Introduction
My name is Ruben Cress, I'm a content strategist and photographer based in the Netherlands. I've been working as a photographer and content strategist for over 10 years. I've worked for respectable big and small international companies worldwide. It was my job to find solutions for companies, and translate a brand's mission into high-quality visuals. While photography has always been a passion, finding and creating out-of-the-box solutions for companies has been my drive to create.
Since 2017, I've been researching blockchain technology, cryptocurrency, and digital currencies. I have also been part of the Hive community for 5 years. For these years, I've been trying to get a better understanding of how Hive works and it just blows my mind how very little traction this blockchain has received.
Over the course of 5 years, I've researched, brainstormed, and thought of concepts that could work well for Hive. None of these concepts, ideas, or brainstorming sessions ever fully grasped the full potential of Hive, and I got stuck due to Hive's wide potential. Hive's capabilities are simply too much. However, sharing this case study may be the first big contribution that I make to the Hive blockchain as a user.
Please note that I've spent a decent amount of hours working on this Case Study, trying to present it as clearly as possible while providing samples of theoretical and potential additional utility for our Hive-Backed Dollar.
Case Study: HBD Savings Delegation
This case study is about the theoretical feature to delegate the Hive Backed Dollar saving rewards from one account to another. I'll explain why this could be a great deal for Hive's ecosystem in-depth, and that this implementation could potentially attract new long-term investors. Besides attracting investors, this theoretical feature could be a groundbreaking way to open up ways to incentivize the use of HBD in general, while locking up value in Hive's ecosystem, as well as introducing DeFi solutions and unseen in the Traditional Finance System. After reading this case study, you'll get a good idea what this feature is all about.
By any means, this case study is no financial advice, and parts of its content is completely theoretical and for educational purposes solely. Of course, I personally would like to see this, or something similar implemented in Hive, as Hive is the blockchain that can deliver, govern and face such a feature.
As stated in the introduction, this Case Study embodies a few weeks (probably more) of research and work, and this translates back into a long-form article. This article is for you if you're a developer, a stakeholder, or a very involved community member/leader. If you're new to Hive, you might be overwhelmed, but I do welcome anyone who would like to reply with their thoughts on this Case Study by delivering constructive and critical feedback.
Table of Contents
#tokens #cryptocurrency
Hive Tokens
First, we will have a look at, and identify the available properties of Hive, HivePower, and Hive-Backed Dollars. This is for future reference of the case study and to understand how these tokens work on Hive.
1. Hive
Hive is the native cryptocurrency of the Hive blockchain. Hive can be used as a form of payment and as a store of value. Hive can be exchanged for other cryptocurrencies, and Hive can be swapped for HivePower, which will give you influence in the Hive network.
2. HivePower
HivePower represents a stake in the Hive blockchain. Users can only receive HivePower when they lock Hive, or get rewarded in HivePower by making contributions to the network. HivePower allows users to have a say in the governance of the blockchain and users can earn (more) rewards for participating in the network. When you lock Hive, you also receive Resource Credits which makes it possible for users to make transactions on the blockchain (blogging, commenting, voting, delegating, trading, sending tokens, and such).
3. Hive-Backed Dollars
Hive-Backed Dollars (HBD) are a stablecoin that is pegged to the value of the US dollar. HBD can be used as a store of value, can also be to purchase goods and services from world-wide merchants that accept HBD. Users can also stake HBD to mint more HBD.
There are four ways to mint and receive HBDs.
1) Through posting rewards (50% of the author's rewards are converted to Hivepower, and 50% are converted to HBD). I'm excluding the 100% Hivepower and 100% liquid pay-out options.
2) Through conversions. HIVE tokens can be converted at a fixed exchange rate directly in a wallet.
3) Through the market. Available supply can be bought off the internal HIVE-HBD market, and/or exchanges that have listed HBD.
4) Through locking up Hive-Backed Dollars.
Conclusion: Hive Tokens
What do these tokens have in common? Besides that these tokens all operate on the Hive blockchain, and all three of them have properties such as: low transaction fees, fast confirmation time, and they are all decentralized.
Hive's protocol offers low-cost, fast-, feeless transactions, and focuses on community-driven decision-making governance, which makes Hive one of the biggest blockchains to offer true decentralization to all of its users and builders.
- Low cost / Fee-less
- Fast transactions
- Decentralized
#DeFi
Hive-Backed Dollar savings explained
Now that we know the properties of the three Hive tokens on the blockchain, we need to investigate more about the HBD savings feature of the Hive blockchain.
What is Hive-Backed Dollar Savings?
'Hive-Backed Dollar (HBD) savings' is a feature of the Hive blockchain that allows users to earn interest on their HBD holdings. When you deposit HBD into a savings account, you are essentially lending your HBD to the network, and in return, you earn interest on your deposit. The interest rate on HBD savings is determined by the network's inflation rate, which is set by the community (block validators/witnesses) through a process of decentralized governance.
HBD savings accounts are similar to traditional savings accounts in that they allow users to earn interest on their deposits, but they have some key differences as well. For example, HBD savings accounts are completely decentralized and operate on the Hive blockchain, which means that they are not subject to the same regulations and oversight as traditional savings accounts.
Additionally, because HBD savings accounts are on a blockchain, users can easily access and manage their accounts from anywhere in the world, 24/7/365, and all transactions are fast, secure, and transparent.
Users can deposit or withdraw HBD from their savings account at any time, although withdrawal may take 3 days to be fully processed. This mechanic is to prevent abuse and market manipulation.
Conclusion: Savings
Savings can become a rewarding way to earn interest on your HBD, while at the same time, it helps Hive's ecosystem as this is one of the four ways to mint more HBD.
- The interest rate is determined and set by the community
- Interest rate may vary
- Completely decentralized
- 3-day withdrawal
#Governance #NetworkUsage #DeFi
What benefits does HivePower bring to Hive?
Now that all Hive tokens (excl. Resource Credits) and the main features have been introduced and discussed, I want to take a look at the benefits of HivePower. What exactly does HivePower allow us to do on the platform? This aspect of the Case Study will help us understand how HivePower is handled.
1. Governance
Every HivePower holder has a say in the governance of the Hive blockchain. You have the ability to vote for witnesses (block validators), proposals, and changes to the network that determine the course of the future of the blockchain. Such changes are mostly approved by the top 20 witnesses, as they have been chosen by the majority community as top witnesses.
Furthermore, HivePower holders are encouraged to use their HivePower to fight/prevent abuse and spam made by malicious users on the network.
2. Influence
With HivePower, you will have influence in the network. Whether this is a lot or a little, your influence is mirrored as in your HivePower. The more HivePower you hold, the more your vote counts in the community decision-making process. Whereas the majority sees the vote as a value-driven vote, where in fact, the amount of HivePower determines how much you can distribute of the daily reward pool.
3. Earn rewards
Hive's blockchain is mostly known for its track record in distributing Hive rewards. As mentioned above, all Hive rewards are distributed through community-made decisions.
3.1 Curation rewards
Receiving curation rewards require HivePower as well as activity in the network. This means HivePower stakeholders need to actively participate in the network and find (high)quality content to curate. The rewards are based on the amount of current holding HivePower, and how decisions are made on how to curate content such as blog posts, or comments for example.
3.2 Holding rewards
HivePower holders are also eligible to earn rewards for holding HivePower. These rewards come from block production and are distributed to HivePower holders based on the amount of HivePower they hold. ~3% APR
4. Resource Credits
Resource Credits makes it possible to transact on the network and perform certain actions. These actions are paid in Resource Credits (RCs), which are transferred to you once you "Power Up" (swap Hive tokens for HivePower). The most known actions are; publishing a blog post, voting on a blog post, commenting on a blog post or a comment, and creating an account.
5. Store of Value
HivePower is tied to the overall growth of the entire Hive ecosystem. Hive/HivePower could also become deflationary (conversions), which will eventually cause a decrease in the total maximum supply of Hive, potentially resulting in an increase of value in the remaining tokens.
6. Delegation
You can delegate HivePower to another user. This may be by far the most underrated aspect of HivePower in my opinion. The ability to delegate HivePower to another account is in so many ways very innovative. Distributing value (all of the benefits displayed above) over the network without risking losing it is mind-blowing.
Conclusion: Benefits of HivePower
Most benefits of HivePower are related to the governance of- and transacting on the network. Holding HivePower is a must if you want to participate in the network.
- HivePower is Governance and Participation focused
- Holding HivePower yields a small passive increase of HivePower
- Voting for witnesses (block validators) is important
- Without Resource Credits you cannot transact in the network
- You can delegate HivePower to another person without risking losing it
How can we innovate?
While a blockchain protocol like Hive has been around for years and has proven to be capable of enduring harsh bear markets, it may be simple to say that something is missing (nothing is missing), it has actually proven itself to withstand bad weather. However, it's always good to innovate. So, how can we innovate?
Now that we have fully devoured the current technical aspects of all the tokens on Hive, and the feature of HivePower, we learned that delegation is maybe one of the most powerful mechanics Hive has.
While HivePower makes it possible to transact on the blockchain, it is very participation orientated. Liquid Hive tokens are more or less used for selling or used to swap for HivePower. While Hive-Backed Dollars are only used to sell for another crypto, buy products with, or placed into a HBD savings account to mint new Hive-Backed Dollars over time.
While HivePower holds properties to participate in the Hive blockchain, in terms of governance and transacting in the network, I feel that utility for HBD is somewhat limited.
Here, the question arises, and we start to see a potential option for growth for Hive's ecosystem:
If... Delegating locked Hive (HivePower) mainly focuses on governance and transacting in the network.
Then... Delegating locked Hive-Backed Dollars could focus on...
I'm quite sure we can find plenty of use cases for this potential feature. Most use cases are quite technical or require financial expertise, this eliminates the majority of Hive's potential userbase (and eventually the main target audience). This is the question I'm hoping to answer with this Case Study.
Since this feature doesn't exist on the Hive blockchain, the following research and study are all theoretical. I'm quite sure that the development of such a feature is a heavyweight for our developers with many technical challenges.
#theoretical
Introducing: Delegated Locked Hive-Backed Dollars
Delegated Locked Hive-Backed Dollars is a feature that allows users to delegate HBD that is locked in a savings accounts, to another account. This allows the delegated account to claim newly minted HBD. By delegating locked HBD, users benefit by having the newly minted HBD become claimable by the delegated account without sending or lending out actual HBD.
"Why would someone want to do this?"
Why is a fair question, and one that can be answered quite easily. However, to be able to answer this question thoroughly, a better understanding of HIVE, HIVEPOWER, and HBD is required. In the above sections, we talked about the benefits of the 3 existing tokens on the Hive blockchain for users. While Delegated Locked Hive-Backed Dollars bring benefits (in theory) for users, and could be used as a bridge to bring more utility for HBD, but what benefits would it bring to Hive's ecosystem? If we were to disrupt the financial system, we might as well do it with a bang.
First things first: we first have to understand the benefits of locking HBD for the Hive blockchain and how it impacts Hive's ecosystem.
What is the benefit of locking Hive-Backed Dollars for Hive?
Locking up HBD provides more benefits for Hive than its 20% APR (at the time of writing, this may change in the future). If more HBD is being locked up, we can see a growth in Total Value Locked (TVL), which brings great benefits to the ecosystem of Hive. But what else? These benefits are important aspects and properties that apply to the feature of being able to delegate locked HBD.
1. Stability
Removing existing HBDs from circulation can help stabilize the HBD. When circulating supply becomes more limited, it can make HBD more valuable, which will help to stabilize its price.
2. Increase demand in Hive
Users need HBD to be able to purchase Hive on the internal Hive market. To generate more HBD, users either have to actively participate in the network by blogging and commenting to earn HBD, or they can lock up HBD in a savings account. Trading HBD for HIVE on the internal Hive market drives up demand for Hive and potentially causes Hive's price to go up.
3. More conversion
When HBD is locked up in savings on the Hive blockchain, the newly minted HBD can be converted to Hive at a fixed exchange rate after unlocking them, this unlocking process takes 3 days. The 3.5-day conversion process can be used to increase the amount of Hive in circulation, which in turn could potentially drive up the demand for Hive.
4. Growing a culture of savings
Growing a culture of savings on the Hive blockchain is a sign for Hive to become a more mature blockchain. Promoting such a culture attracts developers, a new type of investor, and attract users in general.
5. Increase liquidity
While locking up HBD might not be directly responsible for increasing liquidity. Minting new HBD increases the total supply of HBD in circulation over time. This makes it easier for newly minted HBD to be traded on the internal market, or these HBD can be locked up again to increase all of the above benefits regarding HBD (both user and platform benefits).
Conclusion: HBD savings
Locking up HBD is a highly underrated form of passive income on the Hive blockchain. Currently, there is 'only' $5 million HBD locked up in savings, which is nothing. Currently, there is very little utility HBD. But when HBD is used massively, it brings many benefits for the entire ecosystem of Hive. In 2022, the total amount of HBD started at 2 million, and the year ended with almost 5 million HBD being locked in savings (source: @Dalz HBD reports), that's a 150% increase.
- It could bring Hive more HBD stabilization
- It could create a culture of savings, which leads to a more mature blockchain
- It could bring Hive to a more mature blockchain, which attracts a new type of users
- Currently, there is very little utility for HBD
It is a great opportunity to research more about HBD and HBD savings. However, this finally allows me to explain a bit more about how the theoretical Delegated Locked Hive-Backed Dollar can bring even more value to our Ecosystem. It's disruptive.
Now that we understand what the benefits are of the most important tokens and features on the Hive blockchain, we understand that creating use cases for these tokens is important for our ecosystem as they contribute to stability, liquidity, value, governance, and overall transacting on Hive.