What Is A Hive-Backed Dollar (HBD)? The Stablecoin That Pays You To Hold It
A Hive-Backed Dollar is an algorithmic stablecoin on the Hive blockchain designed to maintain a 1:1 peg to USD. This means it is backed by on-chain mechanics rather than physical assets, such as official dollar bills or other real-world assets. Staking HBD in the “savings” mechanism also earns holders an additional 15% APR. This is considerably higher than other, more widely recognized stablecoins such as USDT, which is typically deposited on a third-party platform like Nexo to earn yield.
Why Everyone Should Hold Stablecoins: Reduce Risk, Preserve Value & Stay Liquid
This is not a law but simply my own personal viewpoint. Every portfolio needs some form of hedge against possible calamity. Stablecoins are clearly the best way to hedge while simultaneously remaining in the crypto market. One could also look at tokenized gold or even stocks, for that matter. However, stocks would probably not serve as a hedge, though perhaps to some extent, given their lower volatility compared to the crypto market.
That being said, we are living in unprecedented times, where anything could really happen. Stablecoins are also cash-generating assets, provided they are locked up in lending or DeFi vaults and protocols. DeFi vaults are generally considered riskier than lending platforms such as Nexo. However, if one chooses a DeFi opportunity, it is best to use established protocols with healthy volume and a good track record. This is where Hive-Backed Dollars are superior in two ways.
Optimum Yield Explained: How To Increase Crypto Earnings Without Extra Risk
When using platforms like Nexo, users can earn 9.5% to 11.5% on their deposits. In some cases, higher rates are available, which are still pretty good, especially compared to the interest available on bank deposits. With all the chaos in the banking sector of late, I doubt whether many crypto enthusiasts will be looking to banks for anything other than necessity. Vulnerabilities within the banking sector are currently being exposed, and people are waking up to the supremacy of self-custody.
The HBD interest rate is currently 15%, the highest in the industry, to my knowledge. Obviously, DeFi farming pairs can offer more, but there is also the real risk of impermanent loss, as well as hacks and exploits. The DeFi sector still has a lot of maturation to go before eradicating many of these potential threats. The HBD savings mechanism is a relatively safer option. However, it is important to note that risk can never be entirely eradicated, especially in cryptocurrency protocols such as smart contracts.
How To Optimize Yield With HBD: Savings, Returns & Risk-Aware Strategies Explained
There is an aspect of HBD that you can also use to your advantage. There are times when the price does not hold the peg too well. Picking up some HBD when below the peg also helps to maximize your return. For example, over the past 90 days, HBD has traded as low as $0.88 and as high as $1.03. Maximizing this variance can be quite profitable and even repeated as an almost “guaranteed” trade! Buying HBD when it falls below the peg momentarily is a good move. One can always set buy orders at the desired level.
What Are The Levels of Decentralization? Understanding How Web3 Really Works
I have recently published a few articles addressing the rise in financial censorship. Should a person be limited to financial services according to geographical location? Once again, the innocent person, completely excluded from the conflict, must suffer because of others’ actions. True decentralization is the only solution, but it remains a dream. There are only levels of decentralization, where one is more decentralized than another. When it comes to lending, traditional options are extremely centralized.
Nexo and others are categorized as CeFi (centralized finance) and, therefore, are not the best choices amid the current chaos and unpredictability. The recent collapse of the banking sector, which is directly linked to the conflict between Russia and Ukraine, is absolutely shocking. Fortunately, Bitcoin and other cryptocurrencies were available to compensate for the lack of service in traditional finance. Read more about this event in this article.
Hive Offers Decentralization
Though not perfect, Hive is a lot more decentralized than even PancakeSwap, which is supposedly DeFi. Hive is one of the best examples of Web3 we can use as a reference point right now. Holding HBD makes a lot of sense when you consider the risks associated with centralized services. Sure, when the world is more stable, the concerns are a lot less. However, as we are currently witnessing, worst-case scenarios are happening! Are you prepared for a worst-case scenario?
Hive is a lot more than HBD; it’s an entire ecosystem and economy, and as everything else crypto-related, it suffers during bear markets. However, it provides a decentralized solution to investments, yield generation, and value transfers. HBD is a central component of the Hive ecosystem and could play a large role in future adoption, provided it maintains a strong track record of pegging and price stability. Decentralization becomes more attractive in a digital age.
What Are The Risks Of Holding HBD? Understanding The Downsides Of Hive’s Stablecoin
HBD carries the same inherent risks as any other algorithmic stablecoin, meaning stability is not an absolute, which is why it sometimes deviates from its 1:1 peg with USD. This is usually a temporary event. However, investors must be aware that algorithmic stablecoins are more volatile than traditional stablecoins backed by physical assets, such as USDT and USDC. Diversification using these stablecoins helps protect against loss or floating losses.
Because of their design, algorithmic stablecoins can experience higher short-term volatility, liquidity fluctuations, and slower peg recovery during bearish market trends when asset prices often collapse. It is advisable to avoid leveraged HBD products without the appropriate knowledge and risk management. The built-in HBD savings mechanism is perhaps the safest HBD solution. HBD should ideally represent a portion of any stablecoin portfolio, not the entire exposure.
Where Is The Best Place To Buy & Store HBD? Safe Options, Wallets & Yield Strategies Explained
The best centralized exchange for HBD is Upbit, which offers fair to modest liquidity. However, it is also available on various Hive-based DEXs, which is how the majority of the community acquires their tokens. A common way to store Hive-based tokens, such as HBD, is in the Keychain mobile wallet. However, for those seeking cold storage solutions, the Ledger Nano S Plus, Nano X, or Flex are the best options regarding self-custody of HIVE-based tokens.
Final Thoughts
Hive arguably offers the best stablecoin yield, and if you are sharp enough, you can increase your margins by purchasing during periods of market volatility. Furthermore, Hive offers one of the most decentralized ecosystems on the web. In a similar way to how people are finally waking up to the value of Bitcoin, a decentralized Web3 ecosystem like Hive will eventually be recognized for the value it offers.