RE: Community Token Talk Podcast - Ep. 85 | We Discuss & Debate the HBD APR
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Meat of the discussion starts around 16 min, 30 seconds in
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Great episode, much better content than most of the HBD APR rants over the last few days (from all participants).
I fully understand Task laughing my comment a few days ago given his 5 seconds per comment rate.
Since you spent 2 hours on the topic and even discussed the two faces of HBD next to each other, it makes sense to carry on:
I get the adrenaline rush witnesses may get from being the central bankers. It is easy to miss the HBD is kinda foreign currency when it caters certain customer needs better than HIVE does. It's not like it was a corporate debt (HBD can be printed insted of bought to settle the debt) but it is not as easy as printing HIVE (printing HBD instead of buying it admits depegging is sensible).
Bonds market is bigger than e-commerce, I get that. I also think it is fun to play games with offering conservative people interest on HBD hoping to outpace it with HIVE coin price growth. All you risk is missing peg on HBD and shrugging shoulders saying: "You should have known it is not a dollar."
However, until the circular economy you create is big enough not to care about haircuts and stuff (as there will be enough people pretending it is a dollar to always have places to spend), growing the HBD locked-in supply goes directly against the people of Sucre who are going to be butthurt when HBD goes to $0.60 or so.
I don't want to make you feel bad, so let's openly state the complement: Those people who carry liquid HBD on them are making your games harder as well. There is no good vs. evil here. Just Real vs. Barca kind of thing.
Stop calling it a dollar and lot of stuff being said on the podcast ceases to be obvious. Cause it's not (with careful wording).
BTW, if we ever get to 28% debt ratio and Task is still the first one to ask witnesses to fight the problem, I really hope they won't. If HBD holds the peg by then, that's because the market is not bothered about conversions and haircut. In the market that does care about conversion mechanism not delivering full $1 worth of HIVE, the HBD price reflects the risk way earlier. When HIVE can easily drop 50% within days, reaching 15% debt is already an issue. Not a Luna-issue but enough to noticably depeg.
Ultimately u just can’t have 20% on the APR.
Imagine the idea that a long lock up (one year plus) has to have a guaranteed 20% for the duration of the year, I just don’t see people voting for that. Maybe 15% lock up.
If we want to get hbd liquid we will convert to it from our hive holdings.
The idea of using inflation to make hbd liquid is like filling the beach with a bucket of sand at a time.
Once we have time vaults (bonds) I doubt the community will rationally want to issue more than an average of 12-15% APR.
The three day lock in period kind of distorts this. Everyone can agree that high interest rate can come from long lock In only, but then where does the interest rate stop? 60% for 30 years lock in, guaranteed, hard coded into the chain? This is insane. Now it becomes clear why APR at high rates is unrealistic.
Question really is:
Either way it’s a shock to everyone’s system.
To me, getting 20% for a simple 3.5 day lock is completely unrealistic and it’s getting something for almost free. It’s not realistic and not fair to the chain. I’d also not like to keep it that way while we wait for as long as it takes to release time vaults. (12? 18 months).
At the same time, getting a 60% Apr for a 30 year lock in is also completely unrealistic.
A balance will be found.
Once time vaults will be found the risk of high Apr earnings can be shifted to the speculators and collateral backers on the layer II bond collateralised loan markets.
The base layer should not be forced to take the high Apr risk imo, especially when it doesn’t need to take it. The borrowers and yield searchers can easily take an 8% Apr, 1 year hive backed dollar bond and obtain the 12% return to it via their speculations in order to return those who want 20% Apr the returns they are looking for, while not putting any extra risk onto the base layer by risking coming close to the hair cut rule
What if the time valut concept itself is not fair to the chain?
I have no doubts the time vaults are going to happen. Giving people a playground is a service.
Utility first, numbers second. From chain's POV, the principal utility of time valuts is allowing HBD to be taken off circulation for a predefined time, lowering the debt ratio. The secondary utility is creating the need for extra transactions (for derivatives built around this). I would say that both are worth paying for.
The competition is the HBD->HIVE conversion mechanism. The main difference is the "permanency" of the removal from circulation. Unlike time vaults, the chain does not directly pay for servicing the debt ratio and collects 5% whenever the removal gets reversed by HIVE->HBD conversion taking place. The primary costs are visibly on HBD holders (if haircut hits). Secondary cost would be a less stable HBD price (so in practice, there is some cost via running the hbdstabilizer).
Clearly, the 20% APR promotion needs to end ASAP. That said, P stands for "possible" not for "executable" (which would be instant). HBD needs enough presence to be a medium of exchange. Once it proves itself in Sucre, the scaling is suprisingly trivial due to its architecture. Then, the speculators looking for the pristine collateral can (and will) jump on it on their own without further incentives.
The time vault pricing can then be approached from the other end. Starting at 0.001 APR when debt ratio is low, going up when the haircut comes closer. Chain would only buy debt when really need and there will always be some on the playground for the sharks and fixed income people alike.
Shockingly, instead of voting the APR rate, we should vote on (or actually have an algorithm to compute) how much HBD should be locked and then auction off the corresponding amount of bonds.
I just quote this to see if the truth repeated thousand times can get elsewhere.
If the time vault is used as collateral for a bond backed loan market with no kyc and ability to always settle in 1usd of hive, it will pay for itself 1000x over. I’ll get to the rest (it’s a long message)
I fully agree. However, the subtle catch (ability to always settle in 1usd of hive) is often missed.
This scales slower than it looks like and that's why only limited amount of incentives is sensible.
Agreed. It only earns its value when collateralised loans come. The risk and high Apr can be earned from that layer two. No need from hive layer one.
Yes, we need to call it a stableish coin.
I agree with all of this in principle. I especially like the auction of bonds first then let the hbd holders lock in if they wish.
Either way ppl need to have a shock, 1 year hold for what? 15% max. Surely ppl won’t agree to 20% guaranteed for a 1 year lock. When looked at from that perspective it makes more sense to most imo.
The question really is how long do we keep this up, as I can only feel comfortable doing it when the bonding and auction system is in place, and it sounds like this is at least a year away.
If resources were allocated to building This, and building was proceeding in ernest, i could maybe understand ppl getting upset, but the longer we keep this up without the bonding system and auction with collaterilisation system not having been worked on, the more trouble we are asking for
You state,
Writing an 800 word blog about your walk that's essentially your own photo album that no one cares about and earning $100 is essentially getting something for almost free...
That’s why we upvote based on social interactions and traffic. Wish more curators would do this