Inflation, incentives, and change. And yes, we need change!

This needs sharing, IMO.

Prologue / intro

Ever since I started having more health issues than usual I've also gained some friends through some of my "team meetings", or whatever you wanna call them 😆
One of these friends is a previous financial worker with a lot of insight in many aspect of the finance world.

I was talking with him about Hive, and while he can see the smart thing, he quickly asked "How are people getting paid?"

This had me digging a little. Although I knew beforehand that new $HIVE was printed to pay the rewards, I didn't really get the full grasp about it all. I probably still don't.

With some help from my friend, we went over the falling price of $HIVE, the potential reasons behind it and what could be done to try and fix it. Because, let's be honest... no-one wants to invest properly into a currency that just keeps printing new money.
And new users rarely stick around because of the exact same reason - their efforts may be rewarded, but they are not part of the inner circle and hence, their rewards makes it not worth their time.

I stumbled upon some Haircut event. This was news to me, and is also somewhat considered into our conversation.

The case of Hive

As explained by my friend (he's good at explaining shit):

Inflation, printing new money to pay people, will always lead to sell-pressure.

This in itself is fairly easy to understand. And sell-pressure force people to sell - maybe even cheaper than they would like.

What I wasn't fully aware of is the fact that the sell-pressure is "automated".
Automated how, you ask?

Let's say NVIDIA paid their employees with NVDA stocks. This would be pretty good - at first.
They wouldn't be able to buy food, pay rent or anything else with these stocks, so they have to sell them.
This is also pretty good, they have a fairly great value these days.. but here's the catch:
Every time an employee is getting paid, more stocks are printed/made.
This will saturate the market fairly quick and the NVDA stock will fall in price.

That is what Hive is doing.
Whether we like it or not, it's as simple as that.
And, as it turns out, when the Hive price is falling, the debt ratio is increasing. I hadn't taken this into consideration, but apparently there is no guarantee the $HBD will keep its $1 peg if the debt ratio hits 30%.

Well damn!

Solutions

Of course, neither I or my friend has the answers to this, but we've come up with a fe ideas of how this situation could potentially be turned around.

Yield and stake

These two would go hand in hand. My friend called it something similar to "relationship ratio".
$HBD yield of 15% APR would directly be tied to staked $HIVE (HivePower/HP).

Instead of the fixed 15% APR on $HBD, the amount of $HBD you would (or could) get interest on would be the equivalent to the amount of the $HBD value in HivePower.

For every $1 staked $HIVE you "unlock" 15% APR on 1 $HBD

This could ensure both the $HBD price, but also boost the price of $HIVE.

Burn mechanism

Yes, this already exist. But it's not really burning too much of the newly created $HIVE.

What if this was tweaked, with a NULL-address where people could send $HIVE to and in return, have their content promoted?
Currently, Ecency offers promotion, but this is through their own Ecency Points. This doesn't help $HIVE IMO.

This would then promote the content of their choice, selected by sending the identifier in the MEMO, along with the period.
Obviously there would have to be some algorithm to handle this.
How they rank compared to each other would be highly depending on how long a promotion should be.

Now, since the payout window is 7 days, most would probably not go above those 7 days, or promote content that are older than 7 days - but both options should still be possible - with a warning to the user initiating the promotion, of course.

The benefits

What we would achieve with something like this, or maybe even both, would be a change of psychology - changing the way people think about Hive. Both as a blockchain, how it works, but also how much to keep on-chain.

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Thank you for reading,
I appreciate you!

Please share this to reach as many Hive users as possible ❤️

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Images created with AI,
AI inspired title

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Posted Using INLEO