. Other ways HBD is created are DHF proposal payouts, author rewards and interest.
We can see that after a downtrend in 2022, in the last period the HBD supply is very stable around the 11M, with a decrease in the last months.
In the last month the HBD supply has decreased from 11.3M to 10.9M HBD.
Virtual HIVE Supply
When we add the HIVE equivalent supply from the HBD to the HIVE supply we get the chart below.
The light color is HIVE that in theory can be converted from HBD at the current market prices for HIVE.
We can see that the virtual supply fluctuates a lot, mostly because it is tied to the price of HIVE. As the price of HIVE drops, the virtual supply increases and the opposite.
We can notice the sharp increase in the virtual supply in the last period due to the drop in the HIVE price.
When we zoom in 2023 - 2024 we get this:
Here again we can see the increase in the virtual supply towards the end of the chart. The regular HIVE supply has slowly increased in the period.
Projected VS Realized HIVE Inflation in 2020 - 2024
This chart tells the story of the new HIVE entering circulation in 2020 – 2024.
We can notice the sharp drop back in September 2021, when there was a lot of HIVE burned for HBD due to the HBD high prices. Since then, the realized has mostly followed the projected inflation with some small bump on the road. In the beginning of 2023 there was again a reduction in the HIVE supply due to burns for HBD. A sharp growth towards the end of the chart due to the drop in the HIVE price.
Since the creation of HIVE four years ago the realized inflation is at 96M, or on average 24M per year, while the projected inflation is at 102M. A difference in 6M less HIVE created in the four-year period. This is mostly thanks to 2021 when the year ended with negative inflation.
Monthly Inflation
If we plot the monthly inflation in 2023-2024, we get this.
This is a chart for the period of 2021-2024. We can notice that the only negative months are in August and September 2021 and February 2023.
June, July and August 2024 are quite high in inflation with above 1% monthly inflation with August at 1.45%!
In terms of absolute numbers, the HIVE supply in August 2024 has increased from 441.3M to 447.7M, adding 6.4M HIVE in circulation, while the projected one is around 2M.
Yearly Inflation [%]
The yearly, projected and realized inflation looks like this.
With August having high inflation the overall yearly trend for 2024 for Hive is to end above the projected one of 6%, or somewhere close to 10% now. After eight months in the year, we are now close to 10% on a yearly basis. First time when HIVE might end with double digit inflation after 2020. Will see how the rest of the year plays out, but the last months have moved the needle up!
Net HIVE Created by Category in August 2024
Here is the new HIVE put in circulation by category for the month.
Conversions are positive with 4.1M HIVE created in this way. This is the main reason why there is now more HIVE in circulation. Conversions are the main variable that is changing the Hive inflation and when they are positive the inflation is above, or when they are negative the inflation is below the projected one.
The curation rewards are in the second spot with 1M HIVE. Next are the authors rewards with an 500k HIVE added.
Some HIVE was burned for @null as beneficiary and account creation fees.
Note that authors rewards are paid 50% HIVE, 50% HBD, and the HIVE share only is at 500k, while approximately the same amount was paid in HBD equivalent.
All the best
@dalz
The net positive conversions would not be so bad if people would sell HBD for HIVE on the internal market instead of converting (which burns HBD and creates HIVE). Right?
The two things serve different purposes. If someone buys on the internal market, that doesn't particularly enforce the HBD peg mechanism except perhaps in a short term sense.
From the perspective of an individual, you use the internal market to get HBD or Hive (or to profit by day trading or market making). You use the convert option to attempt to profit from the peg divergence (kind of like arbitrage). Some people use the convert option to get Hive from HBD, but those people are usually novices who don't understand the difference between the two.
Normally I agree with you. But using the conversions can also be a bet on a certain direction of the price of HIVE during the delay between the initiation of the conversion and its execution, resulting in more HIVE being printed than one gets from a swap on the internal market. At the state of the alts in general, at this point in time, I would think less about the personal gain and more about the network. There is time to think about the personal gain and taking profits in the alt season.
One is inflationary for HIVE, the other one isn't.
People will not put the network first, regardless of season. Any time there's a chance for personal gain, even if the decision has a negative impact on the network, majority take it. Especially if its convenient.
Unfortunately, this is often true.
Enough people forfeit their HP nowadays for personal gains, even if they're holding it. The value is extracted from Hive and placed somewhere else, on Hive. So even those projects contribute to crumbling the foundation they built their projects on. That's a prime, obvious example. And it seems like there's a new offer to continue down that path every week. It's convenient. No work involved. Auto votes are another obvious example. Paid to be absent, but people pay attention to the state of Hive posts, not because they care about the network. Most likely concerned about the state of their personal gains.
Building the network requires first taking a good honest look at the network, then trying to do things that'll counter the issues so eventually things balance out. Opportunities created in that direction are rare, plus people won't change. Can't expect them to either.
We can debate if Hive means only base layer or does the ecosystem built around Hive basically on Hive-Engine, for now, brings value to Hive or not. I'd say... it depends. I know many if not most of these projects are dead on arrival, which is pretty bad, if you think about it. BUT... there are a few which aren't. The problem is finding them and that their success lasts. It then matters how are they managed and how you channel gains, partially or totally: from the base layer toward projects having their own tokens, or vice versa. It can be a win-win, but generally, if the base layer loses in the long term, everyone loses, unless they jump ship.
Regarding autovotes I have mixed feelings. I understand we need manual curation, and I do my share of manual curation daily. But I failed to be a good full manual curator for different reasons, and I do believe a share of autovotes or following curation trails is ok if your voting mana goes too high.
Regarding this aspect, automating votes may prove to be less necessary after the next HF, when the value of a vote won't decrease based on the level of voting mana. A full vote would be the same at 100% voting mana and at 50%. So, someone who isn't as active daily, could deplete their voting mana more and come back in a few days.
I'd also prefer if the first slash in curation rewards doesn't happen after 24 hours. Maybe I'd remove it completely. And only have a slash in half at 3 days. But certainly 48 hours seem better. I vote manually once a day. And I often miss the window on some posts I would have voted on. And sometimes I still vote on them, even if that hurts my curation rewards. But most people won't. I don't either, in general. I'd rather vote on something inside the 24h window instead. Yes, this is driven by personal gain, but also by how curation works. This is how the game is, you can't be among the ones who play to lose.
If you don't do it, someone else will... In our case, if you do swap in one direction and nobody does the opposite, the HBD stabilizer will be the "other" side and balance out the HBD price...
The "arbitrage" part will be done by HBDstabilizer, if it isn't done by a specific user...
It certainly does its part.
But I've often had a different partner in the swaps on the internal market as I was buying HIVE, often other arbitragers but also what seemed to be regular people too.
How should I explain to an investor that with a planned inflation of 6% not only 8% curation rewards are paid out, but also the 3,35% basic HP APR plus (indirectly) the 15% HBD rewards, let alone the witness and author rewards. It all doesn´t add up.
You can explain all of it, authors, curation, staking, witness, even a small part of DHF, except interest and most of the DHF.
About curation. The overall inflation is set to 6%, for all the hive supply. Curation rewards are 32.5% out of the infaltion, 32.5% * 6% = 1.95% CR .... but this is given out only to staked hive, or HP, curently at 182M HP out of the 450M HIVE, or around 40%. So you have 1.95%/40% = close to 5%. Furthermore not all of the 182M HP is active and votings, or there is around 20% idle and that further pushes the CR rewards to 7% and above... you can do the similar math with staking rewards, that are 15% out of 6%...
But the sums that we are paying out from the DHF are unproportianly big for our curent market cap. It is possible becouse there is simple to much tokens in the DHF as a result of the STEEM premine, and then later we trasfered those tokens in the DHF with the Hive Hardfork in 2020. We are spending a premine to pay development work. Also the interest for HBD is on top of the inflation.
Seems like we need to stop inflating against the virtual supply of Hive. Seems the lower the price goes the higher the inflation is because the HBD price is fixed.
Inflation should only be based on Hive in circulation.
Yes that to
In my opinion: Very low price of Hive, therefore greater growth potential, to this is added the lower convenience of holding HBD after the savings yield has been lowered. This combination generates higher conversions and higher inflation. If the price of Hive is too low then we need APR on HBD as high as possible to encourage conversions to HBD, vice versa if the price of Hive is high then we want a lower APR on HBD to drive conversions to Hive, only in this way we can keep low inflation and better value management at ecosystem level
I agree with this in principle, but the converse would also be required - APR should go lower when price of Hive is higher, to reduce debt levels when we can afford to do so, rather than let them rise in perpetuity.
DHF will eventually have to reduce daily HBD payouts once HIVE's price gets too low.
Thanks for the overview, it seems the DHF is now driving the inflation and therefore also the Hive price action. Things are going to get interesting.
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@jlinaresp(5/15) tipped @dalz
High APR of HBD getting into circulation is the primary cause. In my opinion, APR of HBD should be reduced to 0%. No need to pay interest on HBD savings to users. There should be a fixed percentage of HBD generated from author/curation reward that goes to the funding activities DHF. Also there is no need for ~3% interest paid out just for holding hive as HP. Users should only get rewarded for active participation in the community, no free lunch. Hive burned as a result of the daily does of spam content "Burn Post" and "Burn Comments" as expected is very much insignificant. These spam posts are doing more harm to the community by getting hefty upvotes by the whales, whales rewarding themselves in the form of curation rewards, and these posts often result in the top voted posts every now and then. This is bad for the community and bad for the SEO.
Reducing HBD saving APR to 0% could make large holders convert back to hive at this price point and make the situation even worse abit temporarily assuming the price recovers at all.
The HP interest is up for debate really, on one hand it lets people hold and gains something without having to play the curation game or set up curations trails because noone has time to curate and finding good stuff to read is difficult.
on the other hand you could just get rid of it and then people will either.. be find with it or actually set up said curation trails and auto votes. or delegate to a curation group.
Personally I wouldn't miss the 3% HP inflation. bundle it back into post rewards etc and simplify the system.
The burn posts are insignificant compared to the amount of hive produced but it does do something. Honestly it hurts noone as if the whales who voted on those posts couldn't anymore then they probably just won't vote.. They vote to burn because the see most content on hive as not worth voting and would rather remove those potential rewards from hive altogether.
I'm a hive witness supporting the blockchain please consider voting for me.
The longer the APR stays above 0% the worse the matters will get.
If this ever happens then why would anyone want to buy HBD ever. US treasuries pay way more interest and are basically risk free.
I have some questions:
I thought that the Hive inflation is under strict terms. Can it for an absurd scenario reach 100% for example?
The hardcoded inflation only pertains to what's allocated to the DHF, witness rewards, post/curation rewards and HP inflation.
HBD converted back to HIVE is the primary driver for this inflation, which could be from peoples taking out savings to take advantage of the low HIVE price and/or the continued pressure from DHF proposal payouts.
As for corrections, generally we could see HIVE become deflationary (negative inflation) if the price were to go up, this would be driven by people converting HIVE back into HBD as it's more favourable to do so when HIVE is worth more.
I'm a hive witness supporting the blockchain please consider voting for me.
Its hardcoded only for the regular HIVE inflation. The conversions HBD-HIVE are aditional.
Will it corect itself mostly depends on the HIVE price and HBD in circulation. The ultimate mechanisal is the haircut rule that devalues HBD.
By simple supply and demand economic principles, I think the price of HIVE is under pressure from this inflation of the supply. Your last graphic shows most of the new supply coming from HBD to HIVE conversions, but in the middle we see Author rewards which was 500K in August.
Let's BURN HIVE!
I wanted to so something about inflation so I went to https://peakd.com/me/referrals and set @null as a 5% beneficiary of my author rewards. Sure it is a small amount but at least I can say I am doing something instead of complaining about it or hoping someone else will do something about it! :)
Thank you so much for giving us this quality update
@tipu curate 2
Upvoted 👌 (Mana: 28/48) Liquid rewards.
Thank you very much for this update! Great information.
The hive inflation really needs to be looked into actually