Six years ago I stumbled upon a website and blockchain that shall not be named, having absolutely no idea what I would be getting myself into. Over the past six years this platform and community ended up becoming pretty much my entire life, to the point where at one time my wife wondered if I had joined a cult. I suppose she may not have been far off :-)
In any case, I thought this would be a good opportunity for me to post again and share my thoughts about the state of the ecosystem and current hot topics like HBD APR. I sincerely apologize that I post so infrequently, but hopefully it's apparent that I am extremely active and involved in the Hive ecosystem in other ways.
I should mention/warn you ahead of time that this post is quite long. I guess that's to be expected when I try to cram a year's worth of ideas into one post! For those who manage to slog through it all, hopefully it's worth it and you find these thoughts and ideas to be helpful. If anyone wants to chat about these things (or anything else) feel free to reach out in the comments or on Discord (@yabapmatt there too) and I'll do my best to respond when I can.
It seems that all of the buzz these days is around the APR being paid on HBD savings. As I am currently signaling with my witness parameters, I am in favor of keeping the APR at 20%. For those who are calling anything paying out a 20% APR a scam or unsustainable, it is definitely in no way a scam, and while it may be unsustainable over the very long term (decades), it can be a great tool to help grow the network over the shorter term, especially during market downturns like we are in now.
What would make it a scam is if it promised 20% returns with little to no risk. The biggest issue with Terra (in my opinion) wasn't the fact that it paid out 20% APR or that it failed spectacularly, it was that it was marketed (or at least many people seemed to believe) that holding Terra had little to no risk and was akin to holding dollars in a bank account (which we are coming to learn also has more risk than many initially thought).
That was the scam of it. As long as we all are clear and honest about the fact that HBD has significant risk associated, then the 20% APR makes a whole lot more sense. With lower returns (even 10 or 12%) I don't think it's at all worth the risk and I wouldn't personally hold any meaningful amount of money in HBD. At 20% I have started to think about it - but still have not due to concerns about liquidity which I'll get to below.
Additionally, unlike Hive Power, HBD has no upside potential - so a risky asset with no upside potential has to offer a high APR for anyone to ever have a reason to hold it in any real quantity. The amount of HBD in savings will tell us one way or the other whether or not people think the returns are worth the risk.
Of course, by that logic you might ask why stop at 20%? Why not go to 30% or 100%? That would clearly lead to more HBD in savings and would be more worth the risk, right? Well, interestingly, the higher the APR goes, the more likely the system will hit the debt limit and HBD will no longer be convertible to $1 of HIVE. So basically, the higher the APR, the higher the risk goes too, and at some point the risk increases at a faster rate than the higher returns warrant.
All of this means that there is a sweet spot. There is some APR number that provides the maximum return relative to the risk. This whole debate is simply around guessing where that point is.
I cannot claim to know the answer (nobody does, really) but what I can say is that I spend a LOT of time researching and thinking about stablecoins (including attempting to implement one for Splinterlands) and based on everything I have seen regarding HBD over the past 6 years I don't see any indication that 20% is too high an APR given the current situation within the ecosystem. If anything, it might even be lower than the actual "sweet spot" from a risk/return perspective, so as mentioned above, my vote is to leave it where it is.
Lastly, I have heard some people claim that the HBD APR should be less than Hive Power APR, but as I mentioned above, HBD and HP are different because HP has price upside potential whereas HBD does not. This means that the potential returns for HP already significantly exceed that of HBD, albeit through a different mechanism. Ultimately, the choice for investors is - do you shoot for a known 20% APR (currently) by taking on the significant risk of holding HBD, or do you shoot for an unknown, yet uncapped, return by taking on similar risk by holding HP?
And yes, the risk profile for both HP and HBD are very similar. HBD is not less risky just because it is called a "stablecoin".
Again, I don't know the answer to that, and each investor can come to their own conclusions, but it seems to me that increasing the APR to 20% has for the first time made HBD start to become a viable choice for a more meaningful amount of capital, and I believe that is a positive thing for the network.
While I just spent a bunch of time pontificating about the HBD APR above, in reality I think there are much much more important things that the stakeholders in this ecosystem should be discussing and working on. First and foremost of those, in my opinion, is the issue of liquidity for both HIVE and HBD.
Right now it is almost impossible to purchase or sell HBD tokens in any significant quantity (without causing huge price movements), and it's a similar situation for HIVE for anyone who doesn't have access to Binance (which includes everyone in the US). This is one of the biggest things I suspect is holding this ecosystem back right now, and will continue to hold it back in the future.
If companies, funds, or high net worth investors want to invest millions into HIVE or HBD, we need it to be as easy as possible for them to do it, and even though we don't want them to ever sell those tokens, it's going to be very hard to convince any of those groups to invest significant amounts if they don't feel comfortable that they can easily unload their positions should they need to. Splinterlands is running into this problem right now, and it is a real issue that will be a major roadblock to capital coming into the ecosystem in the future.
The Leofinance team is going in the right direction in trying to address this issue through their wrapped HIVE and HBD tokens on various external EVM chains; however, despite how much I respect that team and what they're doing, I believe what they have built is far from what we will need to really solve this problem.
My ideal solution would be to put a small team together, funded by the DHF, to build a more decentralized bridge for HIVE and HBD to various EVM chains. This could work by setting up multi-sig wallets/contracts on Hive and EVM chains respectively controlled by a majority of the top 20 elected Hive witnesses to hold and manage the bridged tokens and contracts. This post is already long enough so I won't go into the specific details, but I know that @fbslo has built a prototype of something like this in the past and it is definitely doable and would provide a reasonably decentralized and robust bridging solution for the tokens.
Note: I know that Hive Engine has liquidity pools and bridges for external tokens; however, if we really want to attract capital I think we need to go to where the capital is - and that means EVM chains and markets like Uniswap and Sushiswap.
The second part of the solution requires incentivizing people to provide liquidity for the tokens on the various bridged chains. The best way to do that is simply to pay people for it, which can also be accomplished through the DHF. A proposal can be made to pay out HBD to users who provide HIVE or HBD liquidity on various external EVM platforms. Despite everything I said above about the HBD APR, I would happily set the HBD savings rate to 0% and instead apply that HBD inflation towards incentivizing liquidity if that were an option.
I believe that incentivizing liquidity would provide immensely more value for the ecosystem than incentivizing savings, but until things like the bridges, wrapped tokens, and multi-sig setups are built we don't really have a good way of doing that.
Services & Tooling
The second biggest issue for the Hive ecosystem behind the lack of liquidity described above, is the lack of commercial-grade services and tooling available for building on Hive. Hive is incredibly well positioned from a tech perspective for mainsteam mass adoption of blockchain applications, but what we are lacking is the applications themselves.
Of course I know that there are many applications built on top of Hive, but most of them are just a few people building things in their spare time with limited resources. Even though many of those teams have done an amazing job and built some great things considering their limitations, what I think we need for Hive to reach its full potential is a slew of really top-quality applications run by experienced teams with significant funding and resources.
I've talked to a number of teams looking for a platform on which to build their applications, and while they're very interested in Hive due to all of the benefits it provides over most other blockchain platforms, the conversations fall flat once it gets into more detail about how exactly to build on Hive because of the lack of services and tools available.
If you build an application on an EVM chain, you'll have access to hundreds of tools and services including wallets, payments, infrastructure, marketplaces, taxes & accounting, etc. Everything you could possibly need to get your application up and running. On Hive, there is almost none of that and you need to figure it out and build it all on your own.
I know how difficult that is first-hand because we've had to do it for Splinterlands. Unfortunately, what we built for Splinterlands is very specific for that application and can't really be used for other projects. We don't intend for that to be the case going forward, however, which is why when we started building our second game - Genesis League Goals - we planned to build out all of the necessary tools and services in a more generic fashion, and eventually to release them as open-source software, so that we can offer a full, end-to-end solution for teams to build their applications on Hive.
We are calling this the Invennium platform, and the Goals game is the first application built using Invennium which will allow us to show that the tools and services work at scale on a live project. @therealwolf has been leading the project to build out generic Hive tools and services for Invennium, and he has been doing a great job so please give him your support if you aren't already. I hope to see those be made open source and available for third-party applications to begin using in the near future.
Even though we are working on these things, I would also love to see some teams outside of Splinterlands working on them as well. In my opinion that would be a great opportunity for the DHF to provide funding in a way that would lead to a positive overall return for the ecosystem.
A quick list of some of the tools and services that I think are needed are listed below, in case anyone is looking for some projects to work on and to try to get funding for. I would be happy to help provide advice / guidance / support for anyone looking at tackling some of these problems, so feel free to reach out!
- Account Management - Creating Hive accounts, managing keys, account recovery, managing resource credits
- Payments - HIVE & HBD payments, external crypto & fiat options, taxes & accounting support
- Tokens - Fungible & Non-Fungible token creation, management, bridging, and markets
- Infrastructure - Running nodes, fetching data, broadcasting transactions, multi-sig
- Smart Contracts & Governance - Custom JSON smart contracts, validator software, DAOs
I'm no good at predicting the future, so rather than tell you what I think will happen in my seventh year on this platform, I will tell you what I hope will happen. I hope that we at least see the beginnings of another major bull run in the blockchain and crypto industry with new narratives focused around providing real products and services that people value and not as much of the get-rich-quick/ponzi vibes of the ICO craze and the DeFi/NFT boom of previous cycles.
Decentralized Social Media (DeSoc?) seems like it could potentially be a part of the next cycle narrative, which is extremely exciting both because social media desperately needs something to combat the extreme levels of corruption and censorship present in the current system, and because Hive has obviously been waiting for that narrative for 7+ years.
I sincerely hope that Hive isn't overlooked by the shiny new DeSoc platforms that are certain to continue to pop up on other chains, which is why I am pushing for the HIVE token to be available and have liquidity on the most popular DEXes and for there to be great tools and services that allow the best of the shiny new applications to be built right here.
No matter what happens, I sincerely and truly appreciate my time here as part of this community, all of the friends I have made, and all of the people who have supported me along the way. I can't wait to see what the future holds and I look forward to continuing on this journey with all of you!