Hello Readers,

A heated discussion has suddenly emerged in the world of Hive blockchain and in this blockchain based decentralized landscape. As a daily user, all of us already know about the HBD savings feature built on the Hive chain which has an existing popularity with its interesting 20% APR offered on its stable coin Hive Backed Dollar aka HBD. Today when I was browsing, I came across several posts discussing about the potential reduction of the Annual Percentage Rate (APR) on HBD savings. While currently throwing out interests at a generous 20% per annum smoothly, the new proposal which is under consideration at the moment aims to slash this existing rate down to a mere 12%. While the main interest behind the proposal is to make Hive looks a better investment offer then HBD, but we start to continue on this topic, the rationale presented by various articles, you may find out that this is not a straightforward matter and rather, it's a multi-layered issue that requires a careful analysis and discussion before executing.

Dividend Yield Versus Price Speculation

First of all, it is essential to distinguish between HBD and Hive from a financial standpoint. We know a good stock is the once which gets good price appreciation over time and it is more popular amongst investors to invest into positive price speculating stocks like apple, tesla etc. Our hive would thrive to go 1$ rather than becoming a dividend paying stock or bond that depreciates in price. This approach to reduce APR in HBD neglects a fundamental difference between stocks and bonds. Where dividend seeking investors are also there, the majority of top tier stocks in any big market are acquired for speculative purposes. Dividends are good to generate a passive income as a bonus, but they often play second while rallying against those stock's movement in price. The basic point here is that the APR on HIVE should not be its most attractive feature given its potential for significant fluctuations in price movement, making it an unsuitable candidate for yield or dividend seeking strategies.

HBD is and will be a well performing stable coin pegged to 1$ USD value in Hive chain and it does not offer any type of price appreciation feature when talking about the matter here. Unlike HIVE which is the main token of the blockchain and vastly used, HBD attract to a different and limited audience, especially those who are seeking strong stability with a better yield over other stable assets in market. Not everyone is comfortable holding such a stable asset that could see a 40 a 70% decline within just a single year for a worst case scenario, that can doom the whole System. The web2 bond market is also well known for its yield oriented participants which outpaces even the stock market in size.

HBD as a Medium of Exchange

Another great aspect to take in consideration that the HBD's role as a medium of exchange is also very important in Hive chain. With The long known record of HBD stability, due to its pegged nature certainly makes it a great asset for facilitating transactions hassle free with value changes and it also increases trust and more economic activities. The idea of basing HBD's APR on rates while simply copying by other stable coins will certainly overlook its unique role as a foundation for the Hive economy, as it is a great feature for many existing investors who are here because they are getting more APR than other chains. Unlike its many opponents, HBD operates within the core layer structure of the Hive blockchain and thus, it is protected well against centralized entities. The path to Hive's prosperity lies in welcoming the wealth creation factor here through commerce and financial applications.

Hive's Value and the User Perspective

When examining Hive's value in this case against a stable coin, hive is rather a coin that is representing the active technology here. Hive is nothing but a server system that is based on decentralized network and it's imperative to acknowledge that Hive's technological superiority is the key fact here to rise in price because of it utility and usability over years, the network it offers to projects and companies, the existing userbase etc, which is a remarkable facet in this case. Yet for some users, the technological points are often overshadowed by the practical utility of the application but I certainly do not think HBD’s APR reduction to make hive thrive is any good idea. While the marketing of Hive holds great potential, we should know that the real value of Hive lies in the applications and games that engage and interests to users need. As seen with the huge success of Splinterlands as an existing web3 playing game on this chain and performing immense in the whole crypto global gaming sector, user engagement and satisfaction proves for itself from here.

The symbiotic relationship between HBD and HIVE

This should be kept in consideration here where no matter if a user first enters or stays in the change because of the stable coin APR feature or posting and gaming purpose, he stays and and that’s the most important parts. When a user remains active in the change, he will notice all the other features and services this chain is providing and over time, the user will explore and get exposed with. So, Rather than treating them both as adversaries, we must recognise that fact that their success is inter-twined with each other and should not be in the beating each other game. The slowly increasing adoption of HBD can contribute significantly to Hive's growth over time, while on the other hand, the increase in Hive's daily transactions volume and the increase in demand for Hive Power (HP) will get relevant in this matter in this inter connected relationship.

A thriving HBD economy will only enrich the value of Hive, and it will also strengthen the whole hive ecosystem. I think it becomes clear here that the proposal to lower HBD APR will affect the existing good dynamics in hive ecosystem. While regular and periodical evaluations of the tokenomics are a necessary fact, they should not suppress the broader growth initiatives. A purely APR-driven strategy to hive may fails to address the multi level nature of Hive's true value proposition.

Further more, the speculative nature of Hive's price should be the main reason here while keeping HBD APR at 20% not only to keep the existing user base but to attract many more over time. I hope you liked reading my thoughts about the HBD proposal and in the comment below, please leg me know your opinions. See you all in my next article!